WEEK 6 SOLUTIONS Exercise 8-1 1. To record the purchase of inventory on account and the payment of freight charges Inventory 5,000 Accounts payable 5,000 Inventory 300 Cash 300

WEEK 6 SOLUTIONS

Exercise 8-1

1. To record the purchase of inventory on account and the payment of freight charges

Inventory 5,000

Accounts payable 5,000

Inventory 300

Cash 300

2. To record purchase returns

Accounts payable 600

Inventory 600

3. To record cash sales and cost of goods sold

Cash 5,200

Sales revenue 5,200

Cost of goods sold 2,800

Inventory 2,800

Exercise 8-9

Requirement 1

Purchase price = 1,000 units x \$50 = \$50,000

July 15, 2013

Purchases 50,000

Accounts payable 50,000

July 23, 2013

Accounts payable 50,000

Cash (98% x \$50,000) 49,000

Purchase discounts (2% x \$50,000) 1,000

Requirement 2

August 15, 2013

Accounts payable 50,000

Cash 50,000

Requirement 3

The July 15 entry would include a debit to the inventory account instead of to purchases, and the July 23 entry would include a credit to the inventory account instead of to purchase discounts.

Exercise 8-13

Cost of goods available for sale:

Beginning inventory (2,000 x \$6.10) \$12,200

Purchases:

10,000 x \$5.50 \$55,000

6,000 x \$5.00 30,000 85,000

Cost of goods available (18,000 units) \$97,200

First in, first out (FIFO)

Cost of goods available for sale (18,000 units) \$97,200

Less: Ending inventory (determined below) (15,000)

Cost of goods sold \$82,200

Cost of ending inventory:

Date of

purchase Units Unit cost Total cost

August 18 3,000 \$5.00 \$15,000

Last-in, first-out (LIFO)

Cost of goods available for sale (18,000 units) \$97,200

Less: Ending inventory (determined below) (17,700)

Cost of goods sold \$79,500

Cost of ending inventory:

Date of

purchase Units Unit cost Total cost

Beg. Inv. 2,000 \$6.10 \$12,200

August 8 1,000 5.50 5,500

Total \$17,700

Exercise 8-13 (concluded)

Average cost

Cost of goods available for sale (18,000 units) \$97,200

Less: Ending inventory (determined below) (16,200)

Cost of goods sold \$81,000 *

Cost of ending inventory:

\$97,200

Weighted-average unit cost = = \$5.40

18,000 units

3,000 units x \$5.40 = \$16,200

* Alternatively, it could be determined by multiplying the units sold by the average

cost: 15,000 units x \$5.40 = \$81,000

ATTACHMENT PREVIEW

WEEK 6 SOLUTIONS
Exercise 8-1
1.
To record the purchase of inventory on account and the payment of freight
charges
Inventory.
………………………………………………………………………
5,000
……………………………………………………………
Accounts payable
……………………………………………………………………………..
5,000
Inventory.
………………………………………………………………………
300
………………………………………………………………………………
Cash
………………………………………………………………………………..
300
2.
To record purchase returns
Accounts payable.
…………………………………………………………..
600
……………………………………………………………………….
Inventory
………………………………………………………………………………..
600
3.
To record cash sales and cost of goods sold
Cash.
……………………………………………………………………………..
5,200
………………………………………………………………….
Sales revenue
……………………………………………………………………………..
5,200
Cost of goods sold.
………………………………………………………….
2,800
……………………………………………………………………….
Inventory
……………………………………………………………………………..
2,800

Unlock Solution Unlocking…

Exercise 8-9
Requirement 1
Purchase price
=
1,000 units x \$50
=
\$50,000
July 15, 2013
Purchases.
………………………………………………………………………
50,000
……………………………………………………………
Accounts payable
……………………………………………………………………………
50,000
July 23, 2013
Accounts payable.
…………………………………………………………..
50,000
…………………………………………………………………………
Cash
(98% x \$50,000)
……………………………………………………………………………………..
49,000
………………………………………………………
Purchase discounts
(2% x \$50,000)
……………………………………………………………………………………..
1,000
Requirement 2
August 15, 2013
Accounts payable.
…………………………………………………………..
50,000
………………………………………………………………………………
Cash
……………………………………………………………………………
50,000
Requirement 3
The July 15 entry would include a debit to the
inventory