The beginning inventory at Midnight Supplies and data on purchases and sales for
ID: 2516853 • Letter: T
Question
The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:
Date
Transaction
Number of Units
Per Unit
Total
Jan.
1
Inventory
7,500
$ 75.00
$ 562,500
10
Purchase
22,500
85.00
1,912,500
28
Sale
11,250
150.00
1,687,500
30
Sale
3,750
150.00
562,500
Feb.
5
Sale
1,500
150.00
225,000
10
Purchase
54,000
87.50
4,725,000
16
Sale
27,000
160.00
4,320,000
28
Sale
25,500
160.00
4,080,000
Mar.
5
Purchase
45,000
89.50
4,027,500
14
Sale
30,000
160.00
4,800,000
25
Purchase
7,500
90.00
675,000
30
Sale
26,250
160.00
4,200,000
Instructions
1.
Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in
Exhibit 3
, using the first-in, first-out method.
2.
Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.
3.
Determine the gross profit from sales for the period.
4.
Determine the ending inventory cost as of March 31.
5.
Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?
CHART OF ACCOUNTS
Midnight Supplies
General Ledger
ASSETS
110
Cash
111
Petty Cash
120
Accounts Receivable
131
Notes Receivable
132
Interest Receivable
141
Inventory
145
Office Supplies
146
Store Supplies
151
Prepaid Insurance
181
Land
191
Office Equipment
192
Accumulated Depreciation-Office Equipment
193
Store Equipment
194
Accumulated Depreciation-Store Equipment
LIABILITIES
210
Accounts Payable
221
Notes Payable
222
Interest Payable
231
Salaries Payable
241
Sales Tax Payable
EQUITY
310
Common Stock
311
Retained Earnings
312
Dividends
313
Income Summary
REVENUE
410
Sales
610
Interest Revenue
EXPENSES
510
Cost of Goods Sold
515
Credit Card Expense
516
Cash Short and Over
520
Salaries Expense
531
Advertising Expense
532
Delivery Expense
533
Insurance Expense
534
Office Supplies Expense
535
Rent Expense
536
Repairs Expense
537
Selling Expenses
538
Store Supplies Expense
561
Depreciation Expense-Office Equipment
562
Depreciation Expense-Store Equipment
590
Miscellaneous Expense
710
Interest Expense
1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in
Exhibit 3
, using the first-in, first-out method. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.
Date
Purchases
Cost of goods Sold
Inventory
Date
Quantity
Unit Cost
Total Cost
Quantity
Unit Cost
Total Cost
Quantity
Unit Cost
Total Cost
Jan. 1
10
10
28
28
30
Feb. 5
10
10
16
16
28
Mar. 5
5
14
14
25
25
30
30
31
Balances
2. Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.
PAGE 10
JOURNAL
ACCOUNTING EQUATION
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
ASSETS
LIABILITIES
EQUITY
1
2
3
4
3. Determine the gross profit from sales for the period.
4. Determine the ending inventory cost as of March 31.
5. Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?
Higher
Lower
Date
Transaction
Number of Units
Per Unit
Total
Jan.
1
Inventory
7,500
$ 75.00
$ 562,500
10
Purchase
22,500
85.00
1,912,500
28
Sale
11,250
150.00
1,687,500
30
Sale
3,750
150.00
562,500
Feb.
5
Sale
1,500
150.00
225,000
10
Purchase
54,000
87.50
4,725,000
16
Sale
27,000
160.00
4,320,000
28
Sale
25,500
160.00
4,080,000
Mar.
5
Purchase
45,000
89.50
4,027,500
14
Sale
30,000
160.00
4,800,000
25
Purchase
7,500
90.00
675,000
30
Sale
26,250
160.00
4,200,000
Instructions
1.
Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in
Exhibit 3
, using the first-in, first-out method.
2.
Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.
3.
Determine the gross profit from sales for the period.
4.
Determine the ending inventory cost as of March 31.
5.
Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?
CHART OF ACCOUNTS
Midnight Supplies
General Ledger
ASSETS
110
Cash
111
Petty Cash
120
Accounts Receivable
131
Notes Receivable
132
Interest Receivable
141
Inventory
145
Office Supplies
146
Store Supplies
151
Prepaid Insurance
181
Land
191
Office Equipment
192
Accumulated Depreciation-Office Equipment
193
Store Equipment
194
Accumulated Depreciation-Store Equipment
LIABILITIES
210
Accounts Payable
221
Notes Payable
222
Interest Payable
231
Salaries Payable
241
Sales Tax Payable
EQUITY
310
Common Stock
311
Retained Earnings
312
Dividends
313
Income Summary
REVENUE
410
Sales
610
Interest Revenue
EXPENSES
510
Cost of Goods Sold
515
Credit Card Expense
516
Cash Short and Over
520
Salaries Expense
531
Advertising Expense
532
Delivery Expense
533
Insurance Expense
534
Office Supplies Expense
535
Rent Expense
536
Repairs Expense
537
Selling Expenses
538
Store Supplies Expense
561
Depreciation Expense-Office Equipment
562
Depreciation Expense-Store Equipment
590
Miscellaneous Expense
710
Interest Expense
Explanation / Answer
STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jan 7500 75 562500 10-Jan 22500 85 1912500 7500 75 562500 22500 85 1912500 28-Jan 7500 75 562500 3750 85 318750 18750 85 1593750 30-Jan 3750 85 318750 15000 85 1275000 5-Feb 1500 85 127500 13500 85 1147500 10-Feb 54000 87.5 4725000 13500 85 1147500 54000 87.5 4725000 16-Feb 13500 85 1147500 13500 87.5 1181250 40500 87.5 3543750 28-Feb 25500 87.5 2231250 15000 87.5 1312500 5-Mar 45000 89.5 4027500 15000 87.5 1312500 45000 89.5 4027500 14-Mar 15000 87.5 1312500 15000 89.5 1342500 30000 89.5 2685000 25-Mar 7500 90 675000 30000 89.5 2685000 7500 90 675000 30-Mar 26250 89.5 2349375 3750 89.5 335625 7500 90 675000 TOTAL 129000 11340000 130 10891875 11250 1010625 Req 2: Date Description Debit Credit Assets Liabilities Equity 1 31-Mar Accounts receivable Dr. 19,875,000 19,875,000 Sales revenue 19,875,000 19,875,000 2 31-Mar Cost of goods Sold Dr. 10,891,875 -10,891,875 Inventory 10,891,875 -10,891,875 Req 3 Gross profit: Total sales 19,875,000 Les: COGS 10,891,875 Gross profit: 8,983,125 Req 4: Ending balancec of Inventory is $ 1010,625 Req 5: Lower, as the prices are rising the ending inventory in LIFO is based on earliest purchases.
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