2811422513

2811422513 - Chapter 6 Merchandise Inventory and Cost of...

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Chapter 6 Merchandise Inventory and Cost of Goods Sold Check Points (10 min.) CP 6-1 Nissan North America Balance Sheet December 31, 20X6 Current assets: Inventory (300 @ $80)…………………. . $24,000 Nissan North America Income Statement Year Ended December 31, 20X6 Sales revenue [700 × ($80 + $40)] ………. $84,000 Cost of goods sold (700 @ $80)………… 56,000 Gross profit…………………………………. $28,000 Chapter 6 Merchandise Inventory and Cost of Goods Sold 123
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(10-15 min.) CP 6-2 1. (Journal entries) Inventory…………………………………. . 100,000 Accounts Payable……………………. 100,000 Cash ($140,000 × .20) …………………… 28,000 Amounts Receivable ($140,000 × . 80). . 112,000 Sales Revenue………………………. .. 140,000 Cost of Goods Sold……………………. . 60,000 Inventory ($100,000 × .60) …………. . 60,000 2. (Financial statements) BALANCE SHEET Current assets: Inventory ($100,000 – $60,000)………………. $40,000 INCOME STATEMENT Sales revenue……………………………………… $140,000 Cost of goods sold………………………………. . 60,000 Gross profit………………………………………… $ 80,000 Financial Accounting 6/e Solutions Manual 124
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(10 min.) CP 6-3 Billions Inventory………………………… 6.4 Cash…………………………. .. 6.4 Accounts Receivable…………. 28.5 Sales Revenue………………. 28.5 Cost of Goods Sold…………… 6.2 Inventory……………………. .. 6.2 Cash……………………………… 26.3 Accounts Receivable………. 26.3 Chapter 6 Merchandise Inventory and Cost of Goods Sold 125
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(10 min.) CP 6-4 1. Inventory costs are increasing from $10 to $14 to $18 per unit. 2. FIFO results in the highest cost of ending inventory ($360) because under FIFO the ending inventory is costed at the last costs incurred during the period. When costs are increasing, the last costs are the highest costs. FIFO results in the lowest cost of goods sold . This occurs because the oldest costs are assigned to cost of goods sold. When costs are increasing, the oldest costs are the lowest. FIFO results in the highest gross profit because cost of goods sold, the expense, is the lowest. (Sales revenue is unaffected by the inventory costing method.) 3. LIFO results in the lowest cost of ending inventory ($240) because under LIFO, the ending inventory is costed at the oldest costs. When costs are increasing, the oldest costs are the lowest costs. LIFO results in the highest cost of goods sold . This occurs because the last costs of the period are assigned to cost of goods sold. When costs are increasing, the last costs are the highest. LIFO results in the
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This homework help was uploaded on 04/07/2008 for the course ACCT 203 taught by Professor Fewox during the Spring '08 term at CofC.

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2811422513 - Chapter 6 Merchandise Inventory and Cost of...

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