Question

comprehensive problem, please help with journal entries for the 6 transactions, t accounts provided

Bower Consulting Company started the period with cash of $25,000, 500 units of inventory with a cost of $20,000 (uses FIFO) , common stock of $20,000 and retained earnings of $25,000. Bower engaged in the following transactions in 2013:
Transactions during 2013
1	Purchased with cash 50 units of inventory for $2,500
2	Purchased on account 250 units of inventory for $14,000
3	Sold 750 units of inventory for $112,500. This was a cash sale
4	Sold 10 units of inventory for $1,500. This was a cash sale
5	Made a partial refund for 8 units to the customer who purchased the 10 units in the transaction above.
Information for Adjusting Entries
6	Bower carries only one type of inventory item. At year end the market value of each unit of inventory was $45 per unit.
	Re-evaluate the value of the ending inventory and prepare the necessary journal entry, assuming Bower applies the lower of cost or market rule to individual items

Bower Consulting Company
General Journal, 2013
Event	Account Titles	Debit	Credit
1
2
3
4
5
6

Answer 1

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Bower Consulting Company						Calculation of per unit rate:
Date	Account	Debit $	Credit $			Date
1	Inventory	2,500.00				1	Amount	2,500.00
	Cash		2,500.00				Units	50.00
	(Purchased with cash 50 units of inventory for $2,500)						Rate per unit	50.00
2	Inventory	14,000.00				2	Amount	14,000.00
	Accounts Payable		14,000.00				Units	250.00
	(Purchased on account 250 units of inventory for $14,000)						Rate per unit	56.00
3	Cash	112,500.00				3	Amount	112,500.00
	Sales		112,500.00				Units	750.00
	(Sold 750 units of inventory for cash $112,500.)						Rate per unit	150.00
3	Cost of good sold	33,700.00			As company used FIFO so -
	Inventory		33,700.00		Particulars	Units	Rate	Cost
					Opening Stock	500.00		20,000.00
					Purchased on 1	50.00		2,500.00
					Purchased on 2	200.00	56.00	11,200.00
					Cost of good sold	750.00		33,700.00
4	Cash	1,500.00				4	Amount	1,500.00
	Sales		1,500.00				Units	10.00
	(Sold 10 units of inventory for cash $1,500.)						Rate per unit	150.00
4	Cost of good sold	560.00			As company used FIFO so -
	Inventory		560.00		Particulars	Units	Rate	Cost
					Purchased on 2	10.00	56.00	560.00
					Cost of good sold	10.00		560.00
5	Sales returns	1,200.00		This is 8 units * $ 150.
	Cash		1,200.00	This is 8 units * $ 150.
5	Inventory	448.00		This is 8 units * $ 56.
	Cost of good sold		448.00	This is 8 units * $ 56.
Calculation of ending Inventory
	Particulars	Units	Rate	Cost
	Opening Stock	500.00	40.00	20,000.00
	Purchased on 1	50.00	50.00	2,500.00
	Purchased on 2	250.00	56.00	14,000.00
	Total	800.00		36,500.00
	Sales on 3	(750.00)
	Sales on 4	(10.00)
	Sales returns on 5	8.00
	Ending (units)	48.00
	Cost price	56.00		2,688.00
	Market price	45.00		2,160.00
	Value should be lower of both i.e. $ 45.
	Impact on Profit and loss			528.00
Journal entry
Date	Account	Debit $	Credit $
6	Profit and loss	528.00
	Inventory		528.00