BB-Handout _3-Chapter 3

# BB-Handout _3-Chapter 3 - Handout#3-Chapter 3 PROBLEM322...

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Handout #3-Chapter 3 PROBLEM 3-22 Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost. Event Classification a. Transportation-in. b. Insurance on the office building. c. Office supplies. d. Costs incurred to improve the quality of goods available for sale. e. Goods purchased for resale. f. Salaries of salespersons. g. Advertising costs. h. Transportation-out. i. Rent expense. j. Salary of the company president. 3-1

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Demonstration Problem 3-1: Inventory Purchase/Sale, Perpetual Method The following events pertain to Jefferson Hardware Store. Jefferson uses the perpetual invent- ory method. 1. Jefferson Hardware was started on January 1, 2010 when it acquired \$5,000 cash by issuing common stock. 2. The store paid \$4,500 cash to purchase inventory. 3. Jefferson sold for \$6,000 cash inventory that cost \$3,500. 4. During 2010, the store paid \$2,000 cash for operating expenses. Required Record the events in a financial statements model. Then prepare an income statement and a balance sheet. Demonstration Problem 3-1: Work Paper Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow No. Cash + Inven. = Liab. + C. Stk. + Ret. Ear. Beg. Bal. -0- + -0- = -0- + -0- + -0- -0- -0- = -0- -0- 1 + = + + = 2 + = + + = 3(a) + = + + = 3(b) + = + + = 4 + = + + = Totals 4,500 + 1,000 = -0- + 5,000 + 500 6,000 – 5,500 = 500 4,500 NC 3-2
Jefferson Hardware Store Financial Statements Income Statement For the Year Ended December 31, 2010 Sales Cost of Goods Sold (Product Cost) Gross Margin Operating Expenses (Period Cost) Net Income \$ 500 Balance Sheet as of December 31 Assets Cash Inventory Total Assets Stockholders’ Equity Common Stock \$5,000 Retained Earnings Total Stockholders’ Equity \$5,500 3-3

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Demonstration Problem 3-2: Perpetual Inventory Transactions (Gross Method) Lisa’s Dress Shop (LDS) experienced the following events in 2010, its first year of operations. The dress shop uses the perpetual inventory method.
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BB-Handout _3-Chapter 3 - Handout#3-Chapter 3 PROBLEM322...

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