220Ch5 8 Solutions

Exercise 5-1 (30 minutes)
a. Specific identification
Ending inventory100 units from January 30, 80 units from January
20, and 45 units from beginning inventory
Computations
Sold
Ending
Inventory
(100 x $5.00) + (80 x $6.00) + (45 x $7.00)....... $1,295

$2,800 - $1,295..................................................
$1,505
Cost of
Goods
b. Weighted average perpetual

Date
Goods Purchased
Cost of Goods Sold
1/ 1
1/10
90 @ $ 7.00 = $ 630
1/20
220 @ $6.00
Inventory Balance
140 @ $7.000
= $ 980
50 @ $7.000
= $ 350
50 @ $7.000
220 @ $6.000
= $1,670
(avg. cost is $6.185)
1/25
1/30
100 @ $5.00
145 @ $6.185 = $ 897*

_____
$1,527
125 @ $6.185
= $ 773*
125 @ $6.185
100 @ $5.000
= $1,273
(avg. cost is $5.658)

*rounded
c. FIFO Perpetual
Date
Goods Purchased
Cost of Goods Sold
1/ 1
1/10
1/20
90 @ $7.00 = $ 630
220 @ $6.00
1/25
1/30
100 @ $5.00
Exercise 5-1 (Continued)
50 @ $7.00
95 @ $6.00 = $ 920
_____
$1,550
Inventory Balance
140 @ $7.00
= $ 980
50 @ $7.00
= $ 350
50 @ $7.00
220 @ $6.00
= $1,670
125 @ $6.00
= $ 750
125 @ $6.00
100 @ $5.00
= $1,250
d. LIFO Perpetual
Date
Goods Purchased
Cost of Goods Sold
Inventory Balance
1/ 1
1/10
1/20
90 @ $7.00
= $ 980
50 @ $7.00
= $ 350
50 @ $7.00
220 @ $6.00
= $1,670
= $ 870
50 @ $7.00
75 @ $6.00
= $ 800
_____
$1,500
50 @ $7.00
75 @ $6.00
100 @ $5.00
= $1,300
= $ 630
220 @ $6.00
1/25
1/30
140 @ $7.00
145 @ $6.00
100 @ $5.00
Alternate Solution Format for FIFO and LIFO Perpetual

Computations
Sold
c. FIFO
(125 x $6.00) + (100 x $5.00).............................................
Ending
Inventory
Cost of
Goods
$1,250
(90 x $7.00) + (50 x $7.00) + (95 x $6.00).........................

d. LIFO
(50 x $7.00) + (75 x $6.00) + (100 x $5.00).......................
$1,550
$1,300
(90 x $7.00) + (145 x $6.00)...............................................
$1.500

LIBERTY COMPANY
Income Statements
For Month Ended January 31
Sales...............................
Specific
Identification
Weighted
Average
FIFO
LIFO
$3,525
$3,525
$3,525
$3,525
1,505
2,020
1,250
770
231
$ 539
1,527
1,998
1,250
748
224*
$ 524
1,550
1,975
1,250
725
218*
$ 507
1,500
2,025
1,250
775
233*
$ 542
(235 units x $15 price)
Cost of goods sold........

Gross profit....................
Expenses.......................
Income before taxes.....
Income tax expense (30%).
Net income.....................
* Rounded to nearest dollar.
Exercise 5-2 (Concluded)

1. LIFO method results in the highest net income of $542.
2. Weighted average net income of $524 falls between the FIFO net
income of $507 and the LIFO net income of $542.
3. If costs were rising instead of falling, then the FIFO method would
yield the highest net income.

a.
FIFO Perpetual
Date
Goods Purchased
Cost of Goods Sold
1/ 1
1/10
3/14
113 @ $ 8 = $ 904
315 @ $13 = $4,095
3/15
7/30
13 @ $ 8
167 @ $13 = $ 2,275
250 @ $18 = $4,500
10/ 5
10/26
148 @ $13
230 @ $18 = $ 6,064
50 @ $23 = $1,150
______
$9,243
Exercise 5-3 (Concluded)
Inventory Balance
126 @ $ 8
= $1,008
13 @ $ 8
= $ 104
13 @ $ 8
315 @ $13
= $4,199
148 @ $13
= $1,924
148 @ $13
250 @ $18
= $6,424
20 @ $18
= $ 360
20 @ $18
50 @ $23
= $1,510
a. LIFO Perpetual
Date
Goods Purchased
Cost of Goods Sold
1/ 1
1/10
3/14
113 @ $ 8 = $ 904
315 @ $13 = $4,095
3/15
180 @ $13 = $2,340
7/30
250 @ $18 = $4,500
250 @ $18 = $4,500

128 @ $13 = 1,664
$6,164
10/ 5
10/26
50 @ $23 = $1,150
_____
$9,408
Inventory Balance
126 @ $ 8
= $1,008
13 @ $ 8
= $ 104
13 @ $ 8
315 @ $13
= $4,199
13 @ $ 8
135 @ $13
= $1,859
13 @ $ 8
135 @ $13
250 @ $18
= $6,359
13 @ $ 8
7 @ $13
13 @ $ 8
7 @ $13
50 @ $23
= $ 195
= $1,345
Alternate Solution Format

Ending
Inventory
a. FIFO
(20 x $18) + (50 x $23)............................................................
(113 x $8) + (13 x $8) + (167 x $13) + (148 x $13) +
(230 x $18).........................................................................
b. LIFO
(13 x $8) + (7 x $13) + (50 x $23)...........................................
(113 x $8) + (180 x $13) + (250 x $18) + (128 x $13).......
Cost of
Goods Sold
$1,510
$9,243
$1,345
$9,408
FIFO Gross Margin

Sales revenue (671 units sold x $40 selling price).................
Less: FIFO cost of goods sold................................................
Gross profit................................................................................
$26,840
9,243
$17,597
LIFO Gross Margin

Sales revenue (671 units sold x $40 selling price).................
Less: LIFO cost of goods sold................................................
Gross profit................................................................................
$26,840
9,408
$17,432

a. Specific identification methodCost of goods sold
Cost of goods available for sale.....................................
$10,753
Ending inventory under specific identification

3/14 purchase ( 5 @ $13) .......................................
65
7/30 purchase ( 15 @ $18).......................................
270
10/26 purchase ( 50 @ $23).......................................
1,150
Total ending inventory under specific identification. .
1,485
Cost of goods sold under specific identification........
$ 9,268
b. Specific identification methodGross margin

Sales revenue (671 units sold x $40 selling price)........
$26,840
Less: Specific identification cost of goods sold..........
9,268
Gross profit.......................................................................
$17,572

Per Unit
Cost Market
Total
Cost
Total
Market
LCM applied to
Products
Whole
Inventory Items
Unit
Helmets.......
19
$45
$49
$ 855
$ 931
$ 855
Bats..............
12
73
67
876
804
804
Shoes...........
33
90
86
2,970
2,838
2,838
Uniforms......
37
31
31
1,147
1,147
1,147
$5,848
$5,720
$5,644
a.
Lower of cost or market of inventory as a whole = $5,720
.
$5,720
b.
Lower of cost or market of inventory by product = $5,644

1. Correct gross profit = $1,100,000 - $700,000 = $400,000 (for each
year)
2. Reported income figures
Year 2008
Sales................................
Year 2009
$1,100,000
Year 2010
$1,100,000
$1,100,000
Cost of goods sold

Beginning inventory....... $280,000
$262,000
$280,000
Cost of purchases..........
700,000
700,000
700,000
Good available for sale...
980,000
962,000
980,000
Ending inventory............
262,000
280,000
280,000
Cost of goods sold.........
718,000
682,000
700,000
Gross profit......................
$
382,000
$
418,000
$ 400,000
1.
Jan. 1 Petty Cash
Cash..............................................................
350
350
To establish a petty cash fund.
2.
Jan. 8 Postage Expense...............................................
Merchandise Inventory*....................................
Delivery Expense...............................................
Miscellaneous Expenses..................................
Cash..............................................................
67
35
52
56
210
To reimburse the petty cash fund.

* Transportation-in costs are included in
Merchandise Inventory under a perpetual system.
3.
Jan. 8 Postage Expense
Merchandise Inventory.....................................
Delivery Expense...............................................
Cash..............................................................
67
35
52
56
210
To reimburse the petty cash fund.*
Jan. 8 Petty Cash..........................................................

Cash..............................................................
To increase the petty cash fund.*
* The two January 8 entries can be combined into one entry.
200
200
1.
Sept. 9 Petty Cash
Cash..............................................................
250
250
To establish a $250 petty cash fund.
2.
Sept. 30 Merchandise Inventory*....................................
Postage Expenses.............................................
Cash Short and Over.........................................
Cash..............................................................
47
62
103
4
216

* Transportation-in costs are included in
Merchandise Inventory under a perpetual system.
3.
Oct. 1
Petty Cash..........................................................
Cash..............................................................
To increase the petty cash fund to $300.
50
50

Bank Balance
Add Deduc
t
1.
NSF check from customer returned on Sept.

25 but not recorded by this company.
2.
Interest earned on the account.
3.
Deposit made on September 5 and

processed by bank on September 6.
4.
Check written by another depositor but

charged against this company's account.
5.
Bank service charge.
6.
Checks outstanding on August 31 that

cleared the bank in September.
7.
Check written against the company account

and cleared by the bank; erroneously not
recorded by the company recordkeeper.
8.
Checks written and mailed to payees on

October 2.
10
.
Checks written by the company and mailed

to payees on September 30.
11
.
Deposit made on September 30 after the

bank closed.
12
.
Special bank charge for collection of note in

No. 8 on company's behalf.
Not Shown on
Reconciliation
Cr.
Dr.
Cr.
Principal and interest on a note receivable to

this company is collected by the bank but
not yet recorded by the company.
9.
Book Balance
Add Deduc Adjust
t
Cr.
Dr.
Cr.

AUSTIN CLINIC
Bank Reconciliation
June 30, 2009
Bank statement balance.....
$15,382
Add
Deposit of June 30...........
2,933
18,315
Deduct
Outstanding checks........
Adjusted bank balance......
2,700
$15,615
Book balance....................
........................................
Add
Error on Ck. No. 919.........
Deduct
Bank service charge........
Adjusted book balance......
$15,671
9
15,680
65
$15,615

WALSH COMPANY
Bank Reconciliation
May 31, 2009
Bank statement balance.....
Add
Deposit of May 31............
Bank error......................
Deduct
Outstanding checks........
Adjusted bank balance......
Problem 6-2A (30 minutes)
$6,900
Book balance....................
........................................
$7,750
1,100
200
8,200
800
_____
$7,400
Deduct
Bank service charge........
NSF check......................
Adjusted book balance......
50
300
$7,400
Part 1
Feb. 2 Petty Cash.......................................................
Cash...........................................................
To establish the $300 petty cash fund.
300
300
Part 2
Beard Gallery
Petty Cash Payments Report (for February)
Delivery expense
Feb. 23 Delivery of customer's merchandise..........
$ 23.00
Mileage expense
Feb. 14 Reimbursement for mileage........................
66.00
Postage expense
Feb. 12 Express delivery of contract.......................
Feb. 27 Postage expense..........................................
$ 7.85
55.00
62.85
Merchandise inventory (transportation-in)*

Feb. 9 COD charges on purchases........................
Feb. 25 COD charges on purchases........................
32.50
10.30
42.80
Office supplies expense

Feb. 5 Purchased paper for copier.........................
Feb. 20 Purchased stationery...................................
Total
14.55
67.67
82.22
$276.87
* Transportation-in costs are included in Merchandise Inventory under a perpetual

system.
Part 3
Feb. 28 Delivery Expense............................................
Mileage Expense.............................................
Postage Expense............................................
Merchandise Inventory...................................
Office Supplies Expense................................
Cash Over and Short......................................
Cash...........................................................
23.00
66.00
62.85
42.80
82.22
2.31
279.18
Feb. 28 Petty Cash.......................................................

Cash...........................................................
Note: The two Feb. 28 entries can be combined into
one.
100.00
100.00

Part 1
May 1 Petty Cash...............................................................
Cash...................................................................
350.00
350.00
To establish the $350 petty cash fund.
May 15 Janitorial Expenses................................................

Miscellaneous Expenses.......................................
Postage Expenses..................................................
Advertising Expense..............................................
Cash Over and Short........................................
Cash...................................................................
109.20
89.15
60.90
80.01
6.10
333.16
May 16 Petty Cash...............................................................

Cash...................................................................
200.00
200.00

Note: The May 31 entries can be combined into one
entry.
May 31 Postage Expenses..................................................

Mileage Expense....................................................
Delivery Expense....................................................
Cash Over and Short..............................................
Cash...................................................................
59.10
47.05
48.58
5.00
159.73
May 31 Cash.........................................................................
Petty Cash.........................................................
To decrease the petty cash fund to $500.
50.00
50.00
Part 2
If the May 31 replenishment is not made and no entry is recorded,
then several expenses would not be recognized and both net income
and equity would be overstated by $159.73 ($59.10 + $47.05 + $48.58 +
$5.00). Also, the petty cash asset and total assets would be
overstated by $159.73.
Part 1
HAMILTON COMPANY
Bank Reconciliation
July 31, 2009
Bank statement balance........
Add
Deposit of July 31...............
Deduct
Checks No. 3031....
$1,670
3065....
611
3069.... 2,438
Adjusted bank balance..........
$28,575
7,152
35,727
Book balance......................
...........................................
Add
Proceeds of note less
collection charge.............
$25,862
5,970
31,832
Deduct
NSF check................$ 805
Service charge.............
4,719
$31,008
Error (Check 3056)...... 10

Adjusted book balance.........
824
$31,008
Part 2
July Cash.......................................................................
31
Collection Expense...............................................
Notes Receivable............................................
5,970
30
6,000
To record note collection less fees.
July Accounts ReceivableE. Shaw..........................

31
Cash.................................................................
805
805
To charge account for NSF check plus fees.
July Miscellaneous Expenses......................................

31
Cash.................................................................
9
9
To record bank service fee.
July Rent Expense........................................................

31
Cash.................................................................
10
To correct an entry error.
Problem 6-4A (Concluded)

Part 3
a. If the company's Cash account balance of $25,862 is listed on
the bank reconciliation as $25,682 then:
(i)
The final balance that results from adjusting the bank

statement balance will not be affected by the error; and
(ii) The final balance that results from adjusting the book
balance of cash will be understated by $180 ($25,862 $25,682), and the bank reconciliation will not balance.
b. The bank's collection of the $6,000 note less the $30 collection
fee should have been added to the book balance of cash.
Instead, it was added to the bank statement balance. As a
result:
(i)
The final balance that results from adjusting the bank

statement balance will be overstated by $5,970; and
10
(ii) The final balance that results from adjusting the book
balance will be understated by $5,970.

Part 1
GENERAL LEDGER
Accounts Receivable
Nov. 5
5,817 Nov. 21 268
10
1,774
13
1,040
30
3,698
Bal. 12,061
Sales
Nov. 5
10
13
30
5,817
1,774
1,040
3,698
Sales Returns and

Allowances
Nov. 21 268
Exercise 7-2 (concluded)

Part 1continued
ACCOUNTS RECEIVABLE LEDGER
Nov. 5
30
Bal.
Ski Shop
5,817
Welcome Enterprises
Nov. 10 1,774
Nov. 13
3,698
9,515
Bal.
Kit Ronin
1,04 Nov. 21
0
772
Part 2
Beachum Company
Schedule of Accounts Receivable
November 30, 2009
Ski Shop...............................................................................
Welcome Enterprises..........................................................
Kit Ronin..............................................................................
Total......................................................................................
$ 9,515
1,774
772
$12,061
Comparison: The total of the Schedule of Accounts Receivable

($12,061) is proved with the balance of the Accounts Receivable
controlling T-account from Part 1 ($12,061).
268
Dec. 31 Bad Debts Expense...............................................

Allowance for Doubtful Accounts..................
5,148
5,148
To record estimated bad debts expense

(.006 x $858,000).
Feb. 1 Allowance for Doubtful Accounts.......................

Accounts ReceivableD. Fidel.....................
429
429
To write off an account.
June 5 Accounts ReceivableD. Fidel...........................

429
429
To reinstate an account.
June 5 Cash.......................................................................
Accounts ReceivableD. Fidel.....................
429
429
To record cash received on account.

a.
Dec. 31 Bad Debts Expense*..............................................
Allowance for Doubtful Accounts................
419
419
To record estimated bad debts expense.

*
Unadjusted balance
Estimated balance ($139,500 x .02)
Required adjustment
= $2,371
= 2,790
= $ 419
b.
Dec. 31 Bad Debts Expense**.............................................
Allowance for Doubtful Accounts................
credit
credit
credit
3,277
3,277
To record estimated bad debts expense.

**
Unadjusted balance
Estimated balance ($139,500 x .02)
Required adjustment
= $ 487
= 2,790
= $3,277
debit
credit
credit
a. Computation of the estimated balance of the allowance for

uncollectibles:
Not due:
1 to 30:
31 to 60:
61 to 90:
Over 90:
$66,000 x 0.01 =
15,000 x 0.02 =
6,000 x 0.04 =
3,000 x 0.07 =
5,000 x 0.12 =
$ 660
300
240
210
600
$2,010 credit
b.
Dec. 31 Bad Debts Expense..........................................
Allowance for Doubtful Accounts............
2,310
2,310
To record estimated bad debts.*

*
Unadjusted balance...........................
Estimated balance.............................
300 debit
2,010 credit
Required adjustment.........................
$2,310 credit
c.
1,810
1,810

*
$ 200 credit
2,010 credit
$1,810 credit

a. Computation of the estimated balance of the allowance for
uncollectibles:
$95,000 x 0.02 =
$1,900 credit
b.
To record estimated bad debts.
*
300 debit
2,200
2,200
1,900 credit
$2,200 credit
c.
1,700
1,700

*
$ 200 credit
1,900 credit
$1,700 credit
Feb. 1 Allowance for Doubtful Accounts.......................

Accounts ReceivableLaguna Co................
Accounts ReceivableMalibu Co.................
950
200
750
To write off specific accounts.
June 5 Accounts ReceivableLaguna...........................

200
200
To reinstate an account.
June 5 Cash.......................................................................
Accounts ReceivableLaguna.....................
200
200

a. Expense is 2% of credit sales
Dec. 31 Bad Debts Expense............................................
Allowance for Doubtful Accounts...............
To record estimated bad debts
[$300,000 x .02].
6,000
6,000
b. Expense is 1% of total sales

7,000
7,000
To record estimated bad debts

[($300,000 + $400,000) x .01].
c. Allowance is 8% of accounts receivable

6,200
6,200

*
Unadjusted balance....................................
Estimated balance ($65,000 x 8%).............
$1,000 debit.
5,200 credit
Required adjustment..................................
$6,200 credit

July 4 Accounts Receivable........................................
Sales.............................................................
7,160
7,160
To record sales on credit.
4 Cost of Goods Sold...........................................

Merchandise Inventory...............................
4,582
4,582
To record cost of sales.
9 Cash....................................................................
Factoring Fee Expense*....................................
Accounts Receivable..................................
19,285
1,015
20,300
To record sale of receivable. *($20,300 x .05)
17 Cash....................................................................
Accounts Receivable..................................
3,938
3,938
27 Cash....................................................................
Notes Payable..............................................
11,000
To record cash from a loan.

Note to Financial Statements
Accounts receivable in the amount of $14,700 are pledged as
security for a $11,000 note payable to Main Bank.
11,000

Nov. 1 Notes ReceivableC. Cruz.............................
Accounts ReceivableC. Cruz.................
15,000
15,000
To record receipt of note on account.
Dec. 31 Interest Receivable..........................................

Interest Revenue........................................
175
175
To record interest earned

[$15,000 x .07 x 60/360].
Apr. 30 Cash..................................................................
Notes ReceivableC. Cruz.......................
Interest Receivable....................................
15,525
15,000
350
175
To record cash received on note plus

interest earned [$15,000 x .07 x 120/360].

Mar. 21 Notes ReceivableJ. Penn.............................
Accounts ReceivableJ. Penn................
17,200
17,200
To record receipt of note on account.
Sept. 17 Accounts ReceivableJ. Penn......................

Notes ReceivableJ. Penn.......................
17,802
602
17,200
To record note dishonored plus interest

earned [$17,200 x .07 x 180/360 = $602].
Dec. 31 Allowance for Doubtful Accounts..................

Accounts ReceivableJ. Penn................
To write off an account.
17,802
17,802

Purchase price.........................................................
Closing costs............................................................
Total cost of acquisition..........................................
$404,000
21,500
$425,500
Allocation of total cost

Appraised
Value
Percent
of Total
Applying %
to Cost
Apportioned
Cost
47%
$425,500 x .47
$199,985
Land..........................
$217,140
Land improvements...........
83,160
18
$425,500 x .18
76,590
Building....................
161,700
35
$425,500 x .35
148,925
Totals........................
$462,000
100%
Journal entry
Land.....................................................................
Land Improvements...........................................
Building...............................................................
Cash.............................................................
To record costs of lump-sum purchase.
$425,500
199,985
76,590
148,925
425,500
Double-declining-balance depreciation
Depreciation rate: 100% / 4 years = 25% x 2 = 50%
Year
Beginning-Year
Book Value
Depreciation
Rate
2009.......
$102,000
2010.......
51,000
50
2011.......
25,500
50
2011.......
21,000
--
Total.......
50%
Annual
Depreciation
Year-End
Book Value
$51,000
$51,000
25,500
25,500
4,500*
--
21,000
21,000
$81,000
* Do not depreciate more than $4,500 in the third year since the
salvage value is not subject to depreciation.

Units-of-production:
Depreciation per unit = ($67,000 - $4,000) / 420,000 units = $0.15 per
unit
For 29,900 units in second year: Depreciation = 29,900 x $0.15 =
$4,485
Double-declining-balance:
Double-declining-balance rate = (100% / 10 years) x 2 = 20% per year
First years depreciation = $67,000 x 20% = $13,400
Book value at beginning of second year = $67,000 - $13,400 = $53,600
Second years depreciation = $53,600 x 20% = $10,720
Straight-line depreciation for 2009

($253,000 - $25,300) / 5 years = $45,540

1. Original cost of machine................................................
Less two years' accumulated depreciation
[($26,400 - $2,900) / 4 years] x 2 years.......................
$ 26,400
Book value at end of second year.................................
$ 14,650
2. Book value at end of second year.................................
$ 14,650
Less revised salvage value............................................
(2,050)
Remaining depreciable cost...........................................
$ 12,600
(11,750)
Revised annual depreciation = $12,600 / 3 years = $4,200

1.
Equipment...............................................................
Cash..................................................................
29,500
29,500
To record betterment.
2.
Repairs Expense....................................................
Cash..................................................................
7,375
7,375
To record ordinary repairs.
3.
Equipment...............................................................
Cash..................................................................
22,450
22,450
To record extraordinary repairs.

2013
July 1
Depreciation Expense...........................................
Accumulated Depreciation--Machinery..........
5,875
5,875
To record one-half year depreciation.*

*Annual depreciation = $94,000 / 8 years = $11,750
Depreciation for 6 months in 2013 = $11,750 x 6/12 = $5,875
1. Sold for $43,593 cash

July 1
Cash......................................................................
Accumulated DepreciationMachinery............
Gain on Sale of Machinery..............................
Machinery..........................................................
To record sale of machinery.*
*Total accumulated depreciation at date of disposal:

Four years 2009-2012 (4 x $11,750)......... $47,000
Partial year 2013 (6/12 x $11,750).............
5,875
Total accumulated depreciation.............. $52,875
Book value of machinery = $94,000 - $52,875 = $41,125
Gain on sale = $43,593 - $41,125 = $2,468
43,593
52,875
2,468
94,000
2. Destroyed by fire with $39,480 cash insurance settlement

July 1
Cash......................................................................
Loss from Fire......................................................
Accumulated DepreciationMachinery............
Machinery..........................................................
39,480
1,645
52,875
94,000
To record disposal of machinery from fire.
Loss on sale = $39,480 - $41,125 = $(1,645)

Dec. 31
Depletion ExpenseMineral Deposit...............

Accumulated DepletionMineral Deposit...
498,960
498,960
To record depletion [$3,920,000/1,400,000 tons =

$2.80 per ton; 178,200 tons x $2.80 = $498,960].
Dec. 31
Depreciation ExpenseMachinery ..................

Accumulated DepreciationMachinery......
26,730
26,730
To record depreciation [$210,000/1,400,000 tons=

$0.15 per ton; 178,200 tons x $0.15 = $26,730].

Jan.
1 Copyright.............................................................
Cash.................................................................
432,000
432,000
00
To record purchase of copyright.
Dec. 31 Amortization ExpenseCopyright...................

Accumulated AmortizationCopyright.......
To record amortization of copyright
[$432,000 / 15 years].
28,800
28,800

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Exercise 5-1 (30 minutes)

(100 x $5.00) + (80 x $6.00) + (45 x $7.00)....... $1,295

b. Weighted average perpetual

Cost of Goods Sold

(avg. cost is $6.185)

145 @ $6.185 = $ 897*

(avg. cost is $5.658)

Cost of Goods Sold

Exercise 5-1 (Continued)

Cost of Goods Sold

Alternate Solution Format for FIFO and LIFO Perpetual

(90 x $7.00) + (50 x $7.00) + (95 x $6.00).........................

(90 x $7.00) + (145 x $6.00)...............................................

Exercise 5-2 (20 minutes)

(235 units x $15 price)

Cost of goods sold........

Exercise 5-2 (Concluded)

Exercise 5-3 (30 minutes)

Cost of Goods Sold

Exercise 5-3 (Concluded)

Cost of Goods Sold

250 @ $18 = $4,500

250 @ $18 = $4,500

Alternate Solution Format

FIFO Gross Margin

LIFO Gross Margin

Exercise 5-4 (15 minutes)

Ending inventory under specific identification

7/30 purchase ( 15 @ $18).......................................

10/26 purchase ( 50 @ $23).......................................

Total ending inventory under specific identification. .

Cost of goods sold under specific identification........

b. Specific identification methodGross margin

Less: Specific identification cost of goods sold..........

Exercise 5-5 (15 minutes)

Lower of cost or market of inventory as a whole = $5,720

Lower of cost or market of inventory by product = $5,644

Exercise 5-6 (25 minutes)

Cost of goods sold

Good available for sale...

Cost of goods sold.........

Exercise 6-4 (20 minutes)

To establish a petty cash fund.

To reimburse the petty cash fund.

To reimburse the petty cash fund.*

Jan. 8 Petty Cash..........................................................

Exercise 6-5 (20 minutes)

To establish a $250 petty cash fund.

To reimburse the petty cash fund.

Exercise 6-6 (20 minutes)

NSF check from customer returned on Sept.

Interest earned on the account.

Deposit made on September 5 and

Check written by another depositor but

Bank service charge.

Checks outstanding on August 31 that

Check written against the company account

Checks written and mailed to payees on

Checks written by the company and mailed

Deposit made on September 30 after the

Special bank charge for collection of note in

Principal and interest on a note receivable to

Exercise 6-8 (25 minutes)