CPI sells computer peripherals. At December 31, year 1, CPI’s inventory amounted to $670,000. During the first week in January, year 2, the company made only one purchase and one sale. These transactions were as follows. Jan. 2 Purchased 20 modems and 80 printers from Sharp. The total cost of these machines was $42,000, terms 3/10, n/60. Jan. 6 Sold 30 different types of products on account to Pace Corporation. The total sales price was $27,000, terms 5/10, n/90. The total cost of these 30 units to CPI was $14,040 (net of the purchase discount). CPI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable. Required: b. Prepare journal entries to record these transactions, assuming that CPI uses a perpetual inventory system. c. Compute the balance in the Inventory account at the close of business on January 6. d. Prepare journal entries to record the two transactions, assuming that CPI uses a periodic inventory system. e. Compute the cost of goods sold for the first week of January assuming use of the periodic system. (Use your answer to part c as the ending inventory.) g. Compute the gross profit margin on the January 6 sales transaction.

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter20: Accounting For Inventory

Section: Chapter Questions

Problem 1MP

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CPI sells computer peripherals. At December 31, year 1, CPI’s inventory amounted to $670,000. During the first week in January, year 2, the company made only one purchase and one sale. These transactions were as follows.

Jan.	2		Purchased 20 modems and 80 printers from Sharp. The total cost of these machines was $42,000, terms 3/10, n/60.
Jan.	6		Sold 30 different types of products on account to Pace Corporation. The total sales price was $27,000, terms 5/10, n/90. The total cost of these 30 units to CPI was $14,040 (net of the purchase discount).

CPI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable.

Required:

b. Prepare journal entries to record these transactions, assuming that CPI uses a perpetual inventory system.

c. Compute the balance in the Inventory account at the close of business on January 6.

d. Prepare journal entries to record the two transactions, assuming that CPI uses a periodic inventory system.

e. Compute the cost of goods sold for the first week of January assuming use of the periodic system. (Use your answer to part c as the ending inventory.)

g. Compute the gross profit margin on the January 6 sales transaction.

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