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Problem 1 (25 points) Home Furniture Ltd. sells washing machines. At December 31. 2018, Home Furniture L amounted to $250,000
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Answer #1

1. The operating cycle of a merchandising company covers the period from investing cash for purchasing merchandise and ends with the collection of cash by selling the merchandise.

Therefore, the typical operating cycle of a merchandising company = Inventory Conversion Period + Average Collection Period.

2. In the books of Home Furniture Ltd. :

Date Account Titles Debit Credit
$ $
Jan 5 Inventory 46,560
Accounts Payable 46,560
To record purchase of inventory on credit
Jan 12 Accounts Receivable 82,500
Sales 82,500
To record sales on credit
Jan 12 Cost of Goods Sold 30,800
Inventory 30,800
To record cost of goods sold

3. Balance in Inventory Control Account at the close of business on Jan 12 = $ 250,000 + $ 46,560 - $ 30,800 = $ 265,760.

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Problem 1 (25 points) Home Furniture Ltd. sells washing machines. At December 31. 2018, Home Furniture L amounted to $250,000. During the first week of January 2018, the company made only o n...
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