CHAPTER 5

5.1
Aug. 1 Inventory...........................................................7,500
Account payable (Aron)................................................7,500
Purchased goods, term 1/10, n/30

5 Account Receivable............................................5,200
Sales Revenue..............................................................5,200
Goods sold, term 2/10, n/60

8 Inventory...........................................................5,400
Account payable.............................................................5,400

9 Freight costs.........................................................125
Cash...............................................................................125
Shipping charges were paid on August 5

10 Merchandise return and Allowances..................600

Account receivable........................................................600
Customer returned good

10 Inventory...............................................................400
Cost of Goods sold.........................................................400
Goods were returned to inventory

12 Accounts Payable.................................................400
Inventory.......................................................................400

14 Accounts Payable.................................................200
Cash.............................................................................200
Aug.15 Cash......................................................................4,508
Sales Discount*.....................................................92
Accounts Receivable................................................4,600
Received payment within discount period.
*($5,200 - $600) x 2%
18 Accounts Payable—Waters................................5,000
Inventory* ................................................................50
Cash **......................................................................4,950
Paid for goods within discount period
*($5,400 - $400) x 1%
**($5,400 - $400) x (100% - 1%)

19 Accounts Receivable—Tux.................................4,800
Sales Revenue.............................................................4,800
Sold goods, terms n/10.

22 Goods returns and Allowances..........................500

Accounts Receivable – Tux............................................500

29 Cash*.................................................................4,300
Accounts Receivable - ...............................................4,300

30 Account Payable – Aron.....................................7,300

Cash ..........................................................................7,300
Paid $7,500 less $200 freight paid by Lowe’s.
(Discount period lapsed.)

5.2
1)
Net sale
 NET SALE
sale 225,600
Sale discount 2,250
Sale return and allowance 12,000
Sale salaries expense
Total sale 211350

2)
COST OF MERCHANDISE
PURCHASED
Invoice cost of merchandise 92,000
purchases
Purchases discounts received 2,000
Purchases returns and 4,500
allowances
Cost of transportation-in 4,600
total 90,100

3)

Sale $ 225,600

Less: Sales discounts 2,250

Less: Sales returns and allowances 12,000

Net sales $211,350

Cost of goods sold 74,500

Gross profit $ 136,850

Selling expense

Sales salaries expense 32,000

Rent expense- Selling space 8,000

Store supplies expense 1,500

Advertising expense 13,000

 Total selling expense $54,500

General and administrative expense

Office salaries expense 28,500

Rent expense- office space 3,600

Office supplies expense 400

Total general and administrative expense $32,500

Net income $49,850

4)

INCOME STATEMENT

Net sales 211,350

Expense

Selling expense 54,500

General and administrative expense 32,500

Cost of goods sold 74,500

Total expense 161,500

Net income $49,850

5) closing entries

Aug 31 Sales 225,600

Income summary 225,600

 Aug 31 Income summary 175,750

Sales discounts 2,250

Sales return and allowances 12,000

Cost of goods sold 74,500

Sales salaries expense 32,000

Rent expense- Selling space 8,000

Store supplies expense 1,500

Advertising expense 13,000

Office salaries expense 28,500

Rent expense- Office space 3,600

Office supplies expense 400

Aug 31 Income summary 104,550

K.Valley capital 104,550

Aug 31 Income summary 8,000

K. Valley withdrawals 8,000

CHAPTER 6
6.1
 Cost of goods sold
2019 2020
Beginning inventory $20,000 $27,000
Cost of goods purchased 150,000 175,000
Cost of goods available for sale 170,000 202,000
Ending inventory 27,000 40,000
Cost of goods sold $143,000 $162,000
(1) ending inventory(2019): $30,000- $3,000= $27,000
(2) ending inventory(2020): $35,000+ $ 5,000= $40,000
6.2

1. Compute cost of goods available for sale and units available for sale

Beginning inventory 150 units x $10 $1,500

Mar 14 400 units x $15 6,000
Jul 30 450 units x $18 8,100
Oct 26 250 units x $20 5,000
Units available 1,250 units
Cost of goods available for sale $20,600

2. Compute the number of units in ending inventory

Units available 1,250 units

Less: Units sold ( 90 + 350 + 460) 900 units
Ending inventory (units) 350 units

3. Compute the cost assigned to ending inventory using:

a. FIFO

Date Goods available for Sale Cost of Goods Sold Ending Inventory
Jan. 1 150 x $10 = $1,500 150 x $10 = $1,500
Mar. 14 400 x $15 = $6,000 400 x $15 = $6,000
Jul. 30 450 x $18 = $8,100 350 x $18 = $6,300 100 x $18 = $1,800
Oct. 26 250 x $20 = $5,000 250 x $20 = $5,000
Total $13,800 $6,800
b. LIFO

Date Goods available for Sale Cost of Goods Sold Ending Inventory
Jan. 1 150 x $10 = $1,500 150 x $10 = $1,500
Mar. 14 400 x $15 = $6,000 200 x $15 = $3,000 200 x $15 = $3,000
Jul. 30 450 x $18 = $8,100 450 x $18 = $8,100
Oct. 26 250 x $20 = $5,000 250 x $25 = $5,000
Total $16,100 $4,500

c. Weighted Average – Periodic

Date Goods Available for Sale Cost of Goods Sold Ending Inventory
Jan.1 150 x $10 = $1,500
Mar.14 400 x $15 = $6,000
Jul.30 450 x $18 = $8,100
Oct.26 250 x $20 = $5,000

1,250 $20,600
$20,600 / 1,250 = $16.48 per unit 900 x $16.48 = $14,832 350 x 416.48 = $5,768
d. Specific Identification
Date Goods Available for Sales Cost of Goods Sold Ending Inventory
Jan.1 150 x $10 = $1,500 150 x $10 = $1,500 0 x $10 = 0
Mar.14 400 x $15 = $6,000 240 x $15 = $3,600 160 x $15 = $2,400
Jul.30 450 x $18 = $8,100 290 x $18 = $5,220 160 x $18 = $2,880
Oct.26 250 x $20 = $5,000 220 x $20 = $2,400 30 x $20 = $600
Total $12,720 &5,880

4.
FIFO LIFO Weighted Specific
Average Identification
Sales $43,750 $43,750 $43,750 $43,750
Less: COGs 13,800 16,100 14,832 12,720
Gross Profit $29,950 $27,650 28,918 $31,030
Sales = (90 units x $30.00) + (350 units x $45.00) + (460 units x $55.00) = 443,750