Financial Accounting Fundamentals Practice 5

Financial Accounting Fundamentals Practice 5 – Week 3 (ACC201)

This is Practice 5 from Financial accounting fundamentals week 3

Recording purchases, purchases returns, and purchases allowances

Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method.
  

Apr. 2 Purchased $6,100 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point.
  3 Paid $230 cash for shipping charges on the April 2 purchase.
  4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $500.
  17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.
  18 Purchased $11,500 of merchandise from Frist Corp. with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination.
  21 After negotiations, received from Frist a $400 allowance toward the $11,500 owed on the April 18 purchase.
  28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.
NoDateGeneral JournalDebitCredit
1Apr 02Merchandise inventory6,100
Accounts payable—Lyon6,100
2Apr 03Merchandise inventory230
Cash230
3Apr 04Accounts payable—Lyon500
Merchandise inventory500
4Apr 17Accounts payable—Lyon5,600
Cash5,488
Merchandise inventory112
5Apr 18Merchandise inventory11,500
Accounts payable—Frist11,500
6Apr 21Accounts payable—Frist400
Merchandise inventory400
7Apr 28Accounts payable—Frist11,100
Cash10,989
Merchandise inventory111

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.
 

May 3 Allied made its first and only purchase of inventory for the period on May 3 for 1,000 units at a price of $10 cash per unit (for a total cost of $10,000).
  5 Allied sold 500 of the units in inventory for $14 per unit (invoice total: $7,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $5,000.
  7 Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $700). Allied restores the units, which cost $500, to its inventory.
  8 Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $300 toward the original invoice amount to compensate for the damage.
  15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.
NoDateGeneral JournalDebitCredit
1May 03Merchandise inventory10,000
Cash10,000
2May 05Accounts receivable7,000
Sales7,000
3May 05Cost of goods sold5,000
Merchandise inventory5,000
4May 07Sales returns and allowances700
Accounts receivable700
5May 07Merchandise inventory500
Cost of goods sold500
6May 08Sales returns and allowances300
Accounts receivable300
7May 15Cash5,880
Sales discounts120
Accounts receivable6,000

Merchandise accounts and computations

Kleiner Merchandising Company
Accumulated depreciation$700
Beginning inventory 9,500
Ending Inventory 5,700
Expenses 1,900
Net Purchases 11,100
Net Sales 18,500
Krug Service Company
Expenses$9,400
Revenues 23,000
Cash 850
Prepaid rent 860
Accounts payable 200
Equipment 2,200


Required:

a. Compute gross profit, the goods available for sale, and the cost of goods sold for the merchandiser. Hint: Not all information may be necessary.
b. Use the above information from a service company and from a merchandiser to compute net income.


a.Goods available for sale$20,600
Cost of goods sold$14,900
Gross profit$3,600
b.Net income for Krug Service Company$13,600
Net income for Kleiner Merchandising Company$1,700

Financial Accounting Fundamentals Practice 5 – Week 3

Required information

[The following information applies to the questions displayed below.]
 

Laker Company reported the following January purchases and sales data for its only product.

Date ActivitiesUnits Acquired at CostUnits sold at Retail
Jan.1 Beginning inventory235units@$16.00 =$3,760       
Jan.10 Sales         185units@$25.00 
Jan.20 Purchase180units@$15.00 = 2,700       
Jan.25 Sales         200units@$25.00 
Jan.30 Purchase370units@$14.50= 5,365       
   Totals785units    $11,825 385units    

 
The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 400 units, where 370 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

Perpetual: Inventory costing methods

Required:
1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.
2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.


Complete this questions by entering your answers in the below tabs.

Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.

Specific Identification
Available for SaleCost of Goods SoldEnding Inventory
Purchase DateActivityUnitsUnit CostUnits SoldUnit CostCOGSEnding Inventory- UnitsCost Per UnitEnding Inventory- Cost
Jan. 1Beginning inventory235$16.00210$16.00$3,36025$16.00$400
Jan. 20Purchase180$15.00175$15.00$2,6255$15.00$75
Jan. 30Purchase370$14.500370$14.50$5,365
785385$5,985400$5,840
 
 
 

Complete this questions by entering your answers in the below tabs.

Determine the cost assigned to ending inventory and to cost of goods sold using weighted average. (Round cost per unit to 2 decimal places.)

Weighted Average – Perpetual:
Goods PurchasedCost of Goods SoldInventory Balance
Date# of unitsCost per unit# of units soldCost per unitCost of Goods Sold# of unitsCost per unitInventory Balance
January 1235@$16.00=$3,760.00
January 10185@$16.00=$2,960.0050@$16.00=$800.00
January 20180@$15.0050@$16.00=$800.00
180@$15.00=2,700.00
Average cost230@$15.22$3,500.00
January 25200@$15.22=$3,044.0030@$15.22=$456.60
January 30370@$14.5030@$15.22=$456.60
370@$14.50=5,365.00
Totals$6,004.00400@$14.55$5,821.60
 
 

Complete this questions by entering your answers in the below tabs.

Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.

Perpetual FIFO:
Goods PurchasedCost of Goods SoldInventory Balance
Date# of unitsCost per unit# of units soldCost per unitCost of Goods Sold# of unitsCost per unitInventory Balance
January 1235@$16.00=$3,760.00
January 10185@$16.00=$2,960.0050@$16.00=$800.00
January 20180@$15.0050@$16.00=$800.00
180@$15.00=2,700.00
$3,500.00
January 2550@$16.00=$800.000@$16.00=
150@$15.00=2,250.0030@$15.00=$450.00
$3,050.00$450.00
January 30370@$14.500@$16.00
30@$15.00=450.00
370@$14.50=5,365.00
Totals$6,010.00$5,815.00
 
 

Complete this questions by entering your answers in the below tabs.

Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

Perpetual LIFO:
Goods PurchasedCost of Goods SoldInventory Balance
Date# of unitsCost per unit# of units soldCost per unitCost of Goods Sold# of unitsCost per unitInventory Balance
January 1235@$16.00=$3,760.00
January 10185@$16.00=$2,960.0050@$16.00=$800.00
January 20180@$15.0050@$16.00=$800.00
180@$15.00=2,700.00
$3,500.00
January 2520@$16.00=$320.0030@$16.00=$480.00
180@$15.00=2,700.000@$15.00=
$3,020.00$480.00
January 30370@$14.5030@$16.00=$480.00
0@$15.00
370@$14.50=5,365.00
Totals$5,980.00$5,845.00

Financial Accounting Fundamentals Practice 5 – Week 3

Required information

 [The following information applies to the questions displayed below.]
  
Laker Company reported the following January purchases and sales data for its only product.
  

DateActivitiesUnits Acquired at CostUnits sold at Retail
Jan.1Beginning inventory215 units@$14.00=$3,010       
Jan.10Sales         165 units@$23.00 
Jan.20Purchase160 units@$13.00= 2,080       
Jan.25Sales         190 units@$23.00 
Jan.30Purchase355 units@$12.00= 4,260       
  Totals730 units    $9,350 355 units    

Periodic: Inventory costing

Required:

Required:

The Company uses a periodic inventory system. For specific identification, ending inventory consists of 375 units, where 355 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO.
  

 

Complete this questions by entering your answers in the below tabs.

Determine the cost assigned to ending inventory and to cost of goods sold using specific identification. For specific identification, ending inventory consists of 375 units, where 355 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

a) Specific IdentificationCost of Goods Available for SaleCost of Goods SoldEnding Inventory
# of unitsCost per unitCost of Goods Available for Sale# of units soldCost per unitCost of Goods Sold# of units in ending inventoryCost per unitEnding Inventory
Beginning inventory215$14.00$3,010200$14.00$2,80015$14.00$210
Purchases:
Jan. 20160$13.002,080155$13.002,0155$13.0065
Jan. 30355$12.004,2600355$12.004,260
Total730$9,350355$4,815375$4,535
 
 
 

Complete this questions by entering your answers in the below tabs.

Determine the cost assigned to ending inventory and to cost of goods sold using weighted average. (Round cost per unit to 2 decimal places.)

b) Average CostCost of Goods Available for SaleCost of Goods SoldEnding Inventory
# of unitsAverage Cost per unitCost of Goods Available for Sale# of units soldAverage Cost per UnitCost of Goods Sold# of units in ending inventoryAverage Cost per unitEnding Inventory
Beginning inventory215$3,010
Purchases:
Jan. 201602,080
Jan. 303554,260
Total730$12.81$9,350355$12.81$4,548375$12.81$4,804
 
 
 

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Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.

c) FIFOCost of Goods Available for SaleCost of Goods SoldEnding Inventory
# of unitsCost per unitCost of Goods Available for Sale# of units soldCost per unitCost of Goods Sold# of units in ending inventoryCost per unitEnding Inventory
Beginning inventory21514.00$3,010215$14.00$3,0100
Purchases:
Jan. 2016013.002,080140$13.001,82020$13.00260
Jan. 3035512.004,2600355$12.004,260
Total730$9,350355$4,830375$4,520
 
 
 

Complete this questions by entering your answers in the below tabs.

Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

d) LIFOCost of Goods Available for SaleCost of Goods SoldEnding Inventory
# of unitsCost per unitCost of Goods Available for Sale# of units soldCost per unitCost of Goods Sold# of units in ending inventoryCost per unitEnding Inventory
Beginning inventory21514.00$3,0100215$14.00$3,010
Purchases:
Jan. 2016013.002,0800160$13.002,080
Jan. 3035512.004,260355$12.004,2600
Total730$9,350355$4,260375$5,090
 
 
 

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