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Fields and Forests Inc. is a wilderness store owned by Cirie Fields. She maintains an inventory...

  1. Fields and Forests Inc. is a wilderness store owned by Cirie Fields. She maintains an inventory of items related to camping, hunting and outdoor sports. In the month of May, Fields and Forests Inc. began the month with an inventory balance of $16,000. Purchases during the period were $24,000. Also during the month of May, Fields and Forests Inc. had $34,500 in sales as people prepare for the upcoming camping season. The cost of the inventory sold is $26,250. Assume all transactions were for cash.

    1. Prepare the entry for the purchase of inventory assuming a perpetual inventory system is used.

    2. Assuming a perpetual system is used, prepare the entry/entries for sale of inventory.

    3. What is the gross profit on the sales for the month of May?

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Answer #1
1. Entry for the purchase of inventory:
Account titles and Explanation Debit Credit
Merchandise Inventory / Inventory $24,000
     Accounts Payable / Cash $24,000
(To record inventory purchases)
2. Entries / entry for sale of inventory
Account titles and Explanation Debit Credit
Accounts Receivable / Cash $34,500
     Sales revenue $34,500
(To record sales)
Cost of Goods Sold $26,250
     Merchandise Inventory / Inventory $26,250
(To record cost of goods sold)

.

.

3. Gross profit
Sales revenue: $34,500
Less: Cost of Goods Sold $26,250
Gross Profit   $8,250
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