Question

Riverbed Corporation sells one product, with information for July as follows:

July	1		Inventory		100 units at $16.00 each
	4		Sale		80 units at $20.00 each
	11		Purchase		150 units at $16.40 each
	13		Sale		120 units at $18.80 each
	20		Purchase		160 units at $16.40 each
	27		Sale		100 units at $20.90 each

Riverbed uses the FIFO cost formula. All purchases and sales are on account. Ignore any estimated returns on purchases and sales.

1. Assume Riverbed uses a periodic system. Prepare all journal entries needed, including the end-of-month adjusting entry to record cost of goods sold. A physical count indicates that the ending inventory for July is 110 units
2. Calculate gross profit using the periodic system
3. Assume Riverbed uses a perpetual system. Prepare all July journal entries

• (To record sales on account) – July 4
• (To record cost of goods sold) – July 4
• (To record sales on account) – July 11&13
• (To record COGS) – July 13
• (To record sales on account) – July 20&27
• (To record COGS) – July 27

4. Calculate gross profit using the perpetual system

Answer 1

a.

Date	Account Titles	Debit	Credit
Jul-04	Accounts Receivable	$             1,600
	Sales Revenue		$               1,600
Jul-11	Purchase	$             2,460
	Accounts Payable		$               2,460
Jul-13	Accounts Receivable	$             2,256
	Sales Revenue		$               2,256
Jul-20	Purchase	$             2,624
	Accounts Payable		$               2,624
Jul-27	Accounts Receivable	$             2,090
	Sales Revenue		$               2,090
Jul-31	Inventory, Ending	$             1,804
	Cost of Goods sold	$             4,880
	Purchases		$               5,084
	Inventory, Beginning		$               1,600

b. Gross profit = Sales Revenue - Cost of Goods Sold

= $5946 - 4880 = $1066

c.

Date	Account Titles	Debit	Credit
Jul-04	Accounts Receivable	$             1,600
	Sales Revenue		$               1,600
	Cost of Goods Sold	$             1,280
	Inventory		$               1,280
Jul-11	Inventory	$             2,460
	Accounts Payable		$               2,460
Jul-13	Accounts Receivable	$             2,256
	Sales Revenue		$               2,256
	Cost of Goods Sold	$             1,960
	Inventory		$               1,960
Jul-20	Purchase	$             2,624
	Accounts Payable		$               2,624
Jul-27	Accounts Receivable	$             2,090
	Sales Revenue		$               2,090
	Cost of Goods Sold	$             1,640
	Inventory		$               1,640

d. Gross profit = Sales Revenue - Cost of Goods Sold

= $5946 - 4880 = $1066