Question

Updated Scenario: Many customers have been asking for more hypoallergenic products, so in September you start carrying a line of hypoallergenic shampoos on a trial basis. The following information relates to the purchase and sales of the shampoo:  You use the perpetual inventory method. You are uncertain as to which valuation method to use—FIFO, LIFO, or weighted average, so you calculate inventory using all three and then decide which one you would like to choose. Data: The following events occur in September, 2018: September 1: Paid dividends to self in amount of $10,000. September 5: Pay employee for period ending 8/31. September 7: Purchase merchandise for resale. See “Inventory Valuation” tab for details. September 8: Receive payments from customers toward accounts receivable in amount of $4,000. September 10: Pay August telephone bill. September 11: Purchase baking supplies in amount of $7,000 from vendor on account. September 13: Paid on supplies vendor account in amount of $5,000. September 15: Accrue employee wages for period of September 1 through September 15. September 15: Pay rent on bakery space: $1,500. September 15: Record merchandise sales transaction. See “Inventory Valuation” tab for details. September 15: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details. September 20: Pay employee for period ending 9/15. September 20: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 24: Record sales of merchandise to customers. See “Inventory Valuation” tab for details. September 24: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details. September 30: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 30: Accrue employee wages for period of September 16th through September 30th September 30: Total September bakery sales are $20,000. $6,000 of these sales are on accounts receivable.

 Actual baking supplies on-hand as of September 30 are $1,100.  Office supplies on-hand as of September 30 are $50

Answer 1

Debit Date Accounts Credit 5 1-Sep Dividends Cash 10,000.00 6 10,000.00 7 5-Sep Salary and wages payable Cash 420.00 420.00 10 11 7-Sep Merchandise Inventory 60.00 12 60.00 Cash 13 14 4,000.00 8-Sep Cash 15 Accounts Receivable 4,000.00 16 17 10-Sep Accounts payable 75.00 18 Cash 75.00 19 20 11-Sep Baking Supplies Cash 7,000.00 21 7,000.00 22 23 13-Sep Accounts payable Cash 5,000.00 24 5,000.00 25

15-Sep Salary and wages expense salary and wages payable 456.00 27 456.00 28 29 15-Sep Rent expense 1,500.00 30 Cash 1,500.00 31 32 15-Sep Cash (8 x $8.50) 68.00 33 68.00 Merchandise Sales Revenue 34 35 Cost of goods sold 48.00 36 Merchandise inventory 48.00 37 38 20-Sep Salary and wages payable 456.00 39 Cash 456.00 40 41 20-Sep Merchandise Inventory 122.00 42 Cash 122.00 43 44 24-Sep Cash 1(8 x $8.50) 153.00 45 153.00 Merchandise Sales Revenue 46 47 Cost of goods sold 109.80 48 Merchandise inventory 109.80 49

30-Sep Merchandise inventory 151.25 51 Cash 151.25 52. 53 30-Sep Salary and wages expense salary and wages payable 480.00 54 480.00 55 56 30-Sep Cash 14,000.00 6,000.00 57 Accounts receivable 58 Bakery Revenue 20,000.00 59 60 61