7A) Backwoods Inc. purchases $20,000 of inventory on Jun 1, 20xx with terms of 2

Question

7A) Backwoods Inc. purchases $20,000 of inventory on Jun 1, 20xx with terms of 2/10, N/30 shipped FOB shipping point with $500 of freight costs. The company uses the perpetual inventory method. On Jun 4, Backwoods returns $1,500 of the goods to the seller for a full credit. Backwoods Inc. pays for the inventory on Jun 9, 20xx by authorizing an electronic transfer to the supplier. Make the appropriate journal entries for these transactions.

B) Calculate COGS for Horse Feathers. The company uses the periodic inventory method and had purchases of inventory of $184; purchases returns of $12; purchases discounts of $6; freight-in $6.5 and freight-out costs of $18.5. The beginning inventory was $22 and the ending inventory is $8.

Explanation / Answer

7A) Journal Entries (Amount in $)

7B) Calculation of cost of goods sold (Amount in $)

Date Account Titles Debit   Credit June 1 Inventory 20,000 Accounts Payable 20,000 (To record the purchase of inventory on credit) June 1 Freight in 500 Cash 500 (To record payment in cash) June 4 Accounts Payable 1,500 Inventory 1,500 (To record the returns of inventory to seller) June 9 Accounts Payable (20,000-1,500) 18,500 Discount Received (18,500*2%) 370 Cash (18,500-370) 18130 (To record the payment made to supplier within discount period)

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