Concept explainers
LO 1, 2
(Learning Objectives 1, 2: Show how to account for inventory transactions; apply the FIFO cost method) Spear Corporation’s inventory records for its retail division show the following at May 31:
May 1 | Beginning inventory ......... | 10 units @ $160 = $1,600 |
15 | Purchase ........................... | 5 units@ 161 = 805 |
26 | Purchase ............................ | 14 units @ 170 = 2,380 |
At May 31, 11 of these units are on hand. Journalize the following for Spear Corporation under the perpetual system.
1. Total May purchases in one summary entry. All purchases were on credit.
2. Total May sales and cost of goods sold in two summary entries. The selling price was $560 per unit, and all sales were on credit. Assume that Spear uses the FIFO inventory method.
3. Under FIFO, how much gross profit would Spear earn for the month ending May 31? What is the FIFO cost of Spear Corporation’s ending inventory?
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Financial Accounting (12th Edition) (What's New in Accounting)
- (Learning Objectives 1, 2: Show how to account for inventory transactions; applythe FIFO cost method) Accounting records for Jubilee Corporation yield the following datafor the year ended June 30, 2018 (assume sales returns are non-existent):Inventory, June 30, 2017.......................................................................... $ 7,000Purchases of inventory (on account)......................................................... 61,000Sales of inventory—77% on account; 23% for cash (cost $49,000).........Inventory at FIFO, June 30, 2018 ............................................................100,00019,000Requirements1. Journalize Jubilee’s inventory transactions for the year under the perpetual system.2. Report ending inventory, sales, cost of goods sold, and gross profit on the appropriatefinancial statement.arrow_forward(Learning Objectives 4, 5: Compute gross profit; estimate inventory using the grossprofit method) Cleveland Company, a camera store, lost some inventory in a fire on October15. To file an insurance claim, the company must estimate its October 15 inventory using thegross profit method. For the past two years, Cleveland Company’s gross profit has averaged41% of net sales. Its inventory records reveal the following data:Inventory, October 1................ $ 57,700Transactions October 1–15:Purchases ................................. 490,800Purchase discounts................... 17,000Purchase returns....................... 70,900Sales......................................... 660,000Requirements1. Estimate the cost of the lost inventory using the gross profit method.2. Prepare the income statement for October 1 to October 15 for this product through grossprofit. Show the detailed computations of cost of goods sold in a separate schedule.arrow_forward(Learning Objective 2: Calculate purchases by analyzing inventory account activity)On Willow Grove Department Stores’ most recent balance sheet, the balance of its inventory at the beginning of the year was $12,000. At the end of the year, the inventory balancewas $14,500. During that year, its cost of goods sold was $55,000. All purchases of inventorythroughout the year were on account. What was the total of Willow Grove’s purchases duringthe year?arrow_forward
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