ADM 1340 Lecture Notes - Lecture 5: Perpetual Inventory, Accounts Receivable, Income Statement

58 views10 pages

rubytoad231

21 Feb 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

ceruleanclam927 and 54 others unlocked

ADM 1340 Full Course Notes

Verified Note

42 documents

Document Summary

Prepare entries for purchases and sales under a perpetual inventory system. Prepare entries for purchases and sales under a periodic inventory system. Prepare a single-step and a multiple-step income statement. Merchandising involves purchasing products (inventory) to resell to customers. A merchandising company keeps track of its inventory to determine what is available for sale (inventory) and what has been sold (cost of goods sold). Two systems to account for inventory: perpetual, periodic. Recording purchases of merchandise: purchases, sales taxes. Do not form part of the cost of the merchandise: freight costs. Costs of transporting the goods to the buyer"s place of business. Freight terms state who pays the freight charges. Fob shipping point: journal entry for the buyer. No journal entry for the seller: purchase returns and allowances. Purchase return: the buyer returns the goods to the seller and receives a cash refund or credit. Purchase allowance: the seller gives an allowance (deduction) from the purchase price.

Related Questions

The following data were extracted from the accounting records ofHarkins company for the year ended April 30,2014:

merchandise inventory, may 1,2013 380,000

merchandise incentory, april 30,2014 415,000

purchases 3,800,000

purchases returns and allowances 150,000

purchases discounts 80,000

sales 5,850,000

freight in 16,600

a) prepare the cost of merchandise sold section of the yearended April 30,2014, using the periodic inventory system.

b) determine the gross profit to be reported on the incomestatement for the year ended April 30,2014.

c) would gross profit be different if the perpetual inventorysystem was used instead of the periodic inventory system?

beigetortoise309

Consider the following partially completed income statements for merchandising companies and compute the missingâ amounts under the Flynt Corp. table below the following Data Table:

â view the Incomeâ Statements:

Data Table :

		Rustic Gear		Flynt Corp.
Sales		$	98,000	$	(d)
Cost of Goods Sold:
	Beginning Merchandise Inventory		(a)		31,000
	Purchases and Freight In		50,000		(e)
	Cost of Goods Available for Sale		(b)		91,000
	Ending Merchandise Inventory		(2,200)		(2,200)
	Cost of Goods Sold		63,000		(f)
Gross Profit			35,000		114,000
Selling and Administrative Expenses			(c)		86,000
Operating Income		$	10,000	$	(g)

		Rustic Gear
Sales		$98,000
Cost of Goods Sold:
	Beginning Merchandise Inventory	15,200
	Purchases and Freight In	50,000
	Cost of Goods Available for Sale	65,200
	Ending Merchandise Inventory	(2,200)
	Cost of Goods Sold	63,000
Gross Profit		35,000
Selling and Administrative Expenses		25,000
Operating Income		$10,000

	Flynt Corp.

	__?___
	$31,000
	__?___
	91,000
	(2,200)

	114,000
	86,000
	__?____

a.) Given the following information about purchases and salesduring the year, compute the cost to be assigned to endinginventory under each of three methods: (a) average-cost, (b) FIFO,and (c) LIFO. (Show your work.)

Assume that a periodic inventory system is used.

Jan.	1	Beginning inventory	225 items @ $3 =	$ 675
May	1	Purchases	675 items @ $6 =	4,050
		Totals	900 items	$4,725
		Total sales	450 items
Dec.	31	Ending inventory	450 items

b.) Assuming a perpetual inventory system is used, use thefollowing information to calculate cost of goods sold on anaverage-cost basis.

Dec.	1	Beginning inventory	50 units @ $22
	9	Purchases	50 units @ $24
	17	Sales	25 units
	22	Purchases	75 units @ $27
	27	Sales	40 units

rosesea-lion249

ADM 1340 Lecture Notes - Lecture 5: Perpetual Inventory, Accounts Receivable, Income Statement

ADM 1340 Full Course Notes

Document Summary

Get access

Related Documents

ADM 1340 Lecture Notes - Lecture 5: Three Steps, Gross Margin, Profit Margin

ADM 1340 Lecture Notes - Lecture 5: Gross Profit, Gross Margin, Uptodate

ADM 1340 Chapter Notes - Chapter 5: Shoppers Drug Mart, Perpetual Inventory, Purchase Order

Related Questions