A Comprehensive problem
CPI sells computer peripherals. At December 31, 2011, CPI's inventory amounted to $500,000. A Comprehensive During the first week in January 2012, the company made only one purchase and one sale. These Problem transactions were as follows:
Jan.2 Purchased 20 modems and 80 printers from Shaip. The total cost of these machines was $25,000, terms 3/10, n/60.
Jan.6 Sold 30 different types of products on account to Pace Corporation. The total sales
price was $10,000, terms 5/10, n/90. The total cost of these 30 units to CPI was $6,100 (net of the purchase discount).
CPI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable.
Instructions
a Briefly describe the operating cycle of a merchandising company. Identify the assets and liabilities directly affected by this cycle.
b . Prepare journal entries to record these transactions, assuming that CPI uses a perpetual inventory system.
c .Compute the balance in the Inventory account at the close of business on January 6.
d .Prepare journal entries to record the two transactions, assuming that CPI uses a periodic inventory system.
e .Compute the cost of goods sold for the first week of January assuming use of the periodic system. (Use your answer to part c as the ending inventory.)
f .Which type of inventory system do you think CPI most likely would use? Explain your reasoning.
g .Compute the gross profit margin on the January 6 sales transaction.
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