3.Racers ATVs sells many makes and models of all terrain vehicles. Racers uses a
ID: 2351672 • Letter: 3
Question
3.Racers ATVs sells many makes and models of all terrain vehicles. Racers uses a periodic inventory system. On January 1, Racers had a beginning inventory of AXVs costing $28,600. On January 14, Racers received a shipment of Model AXVs with a purchase price of $14,700 and transportation costs of $400. On May 19, Racers received a second shipment of AXVs with a purchase price of $16,900 and transportation costs of $450. On November 1, Racers received its before Christmas shipment of AXVs with a purchase price of $27,800 and transportation costs of $750.a.Make the necessary journal entries for January 14, May 19, and November 1 to show the purchase of the inventory.
b.Assume that a physical inventory count on December 31 showed an ending inventory of AXVs of $25,800. Determine cost of goods sold for the AXV model for the year.
c.If sales of AXVs were $96,700, what profit did Racers make on this model?
Explanation / Answer
a.
Jan. 14
Dr. Purchase 15,100
Cr. Accounts payable 15,100
May 15
Dr. Purchase 17,350
Cr. Accounts payable 17,350
Nov. 1
Dr. Purchase 28,550
Cr. Accounts payable 28,550
b.
Since there are no data about units, I assumed there is no shrinkage.
Dr. Cost of goods sold 63,800
Cr. Inventory 2,800
Purchase 61,000
c.
Profit = sales - cost of goods sold = 96,700 - 63,800 = 32,900
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