Chatper 5 Homework Solutions

# Chatper 5 Homework Solutions - Chapter 5 Homework Solutions...

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Chapter 5 Homework Solutions LO 1 EXERCISE 5-2 INVENTORIABLE COSTS List price: \$100 × 200 units  \$20,000 Less: 10% volume discount (2,000) Freight costs 56 Insurance for goods in transit               32     Total cost \$18,088 Under the cost principle, all of these costs are necessary to put the inventory into a position where it can be sold. Other classifications: The phone charges and purchasing department salary would both be difficult to match directly with the sale of any particular product and therefore should be treated as operating expenses of the period. The labeling supplies are immaterial in amount and should also be reported as operating expenses. The interest paid to suppliers is a financing cost and would be reported as interest expense on the income statement. LO 3 EXERCISE 5-5 MISSING AMOUNTS IN COST OF GOODS SOLD MODEL Case 1: (a) Beginning inventory: cost of goods available for sale – cost of goods purchased = \$7,110 – (\$6,230 – \$470 – \$200 + \$150) = \$7,110 – \$5,710 = \$1,400 (b) Ending inventory: cost of goods available for sale – cost of goods sold = \$7,110 – \$5,220 = \$1,890

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Case 2: (must first solve d , then c ) (d) Cost of goods available for sale: cost of goods sold + ending inventory = \$5,570 + \$1,750 = \$7,320 (c) Purchase discounts: 1. Cost of goods available for sale – beginning inventory = cost of goods purchased = \$7,320 – \$2,350 = \$4,970 2. Gross purchases – purchase returns and allowances – purchase discounts + transportation-in = cost of goods purchased; \$5,720 – \$800 – purchase discounts + \$500 = \$4,970; purchase discounts = \$5,420 – \$4,970 = \$450 Case 3: (e) Gross purchases: 1. Cost of goods purchased = cost of goods available for sale – beginning inventory = \$8,790 – \$1,890 = \$6,900 2. Gross purchases – purchase returns and allowances – purchase discounts + transportation-in = cost of goods purchased; gross purchases – \$550 – \$310 + \$420 = \$6,900; gross purchases = \$6,900 + \$550 + \$310 – \$420 = \$7,340 (f) Cost of goods sold = cost of goods available for sale – ending inventory = \$8,790 – \$1,200 = \$7,590 LO 3 EXERCISE 5-6 PURCHASE DISCOUNTS July 3 Purchases 3,500 Accounts Payable 3,500 To record purchases of merchandise on credit. Assets = Liabilities + Owners’ Equity +3,500 –3,500 July 6 Purchases 7,000 Accounts Payable 7,000 To record purchases of merchandise on credit. Assets = Liabilities + Owners’ Equity +7,000 –7,000
July 12 Accounts Payable 3,500 Cash 3,465 Purchase Discounts 35 To record payment on account: \$3,500 – 0.01(\$3,500) = \$3,465. Assets = Liabilities + Owners’ Equity –3,465 –3,500 +35 August 5 Accounts Payable 7,000 Cash 7,000 To record payment on account. Assets

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## This note was uploaded on 03/30/2008 for the course ACCT Intro to f taught by Professor Dunno during the Spring '08 term at University of Iowa.

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Chatper 5 Homework Solutions - Chapter 5 Homework Solutions...

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