Question

ABC Ltd had a $24,000 beginning inventory and a $26,000 ending inventory. Net sales were $160,000; purchases, $86,000; purchase returns and allowances, $5,000; and freight-in, $6,000.

a)Cost of goods sold for the period is?

b) make the journal entries for the allowances, which is made on Jan 5th, and the freight-in, on Jan 20th.

Answer 1

Ans. A	Cost of goods sold = Beginning inventory + Net purchase + Freight in - Ending inventory
	$24,000 + $81,000 + $6,000 - $26,000
	$85,000
	*Net purchase = Purchases - Purchase returns and allowances
	$86,000 - $5,000
	$81,000
Ans. B
Date	Particulars	Debit	Credit
Jan-05	Accounts payable	$5,000
	Purchase returns and allowances		$5,000
	(To record purchase return and allowances)
Jan-20	Freight in	$6,000
	Cash		$6,000
	(To record the amount paid for freight in)