Question

Exercise B-09 Nash Company sells one product. Presented below is information for January for Nash Company, Jan. 1 Inventory 102 units at $5 each 4 Sale 81 units at $8 each 11 Purchase 158 units at $6 each 13 Sale 126 units at $9 each 20 Purchase 152 units at $6 each 27 Sale 98 units at $10 each Nash uses the FIFO cost flow assumption. All purchases and sales are an account. Your answer is correct. Assume Nash uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 107 units. (If no entry is required, select "No entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Date Jan. 4 1 648 T 648 Jan. 11 a 948 Jan. 13 Accounts Receivable * Sales Revenue purchases Accounts Payable Taccounts Receivable * Sales Revenue P urchases 1 Accounts Payable Accounts Receivable Sales Revenue Jan. 20 BERPES EEEE SEDE Jan. 27 980 T Jan. 31 Inventory 6421 t 1728 cost of Goods Sold 1 Purchases T Inventory

Answer 1

Assume Nash uses a prepetual system. As Nash using the FIFO method that means goods bought first should be sold first. Date Account Titles and Explanation Debit Credit Jan 4 648 Accounts receivable (81 $ 8) Sales revenue 648 405 Cost of goods sold (81 x $5) Inventory Jan 11 948 Inventory (158 x $ 6) Accounts payable Jan 13 1,134 Accounts receivable (126 x $ 9) Sales revenue 1,134 735 Cost of goods sold (W.N1) Inventory 735 Jan 20 912 Inventory (152 x $ 6) Accounts payable Jan 27 980 Accounts receivable (98 x $ 10) Sales revenue 980 588 Cost of goods sold (W.N 2) Inventory 588

Working Notes Calculation of Cost of goods sold (W.N 1) Jan 13 beginning Inventory Less: Sale on Jan 4 Units left after sale 102 (81) 105 beginning Inventory (21 units x $5) Inventory from Jan 11 Purchases ((126-21) Ⓡ$ 6] Cost of goods sold 630 735 (W.N 2) Jan 27 All the beginning inventory was sold on Jan 13 and cost of purchases for Jan 11 and Jan 20 is $6. Therefore cost of goods sold would be units sold x $ 6 Number of units sold 98 Cost of goods sold (98 $ 6) 588 Computation of Gross Profit Sales (648 + 1,134 +980) Less: Cost of goods sold (405 +465 +588) Gross Profit 2,762 (1,728) 1,034 Gross Profit $ 1,034