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. |
| No | Date | General Journal | Debit | Credit |
| 1 | Apr 02 | Merchandise inventory | 6,100 | |
| Accounts payable—Lyon | 6,100 | |||
| 2 | Apr 03 | Merchandise inventory | 230 | |
| Cash | 230 | |||
| 3 | Apr 04 | Accounts payable—Lyon | 500 | |
| Merchandise inventory | 500 | |||
| 4 | Apr 17 | Accounts payable—Lyon | 5,600 | |
| Cash | 5,488 | |||
| Merchandise inventory | 112 | |||
| 5 | Apr 18 | Merchandise inventory | 11,500 | |
| Accounts payable—Frist | 11,500 | |||
| 6 | Apr 21 | Accounts payable—Frist | 400 | |
| Merchandise inventory | 400 | |||
| 7 | Apr 28 | Accounts payable—Frist | 11,100 | |
| Cash | 10,989 | |||
| Merchandise inventory | 111 |
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. |
| No | Date | General Journal | Debit | Credit |
| 1 | May 03 | Merchandise inventory | 10,000 | |
| Cash | 10,000 | |||
| 2 | May 05 | Accounts receivable | 7,000 | |
| Sales | 7,000 | |||
| 3 | May 05 | Cost of goods sold | 5,000 | |
| Merchandise inventory | 5,000 | |||
| 4 | May 07 | Sales returns and allowances | 700 | |
| Accounts receivable | 700 | |||
| 5 | May 07 | Merchandise inventory | 500 | |
| Cost of goods sold | 500 | |||
| 6 | May 08 | Sales returns and allowances | 300 | |
| Accounts receivable | 300 | |||
| 7 | May 15 | Cash | 5,880 | |
| Sales discounts | 120 | |||
| Accounts receivable | 6,000 |
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 | Activities | Units Acquired at Cost | Units sold at Retail | |||||||||||||||
| Jan. | 1 | Beginning inventory | 235 | units | @ | $ | 16.00 | = | $ | 3,760 | ||||||||
| Jan. | 10 | Sales | 185 | units | @ | $ | 25.00 | |||||||||||
| Jan. | 20 | Purchase | 180 | units | @ | $ | 15.00 | = | 2,700 | |||||||||
| Jan. | 25 | Sales | 200 | units | @ | $ | 25.00 | |||||||||||
| Jan. | 30 | Purchase | 370 | units | @ | $ | 14.50 | = | 5,365 | |||||||||
| Totals | 785 | units | $ | 11,825 | 385 | units | ||||||||||||
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 Sale | Cost of Goods Sold | Ending Inventory | |||||||
| Purchase Date | Activity | Units | Unit Cost | Units Sold | Unit Cost | COGS | Ending Inventory- Units | Cost Per Unit | Ending Inventory- Cost |
| Jan. 1 | Beginning inventory | 235 | $16.00 | 210 | $16.00 | $3,360 | 25 | $16.00 | $400 |
| Jan. 20 | Purchase | 180 | $15.00 | 175 | $15.00 | $2,625 | 5 | $15.00 | $75 |
| Jan. 30 | Purchase | 370 | $14.50 | 0 | 370 | $14.50 | $5,365 | ||
| 785 | 385 | $5,985 | 400 | $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 Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| January 1 | 235 | @ | $16.00 | = | $3,760.00 | ||||||||
| January 10 | 185 | @ | $16.00 | = | $2,960.00 | 50 | @ | $16.00 | = | $800.00 | |||
| January 20 | 180 | @ | $15.00 | 50 | @ | $16.00 | = | $800.00 | |||||
| 180 | @ | $15.00 | = | 2,700.00 | |||||||||
| Average cost | 230 | @ | $15.22 | $3,500.00 | |||||||||
| January 25 | 200 | @ | $15.22 | = | $3,044.00 | 30 | @ | $15.22 | = | $456.60 | |||
| January 30 | 370 | @ | $14.50 | 30 | @ | $15.22 | = | $456.60 | |||||
| 370 | @ | $14.50 | = | 5,365.00 | |||||||||
| Totals | $6,004.00 | 400 | @ | $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 Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| January 1 | 235 | @ | $16.00 | = | $3,760.00 | ||||||||
| January 10 | 185 | @ | $16.00 | = | $2,960.00 | 50 | @ | $16.00 | = | $800.00 | |||
| January 20 | 180 | @ | $15.00 | 50 | @ | $16.00 | = | $800.00 | |||||
| 180 | @ | $15.00 | = | 2,700.00 | |||||||||
| $3,500.00 | |||||||||||||
| January 25 | 50 | @ | $16.00 | = | $800.00 | 0 | @ | $16.00 | = | ||||
| 150 | @ | $15.00 | = | 2,250.00 | 30 | @ | $15.00 | = | $450.00 | ||||
| $3,050.00 | $450.00 | ||||||||||||
| January 30 | 370 | @ | $14.50 | 0 | @ | $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 Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| January 1 | 235 | @ | $16.00 | = | $3,760.00 | ||||||||
| January 10 | 185 | @ | $16.00 | = | $2,960.00 | 50 | @ | $16.00 | = | $800.00 | |||
| January 20 | 180 | @ | $15.00 | 50 | @ | $16.00 | = | $800.00 | |||||
| 180 | @ | $15.00 | = | 2,700.00 | |||||||||
| $3,500.00 | |||||||||||||
| January 25 | 20 | @ | $16.00 | = | $320.00 | 30 | @ | $16.00 | = | $480.00 | |||
| 180 | @ | $15.00 | = | 2,700.00 | 0 | @ | $15.00 | = | |||||
| $3,020.00 | $480.00 | ||||||||||||
| January 30 | 370 | @ | $14.50 | 30 | @ | $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.
| Date | Activities | Units Acquired at Cost | Units sold at Retail | ||||||||||||||
| Jan. | 1 | Beginning inventory | 215 | units | @ | $ | 14.00 | = | $ | 3,010 | |||||||
| Jan. | 10 | Sales | 165 | units | @ | $ | 23.00 | ||||||||||
| Jan. | 20 | Purchase | 160 | units | @ | $ | 13.00 | = | 2,080 | ||||||||
| Jan. | 25 | Sales | 190 | units | @ | $ | 23.00 | ||||||||||
| Jan. | 30 | Purchase | 355 | units | @ | $ | 12.00 | = | 4,260 | ||||||||
| Totals | 730 | 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 Identification | Cost of Goods Available for Sale | Cost of Goods Sold | Ending Inventory | ||||||
| # of units | Cost per unit | Cost of Goods Available for Sale | # of units sold | Cost per unit | Cost of Goods Sold | # of units in ending inventory | Cost per unit | Ending Inventory | |
| Beginning inventory | 215 | $14.00 | $3,010 | 200 | $14.00 | $2,800 | 15 | $14.00 | $210 |
| Purchases: | |||||||||
| Jan. 20 | 160 | $13.00 | 2,080 | 155 | $13.00 | 2,015 | 5 | $13.00 | 65 |
| Jan. 30 | 355 | $12.00 | 4,260 | 0 | 355 | $12.00 | 4,260 | ||
| Total | 730 | $9,350 | 355 | $4,815 | 375 | $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 Cost | Cost of Goods Available for Sale | Cost of Goods Sold | Ending Inventory | ||||||
| # of units | Average Cost per unit | Cost of Goods Available for Sale | # of units sold | Average Cost per Unit | Cost of Goods Sold | # of units in ending inventory | Average Cost per unit | Ending Inventory | |
| Beginning inventory | 215 | $3,010 | |||||||
| Purchases: | |||||||||
| Jan. 20 | 160 | 2,080 | |||||||
| Jan. 30 | 355 | 4,260 | |||||||
| Total | 730 | $12.81 | $9,350 | 355 | $12.81 | $4,548 | 375 | $12.81 | $4,804 |
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.
| c) FIFO | Cost of Goods Available for Sale | Cost of Goods Sold | Ending Inventory | ||||||
| # of units | Cost per unit | Cost of Goods Available for Sale | # of units sold | Cost per unit | Cost of Goods Sold | # of units in ending inventory | Cost per unit | Ending Inventory | |
| Beginning inventory | 215 | 14.00 | $3,010 | 215 | $14.00 | $3,010 | 0 | ||
| Purchases: | |||||||||
| Jan. 20 | 160 | 13.00 | 2,080 | 140 | $13.00 | 1,820 | 20 | $13.00 | 260 |
| Jan. 30 | 355 | 12.00 | 4,260 | 0 | 355 | $12.00 | 4,260 | ||
| Total | 730 | $9,350 | 355 | $4,830 | 375 | $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) LIFO | Cost of Goods Available for Sale | Cost of Goods Sold | Ending Inventory | ||||||
| # of units | Cost per unit | Cost of Goods Available for Sale | # of units sold | Cost per unit | Cost of Goods Sold | # of units in ending inventory | Cost per unit | Ending Inventory | |
| Beginning inventory | 215 | 14.00 | $3,010 | 0 | 215 | $14.00 | $3,010 | ||
| Purchases: | |||||||||
| Jan. 20 | 160 | 13.00 | 2,080 | 0 | 160 | $13.00 | 2,080 | ||
| Jan. 30 | 355 | 12.00 | 4,260 | 355 | $12.00 | 4,260 | 0 | ||
| Total | 730 | $9,350 | 355 | $4,260 | 375 | $5,090 |