Question

E 6.4

on hand, at a cost of $4.00 s are on account. A record record journal gross profit b. Calculate ending inven c. Prepare the journal entry to record the December 22 abil E6.4 (LO 2) AP On May 1, Black Bear Company had 400 units of inventory on hand. each. The company uses a perpetual inventory system. All purchases and sales are on a of inventory transactions for the month of May for the company is as follows: Purchases Sales May 4 1,300 @ $4.10 May 3 300 @ $7.00 14 700 @ $4.40 16 1,000 @ $7.00 500 @ $4.75 400 @ $7.50 Instructions a. Calculate the cost of goods sold and ending inventory using FIFO. b. Prepare journal entries to record the May 4 purchase and the May 3 and 16 sales. c. Calculate gross profit for May DEHAANILA

Answer 1

Solution Required a.: Perpetual FIFO: Goods Purchased Cost of Goods Sold Inventory Balance #of #of units Cost per Cost per Cost per Date Cost of Goods Sold #of units Inventory Balance units sold unit unit unit May 1 4.00 1,600.00 400 300 4.00 100 S 4.00 May 3 1,200.00 400.00 May 4 4.10 4.00 1300 100 400.00 1300 @ 4.10 5,330.00 700 May 14 4.40 100 @ 4.00 400.00 $ 1300 4.10 5,330.00 700 4.40 3,080.00 4.00 400.00 May 16 100 400 4.10 1,640.00 3,690.00 4.40 900 4.10 700 3,080.00 May 18 4.40 400 @ 4.10 1,640.00 700 3,080.00 4.40 May 29 500 4.75 700 3,080.00 500 4.75 2,375.00 Totals 6,930.00 5,455.00 FIFO Method Cost of goods sold $6,930.00 Ending inventory $5,455.00

Required b.: Journal entr to record the May 4 purchase Account Titles and Explanation Debit Credit Date Merchandise Inventory (1300 x $4.10) May 4 5,330.00 $ 5,330.00 Accounts Payable (To record purchase on account) Journal entry to record the May 3 and May 16 sales. Account Titles and Explanation Debit Date Credit Accounts Receivables May 3 2,100.00 Sales revenue (300 x $7.0 7.00) (To record sales on account) $ .00 Cost of Goods sold Merchandise Inventory (300 x $4.00) |(To record cost of goods sold) 1,200.00 May 3 1,200.00 Accounts Receivables Sales revenue (1000 x $7.00) (To record sales on account) May 16 7,000.00 7,000.00 Cost of Goods sold Merchandise Inventory ( (To record cost of goods sold) 4,090.00 May 16 4,090.00 () 100 units @ $4.00+900 units @ $4.10= S4,090 Required c.: Total sales revenue 300 units x $7.00 $2,100 May 3 1000 units x $7.00 $7,000 May 16 400 units x $7.50 $3,000 $12,100 May 18 Total Less: Cost of Goods sold (Refer req a. above) ($6,930) $5,170 Gross Profit Gross profit for May $5,170