Chapter_6_Solutions - Chapter 6 Merchandise Inventory Quick...

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Chapter 6 Merchandise Inventory Quick Check Answers: 1. a 3. a 5. d 7. b 9. a 2. c 4. b 6. c 8. c 10. d Explanations: 1. a. Net income = $600 (Sales $9,300 Cost of goods sold $6,000 Total operating expenses $2,700) 3. a. Cost of goods sold is $490 [$190 from the 10 units of beginning inventory + $300 (15 units @ $20 from the first purchase)] 4. b. FIFO carries over from question 3. Inventory is $740 [(20 units @ $22 from the second purchase) + (15 units @ $20 from the first purchase)] 5. d. FIFO carries over from question 3. Sales revenue is $1,000 (25 units @ $40). Cost of goods sold is $490, as computed in question 3. Chapter 6 Merchandise Inventory 153
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7. b. Beginning inventory………… 10 units @ $19 = $190 June 8 purchase……………. . 30 units @ $20 = 600 Total available………………. . 40 units $790 Average unit cost ($790 / 40 units =) $19.75 10. d. Beginning inventory………………………. .. $100,000 Net purchases………………………………. . 600,000 Cost of goods available …………………… 700,000 Estimated cost of goods sold: Sales revenue……………. ............. $1,000,000 Less: Estimated gross profit of 50%. ............................. (500,000 ) Estimated cost of goods sold…. . 500,000 Estimated cost of ending inventory……. .. $200,000 Accounting 7/e Solutions Manual 154
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Short Exercises (10 min.) S 6-1 FIFO Bicycles Purchases Cost of Goods Sold Inventory on Hand Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost June 1 10 $70 $ 700 16 20 $80 $1,600 10 70 700 20 80 1,600 30 10 $70 $ 700 15 80 1,200 5 80 400 (10 min.) S 6-2 LIFO Bicycles Purchases Cost of Goods Sold Inventory on Hand Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost June 1 10 $70 $700 16 20 $80 $1,600 10 70 700 20 80 1,600 30 20 $80 $1,600 5 70 350 5 70 350 Chapter 6 Merchandise Inventory 155
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(10 min.) S 6-3 AVERAGE COST Bicycles Purchases Cost of Goods Sold Inventory on Hand Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost June 1 10 $70 $700 16 20 $80.00 $1,600 30 76.67 2,300 30 25 $76.67 $1,917 5 76.67 383 (5-10 min.) S 6-4 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT June 16 Inventory (10 × $70) 700 Accounts Payable 700 Purchased inventory on account. 30 Accounts Receivable (25 × $140) 3,500 Sales Revenue 3,500 Sale on account. 30 Cost of Goods Sold 1,900* Inventory 1,900 Cost of goods sold. __________ *(10 × $70) + ($15 × $80) = $1,900 Accounting 7/e Solutions Manual 156
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(5-10 min.) S 6-5 During a period of rising prices, 1. FIFO produces the lowest cost of goods sold because the first costs into inventory, which are the lowest, go to cost of goods sold first. This makes FIFO’s cost of goods sold the lowest. 2. LIFO produces the highest cost of goods sold because the
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This note was uploaded on 05/05/2010 for the course BUSINESS 71395 taught by Professor Brown during the Spring '09 term at Miss. College.

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Chapter_6_Solutions - Chapter 6 Merchandise Inventory Quick...

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