Chapter 5 - CHAPTER 5 CHAPTER 5 BRIEF EXERCISE 5-4 Gross...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 5 CHAPTER 5 BRIEF EXERCISE 5-4 Gross profit ratio: ($50,000 – $30,000)/$50,000 = 40% BRIEF EXERCISE 5-6 Ending Inventory: FIFO: 500 × $6 = $3,000 LIFO: 500 × $5 = $2,500 EXERCISE 5-5 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 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 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
CHAPTER 5 (f) Cost of goods sold = cost of goods available for sale – ending inventory = $8,790 – $1,200 = $7,590 EXERCISE 5-6 July 3 Purchases 3,500 Accounts Payable 3,500 To record purchases of merchandise on credit. Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues Expenses = Net Income Accounts Payable 3,500 (3,500) Purchases 3,500 (3,500) July 6 Purchases 7,000 Accounts Payable 7,000 To record the purchase of merchandise on credit. Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues Expenses = Net Income Accounts Payable 7,000 (7,000) Purchases 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. Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues Expenses = Net Income Cash (3,465) Accounts Payable (3,500) 35 Purchases Discounts* (35) 35 *The Purchase Discounts account has increased. It is shown as a decrease because it is a contra-purchases account and causes expenses to decrease. 2
Background image of page 2
CHAPTER 5 EXERCISE 5-6 CONTINUED Aug. 5 Accounts Payable 7,000 Cash 7,000 To record payment on account. Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues Expenses = Net Income Cash (7,000) Accounts Payable (7,000) EXERCISE 5-7 Mar. 3 Purchases 2,500 Accounts Payable 2,500 To record purchases on credit. Balance Sheet
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 17

Chapter 5 - CHAPTER 5 CHAPTER 5 BRIEF EXERCISE 5-4 Gross...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online