Homework Answers
The following are the accounts involved when inventory is purchased:
1. Cash - If purchase is made for cash, this account in found in balance sheet under current assets.
2.Accounts payable- If purchase is made on account, this account is found in balance sheet under current liabilities.
3.Merchandise Inventory: This account is debited when inventory in form of finished goods or merchandise is purchased, irrespective of it being a cash transaction or account transaction, this account is found in balance sheet under current assets.
4.Raw materials inventory:This account is debited when raw material inventory is purchased, irrespective of it being a cash transaction or account transaction, this account is found in balance sheet under current assets.
The following accounts are involved when inventory is sold:
1.Cost of goods sold: When merchandise inventory is sold , cost of goods sold is debited, this account is found in income statement.
2.Merchandise inventory account is credited, this account is found in balance sheet.
The following accounts are involved when raw material inventory is used:
1.Work in process account is debited when raw material is used for production, this account is found in balance sheet as current assets.
2.Raw material inventory will be debited.
Example:
When walmart procures merchandise from Wonder nation by paying cash $10,000. the following will be the journal entry:
Merchandise inventory a/c..............$10,000.
..............To cash a/c.........................................$10,000.
When the same merchandise in purchased on account:
Merchandise inventory a/c...........$10,000...
............To Accounts payable - Wonder nation a/c ......$10,000..
Add Answer to:
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from the income statement and balance sheet of Belmond, Inc. is
found here:
.
a. How much is the firm's net working capital?
b. Complete an income statement and a balance sheet for
Belmond.
c. If you were asked to respond to parts (a)and (b) as part of
a training exercise, what could you tell your boss about the
company's financial condition based on your answers?
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