Chippewas Company sells one product. Presented below is information for January

Question

Chippewas Company sells one product. Presented below is information for January for Chippewas Company.

Chippewas uses the FIFO cost flow assumption. All purchases and sales are on account.

A. Assume Chippewas uses the perpetual system. Prepare all necessary journal entries.

B. Comput gross profit using the perpetual system.

Jan. 1 Inventory 100 units at $6 each 4 Sale 80 units at $8 each 11 Purchase 150 units at $6.5 each 13 Sale 120 units at $8.75 each 20 Purchase 160 units at $7 each 27 Sale 100 units at $9 each

Explanation / Answer

A. Assume Chippewas uses the perpetual system. Prepare all necessary journal entries.

January 4

Debit: Accounts receivable 640 (80 at 8)

Credit: Sales revenue 640 (80 at 8)

Debit: Cost of goods sold 480 (80 at 6)

Credit: Merchandise inventory 480 (80 at 6)

January 11

Debit: Merchandise inventory 975 (150 at 6.5)

Credit: Accounts payable 975 (150 at 6.5)

January 13

Debit: Accounts receivable 1050 (120 at 8.75)

Credit: Sales revenue 1050 (120 at 8.75)

Debit: Cost of goods sold 770 (20 at 6 plus 100 at 6.5)

Credit: Merchandise inventory 770 (20 at 6 plus 100 at 6.5)

January 20

Debit: Merchandise inventory 1120 (160 at 7)

Credit: Accounts payable 1120 (160 at 7)

January 27

Debit: Accounts receivable 900 (100 at 9)

Credit: Sales revenue 900 (100 at 9)

Debit: Cost of goods sold 675 (50 at 6.5 plus 50 at 7)

Credit: Merchandise inventory 675 (50 at 6.5 plus 50 at 7)

B. Comput gross profit using the perpetual system.

Sales revenue = 640 + 1050 + 900 = 2590

Cost of goods sold = 480 + 770 + 675 = 1925

Gross profit = 2590

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.