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Week 2 Individual Assignment

Week 2 Individual Assignment - E5-3 Month Day Sept 6...

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E5-3 Month Day Sept 6 Merchandise Inventory (80 x $20) 1,600 Cash 9 Merchandise Inventory 80 Cash 10 Accounts Payable (2 x $21) 42 Merchandise Inventory 12 Accounts Receivable (26 x $31) 806 Sales Cost of Goods Sold (26 x $31) 546 Merchandise Inventory 14 Sales Returns and Allowances 31 Accounts Receivable Merchandise Inventory 21 Cost of Goods Sold 20 Accounts Receivable (30 x $31) 930 Sales Cost of Goods Sold (30 x $21) 630 Merchandise Inventory E5-16 a) 1) April 5 Purchases 20,000 Accounts Payable 2) April 6 Freight-In 900 Cash 3) April 7 Equipment 26,000 Accounts Payable 4) April 8 Accounts Payable 2,800 Purchase Returns and Allowances 5) April 15 Accounts Payable ($20,000 - $2,800) 17,200 Purchase Discounts ($20,000 - $2,800) x 2% Cash ($17,200 - $344) b) May 4 Accounts Payable ($20,000 - $2,800) 17,200 Cash 17,200 E6-7 $10,000/100 = $100 per unit $26,000/200 = $130 per unit a) 1) FIFO Ending Inventory = 80 units @ $130 = $10,400 COGS (100 units @ $100) + (120 units @ $130) = $25,600 2) LIFO Ending Inventory = 80 units @ $100 = $8,000 COGS (200 units @ $130) + (20 units @ $100) = $28,000 3) AC average cost = total cost / total units = 36,000/300 = $120 Ending Inventory = 80 units @ $120 = $9,600 COGS 220 units @ $120 = $26,400 b) Because the FIFO method has the lowest COGS, the FIFO method results in the highest net income.
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