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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Identify items missing in determining cost of merchandise sold

For (a) through (d), identify the items designated by X and Y.

  1. a. Purchases − (X + Y) = Net purchases.
  2. b. Net purchases + X = Cost of merchandise purchased.
  3. c. Merchandise inventory (beginning) + Cost of merchandise purchased = X.
  4. d. Merchandise available for sale − X = Cost of merchandise sold before estimated returns.
  5. e. Cost of merchandise sold before estimated returns − X = Cost of merchandise sold.

To determine

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

To Identify: The item designated by the letters X, and Y.

Explanation

Identify the item designated by the letters X, and Y for the following given equation.

a.

Given equation:

      Purchases(X+Y)=Net purchases[Purchases(Purchase returns and allowances+Purchase discount)]=Net purchases

Explanation:

‘Purchase returns and allowances’, and ‘purchase discount’ are to be added together and then deducted from the purchases to determine the net purchases.

Therefore, the designated letters X and Y denotes ‘Purchase returns and allowances’, and ‘purchase discount’.

b.

Given equation:

     Netpurchases+X=CostofgoodspurchasedNetpurchases+Freight-in=Costofgoodspurchased

Explanation:

Freight-in is always added to the net purchases to determine cost of goods purchased.

Therefore, the designated letters X denotes ‘Freight-in’.

c.

Given equation:

Merchandiseinventory(beginning)+Costofmerchandise purchased=X[Merchandiseinventory(beginning)+Costofmerchandise purchased]=(Costofmerchandiseavailableforsale)

Explanation:

Cost of merchandise available for sale is calculated by adding beginning inventory to the cost of merchandise purchased

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