Question

Exercise 8-09 Whispering Company sells one product. Presented below is information for January for Whispering Company. Jan. 1 4 11 13 20 27 Inventory Sale Purchase Sale Purchase Sale 111 units at $5 each 90 units at $8 each 159 units at $6 each 130 units at $9 each 149 units at $7 each 85 units at $11 each Whispering uses the FIFO cost flow assumption. All purchases and sales are on account. Assume Whispering 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 114 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.) Date Account Titles and Explanation Debit Credit Jan. 4 Accounts Receivable 720 Sales Revenue 720 Jan. 11 Purchases 954 Accounts Payable 954 Jan. 13 Accounts Receivable 1170 Sales Revenue 1170

Answer 1

Part 1

FIFO Periodic Inventory System
Date	Accounts title	Debit	Credit
Jan 4	Accounts receivable	$                720
	Sales revenue		$                720
	To record sales revenue on account. (90*8)
Jan 11	Purchase	$                954
	Accounts payable		$                954
	To record inventory purchased on account. (159*6)
Jan 13	Accounts receivable	$             1,170
	Sales revenue		$             1,170
	To record sales revenue on account. (130*9)
Jan 20	Purchase	$             1,043
	Accounts payable		$             1,043
	To record inventory purchased on account. (149*7)
Jan 27	Accounts receivable	$                935
	Sales revenue		$                935
	To record sales revenue on account. (85*11)
Jan 31	Inventory (ending) (114*7)	$                798
	Cost of goods sold (Balancing figure) (1997+555-798)	$             1,754
	Purchases (954+1043)		$             1,997
	Inventory (beginning) (111*5)		$                555
	To close the purchase account. As per the FIFO, most recent cost is assigned to ending inventory. Ending inventory is 114 which consists of 114 units @$7 from units purchased on Jan 20

Sales revenue (720+1170+935)	$        2,825
Less: cost of goods sold	$        1,754
Gross profit	$        1,071

Part 2

First In First Out (FIFO) Method						Perpetual Inventory System
Date	Purchase			Cost of goods sold			Inventory on Hand
	Qty	Price	Value	Qty	Price	Value	Qty	Price	Value
Jan 1							111	5	555
Jan 4				90	5	450	21	5	105
Jan 11	159	6	954				21	5	105
							159	6	954
Jan 13				21	5	105	50	6	300
				109	6	654
Jan 20	149	7	1043				50	6	300
							149	7	1043
Jan 27				50	6	300	114	7	798
				35	7	245
Total Cost of goods sold						$        1,754	Ending Inventory		$        798

FIFO Perpetual Inventory System
Date	Accounts title	Debit	Credit
Jan 4	Accounts receivable	$                720
	Sales revenue		$                720
	To record sales revenue on account. (90*8)
Jan 4	Cost of goods sold	$                450
	Inventory		$                450
	To record the cost of inventory sold
Jan 11	Inventory	$                954
	Accounts payable		$                954
	To record inventory purchased on account. (159*6)
Jan 13	Accounts receivable	$             1,170
	Sales revenue		$             1,170
	To record sales revenue on account. (130*9)
Jan 13	Cost of goods sold	$                759
	Inventory		$                759
	To record the cost of inventory sold (105+654)
Jan 20	Inventory	$             1,043
	Accounts payable		$             1,043
	To record inventory purchased on account. (149*7)
Jan 27	Accounts receivable	$                935
	Sales revenue		$                935
	To record sales revenue on account. (85*11)
Jan 27	Cost of goods sold	$                545
	Inventory		$                545
	To record the cost of inventory sold (300+245)

Sales revenue (720+1170+935)	$        2,825
Less: cost of goods sold (450+759+545)	$        1,754
Gross profit	$        1,071