Accounting for inventory using the perpetual system—LIFO Consider the January transactions. (Cost data has been removed from the sale transactions.)
Completed a consulting engagement and received cash of $7,800.
Prepaid three months’ office rent, $1,650.
Purchased 80 units software inventory on account, $1,680, plus freight in, $80.
Sold 40 software units on account, $3,500.
Consulted with a client for a fee of $1,000 on account.
Paid employee salary, $2,055.
Paid on account, $1,760.
Purchased 240 units software inventory on account, $6,240.
Paid utilities, $250.
Sold 120 units of software for cash, $4,680.
Recorded the following adjusting entries: Accrued salary expense, $685. Depreciation, $100 (Equipment, $30; Furniture, $70). Expiration of prepaid rent, $550. Physical count of inventory, 145 units.
1. Prepare perpetual inventory records for January for Draper using the LIFO perpetual method. (Note: You must figure cost on the 18th, 28th, and 31st.)
2. Journalize and post the January transactions using the perpetual inventory record created in requirement 1. Key all items by date. Compute each account balance, and denote the balance as Bal.
3. Journalize and post the adjusting entries. Denote each adjusting amount as Adj. After posting all adjusting entries, prove the equality of debits and credits in the ledger.