Homwork Chapter 8 - Problem 8-1 Requirement 1 a To record...

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Problem 8-1 Requirement 1 a. To record the purchase of inventory on account and the payment of freight charges. October 12, 2011 Purchases (98% x $22,000) .................................................................. 21,560 ................................................................................. Accounts payable ..................................................................................................... 21,560 Freight-in ................................................................................................ 500 ........................................................................................................ Cash 500 b. To record purchase returns. October 18, 2011 Accounts payable .................................................................................. 3,000 .................................................................................... Purchase returns ....................................................................................................... 3,000 c. To record payment of accounts payable. October 31, 2011 Accounts payable .................................................................................. 21,560 Interest expense ..................................................................................... 440 ........................................................................................................ Cash ..................................................................................................... 22,000 Problem 8-1 (continued) d. To record sales on account. October, 2011 Accounts receivable .............................................................................. 28,000 ......................................................................................... Sales revenue ..................................................................................................... 28,000 No entry is made for the cost of goods sold. Cost of goods sold: Beginning inventory $15,000 Plus net purchases: Purchases $21,560 Less: Purchases returns (3,000) Plus: Freight-in 500 19,060 Cost of goods available for sale 34,060 Less: Ending inventory (16,060 )
Cost of goods sold $18,000 Adjusting entry: October 31, 2011 Cost of goods sold (above) ................................................................... 18,000 Inventory (ending) ................................................................................. 16,060 Purchase returns .................................................................................... 3,000 ........................................................................... Inventory (beginning) ..................................................................................................... 15,000 ................................................................................................ Purchases ..................................................................................................... 21,560 ................................................................................................ Freight-in 500 Problem 8-1 (concluded) Requirement 2 a. To record the purchase of inventory on account and the payment of freight charges. October 12, 2011 Inventory (98% x $22,000) ................................................................... 21,560 ................................................................................. Accounts payable ..................................................................................................... 21,560 Inventory ................................................................................................ 500 ........................................................................................................ Cash 500 b. To record purchase returns. October 18, 2011 Accounts payable .................................................................................. 3,000 ................................................................................................ Inventory ....................................................................................................... 3,000 c. To record payment of accounts payable. October 31, 2011 Accounts payable .................................................................................. 21,560 Interest expense ..................................................................................... 440 ........................................................................................................ Cash ..................................................................................................... 22,000 d. To record sales on account. October, 2011
Accounts receivable .............................................................................. 28,000 ......................................................................................... Sales revenue ..................................................................................................... 28,000 Cost of goods sold ................................................................................. 18,000 ................................................................................................ Inventory ..................................................................................................... 18,000 Problem 8-2 1. The transaction is not correctly accounted for. Inventory held on consignment by another company should be included in the inventory of the consignor. Rasul should include this merchandise in its 2011 ending inventory. 2. The transaction is not correctly accounted for. Legal title to merchandise shipped f.o.b. shipping point changes hands when the goods are shipped. Rasul should record the purchase and corresponding account payable in 2011 and include the merchandise in its 2011 ending inventory. 3. The transaction is not correctly accounted for. Since the merchandise was shipped f.o.b. destination and did not arrive at the customer's location until 2012, it should be included in Rasul’s 2011 ending inventory. The sale should be recorded in 2012. 4. The transaction is correctly accounted for. Merchandise held on consignment from another company belongs to the consignor and should be excluded from the inventory of the consignee. 5. The transaction is correctly accounted for. Since the merchandise was shipped f.o.b. destination and did not arrive at Rasul’s location until 2012, it should not be included in Rasul’s 2011 ending inventory. The purchase is correctly recorded in 2012.

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