Question

ACCTG 331, Intermediate Accounting Simulations #3: Inventory Ch 8 and 9 25 points USE EXCEL SPREADSHEET FOR ALL OF YOUR WORK #1-Perpetual Inventory Method-Journal Entries-12 points Required: Prepare journal entries for each of the following transactions under the Perpetual Inventory method-include recording date and all required revenue, expense and balance sheet accounts. The Widget Company sells only one product (widgets) and uses FIFO. December 31, 2019 inventory is as follows: Date purchased December 5, 2019 December 20, 2019 December 28, 2019 Quantity 1,500 700 500 Unit cost $5.34 I $5.48 $5.40 1. January 2, 2020: Received 1,000 widgets with a unit cost of $6.00. The units were shipped from the supplier on December 29, 2019 FOB shipping point. The widgets were not included in the December 31, 2019 inventory. Payment terms are 2/10, net 30. The company uses the Net Method for recording payment discounts. 2. January 5, 2020: Sold 3,000 widgets for $11.00 each and shipped FOB shipping point. Payment terms are 1/10, net 30. The company uses the Gross Method for recording sales discounts. 3. January 6, 2020: Paid in full for the 1,000 widgets received on January 2, 2020. 4. January 10, 2020: Customer returned 200 of the widgets sold and shipped on January 5, 2020. All items were in excellent condition and returned to inventory. 5. January 15, 2020: Received 2,500 widgets with unit cost of $5.90. Payment terms are net 30-no payment discount offered. Atlas Freight Company billed Widgets $250.00 for delivering the widgets and Widgets paid Atlas immediately. 6. Calculate the following for January 2020: a. Inventory quantity on hand and account balance at the end of the month b. Net Sales, Cost of Goods Sold and Gross Profit for January 2020

Answer 1

Answer-1:

Debit 5,880 Credit 5,880 33,000 33,000 16,310 16,310 5,880 Date General Journal Inventory Jan.02, 2020 Account payable Account receivable Jan.05, 2020 Sales Cost of goods sold Jan.05, 2020 Inventory Account payable Jan.06, 2020 Cash Sales return and allowance Jan. 10, 2020 Account receivable Inventory Jan.10, 2020 Cost of goods sold Inventory Jan.15, 2020 Account payable Freight-in Jan.15, 2020 Cash 5,880 2,200 2,200 1,176 1,176 14,750 14,750 250 250

Answer-1(a):

Total ending inventory quantity = 3,400

Inventory account balance = $20,042

Answer-1(b):

Net sales = $33,000 - $2,200 = $30,800

Cost of goods sold = $16,130 - $1,176 = $15,134

Gross profit = Net sales - Cost of goods sold - Freight-in

                    = $30,800 - $15,134 - $250 = $15,416

Date Purchase Rate Unit Dec.31, 2019 | L 700 Jan.02, 2020 1000 5.88 FIFO COST METHOD Sale Balance Total Unit Rate Total Unit Rate Total 1500 5.34 8010 T 5.48 3836 500 5.40 2700 1500 5.34 8010 700 5.48 3836 500 5.40 2700 5880 1000 5880 1500 5.34 8010 700 5.48 3836 500 5.40 2700 300 5.88 1764 700 5.88 4116 700 5.88 4116 1176 200 5.88 1176 700 5.88 4116 200 5.88 1176 14750 T 5.90 14750 5.88 Jan.05, 2020 Jan. 10, 2020 200 5.88 Jan.15, 2020 2500 5.90 2500