Question

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries—FIFO

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.

Short answer

The revenue generated through sales amounts to$3,400 and the gross profit earned is $1,400.

Step-by-step solution

Step-by-Step-SolutionStep1: Journal entry for purchase of inventory

Date	Description	Debit	Credit
Oct 16	Merchandise Inventory (bicycles)	$2,720
	Accounts Payable		$2,720
	Being inventories purchased on credit

Journal entry for the sale of inventory

Date	Description	Debit	Credit
Oct 31	Accounts Receivables	$3,400
	Sales Revenue		$3,400
	Being inventories purchased on credit
Oct 31	Cost of goods sold	$2,000
	Merchandise inventory (bicycles)		$2,000
	Being goods sold valued based on FIFO