Soln5-07 - Problem Solutions Chapter 5 137 PROBLEM SOLUTIONS 5-1 Computing Missing Amounts Requirements 1 and 2 are shown below Computed amounts

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

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

Unformatted text preview: Problem Solutions Chapter 5 137 PROBLEM SOLUTIONS 5-1 Computing Missing Amounts Requirements 1. and 2. are shown below. Computed amounts are shown in bold. Company A B C Sales $ 85 $ 57 $ 75 Minus Cost of Goods Sold: Beginning Inventory $ 5 $ 6 $ 21 + Purchases 120 45 55 Goods Available for Sale $125 $ 51 $ 76 Ending Inventory 65 10 21 Cost of goods Sold $ 60 $ 41 $ 55 Gross Profit $ 25 $ 16 $ 20 Operating expenses 18 13 15 Income tax expense 3 1 2 Net income $ 4 $ 2 $ 3 INTRODUCTION TO FINANCIAL REPORTING AND ANALYSIS 4 TH EDITION 138 5-2 Periodic Inventory System Details (Appendix A) Journal entries using the perpetual method are also shown for comparison. Description of the events involving Inventory Periodic Inventory System Journal Entries Perpetual Inventory System Journal Entries a. Purchase inventory on account Purchases 76,200 Accounts Payable 76,200 Inventory 76,200 Accounts Payable 76,200 b. Returned inventory to vendor Accounts Payable 3,400 Purchases 3,400 Accounts Payable 3,400 Inventory 3,400 c. Sold merchandise on account Accounts Receivable 124,800 Sales Revenue 124,800 Accounts Receivable 124,800 Sales Revenue 124,800 Cost of Goods Sold 85,200 Inventory 85,200 d. Sales returns Sales Revenue 2,400 Accounts Receivable 2,400 Sales Revenue 2,400 Accounts Receivable 2,400 Inventory 1,300 Cost of Goods Sold 1,300 e. Compute cost of sales and ending inventory. Inventory (ending) 21,500 Cost of Goods Sold 64,700 * Purchases (net) 72,800 Inventory (beginning) 13,400 No entry required. * For the periodic method: Beginning Inventory $13,400 + Purchases 76,200 Purchase returns 3,400 Goods available for sale $86,200 Ending Inventory 21,500 = Cost of Goods Sold $64,700 Problem Solutions Chapter 5 139 5-3 Inventory Costing Methods (Fluctuating Costs) 1. Computations: Units X Unit cost Total Cost Goods Available for Sale 130 $7.50 $ 975.00 985 8.25 8,126.25 525 8.05 4,226.25 160 7.75 1,240.00 Total Available for Sale 1,800 $14,567.50 Total Sales 1,690 21.00 $35,490.00 Ending Inventory Computations: 1 (a) FIFO ending inventory 110 $7.75 $ 852.50 1 (b) LIFO ending inventory 110 $7.50 $ 825.00 1 (c) Average cost ending inventory 110 $8.093* $ 890.23 * average cost = $14,567.50 1,800 units = $8.093 per unit (rounded) FIFO Cost LIFO Cost Average Cost Sales (rounded) $35,490 $35,490 $35,490 Cost of Sales: Cost of goods available for sale $14,568 $14,568 $14,568 Minus ending inventory 853 825 890 Cost of Goods Sold 13,715 13,743 13,678 Gross Profit $21,775 $21,747 $21,812 INTRODUCTION TO FINANCIAL REPORTING AND ANALYSIS 4 TH EDITION 140 5-3 (continued) 2. Repeat part 1 with one additional purchase of 100 units at $7.50 each: Computations: Units X Unit cost Total Cost Goods Available for Sale 130 $7.50 $ 975.00 985 8.25 8,126.25 525 8.05 4,226.25 160 7.75 1,240.00 100 7.50 750.00 Total Available for Sale 1,900 $15,317.50 Total Sales 1,690 21.00 $35,490.00 Ending Inventory Computations: 1 (a) FIFO ending inventory 100 $7.50 $7....
View Full Document

This note was uploaded on 04/04/2008 for the course ACC 271 taught by Professor Klem during the Winter '08 term at University of Michigan.

Page1 / 20

Soln5-07 - Problem Solutions Chapter 5 137 PROBLEM SOLUTIONS 5-1 Computing Missing Amounts Requirements 1 and 2 are shown below Computed amounts

This preview shows document pages 1 - 5. Sign up to view the full document.

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