Question

Problem 1 (25 points Home Furniture Ltd. sells washing machines. At December 31, 2018, Home Furniture Ltd. inventory amounted to $250,000. During the first week of January 2018, the company made only one purchase and one sale. These transactions were as follows: Jan. 5 Purchased 40 machines from Wash Experts. The total cost of these machines was $48,000 Discount terms 310, n/60. Jan. 12 Sold machines on account to Home supply Ltd. The total sales price was $82,500. The total cost of these 38 units to Norfolk was $30,800. Home Furniture Ltd. has a full-time accountant and a computer-based accounting system. Its records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable

Answer 1

Solution:

Given thet the following information about Home furniture Ltd. sells washing machines.

4	Entries to record the transactions (Periodic system)
Date	Account Title	Debit ($)	Credit ($)
1/5/2019	Purchases	48,000
	Accounts payable		48,000
	(To record purchases made from Wash Experts)
1/12/2019	Accounts receivable	82,500
	Sales		82,500
	(To record sales made to Home Supply Ltd.)
1/31/2019	Sales	82,500
	Inventory (Closing)(250,000+48,000-30,800)	267,200
	Inventory (Opening)		250000
	Purchases		48,000
	Income		51,700
	(To record the closing entries)

5	Cost of goods sold:
	Opening stock	250,000
	Add: Purchases	48,000
	Less: Closing stock	267,200
	Cost of goods sold=	30,800