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Accounting for Merchandising Activities
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LIFO stands for Last In, First Out and pricing of inventory is done such that the most recent items purchased are sold first and their costs are billed to Cost of Goods Sold. For instance, consider a set of LCD TVs were bought for $700 each and sold for $900 by Sony. Here is the journal entry to record this sale and to charge Cost of Goods Sold.

Dr. Cash $900
  Cr. Sales Revenue $900
Dr. Cost of Goods Sold $700
  Cr. Merchandise Inventory $700

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