Chapter 1 Problem 7-17
Gross method Net method
1. Merchandise inventory 1,000,000 1. Merchandise inventory 980,000
Accounts payable 1,000,000 Accounts payable 980,000
2. Accounts payable 50,000 2. Accounts payable 50,000
Cash 50,000 Cash 50,000
3. Accounts payable 800,000 3. Accounts payable 784,000
Cash 784,000 Cash (800,000 x 98%) 784,000
Cost of sales 16,000
4. Accounts payable 150,000 4. Accounts payable 146,000
Cash 150,000 Purchase discount lost 4,000
Cash 150,000
5. Cash 1,200,000 5. Cash 1,200,000
Sales 1,200,000 Sales 1,200,000
Cost of sales 700,000 Cost of sales 686,000
Merchandise inventory 700,000 Merchandise inventory 686,000
(1,000,000 x 70%) (980,000 x 70%)
Problem 7-18
Units Unit cost Total cost
1. FIFO - periodic
Lot No. 4 500 100 50,000
5 14,500 90 1,305,000
15,000 1,355,000
2. Beginning inventory 10,000 80 800,000
Purchases: Lot No. 1 2,000 100 200,000
2 8,000 110 880,000
3 6,000 120 720,000
4 9,500 100 950,000
5 14,500 90 1,305,000
Goods available for sale 50,000 4,855,000
Weighted average (4,855,000/50,000) 15,000 97.10 1,456,500
3. Specific identification
4 9,000 100 900,000
15,000 1,620,000
Goods available Inventory-Dec. 31 Cost of sales
FIFO 4,855,000 1,355,000 3,500,000
Weighted average 4,855,000 1,456,500 3,398,500
Specific identification 4,855,000 1,620,000 3,235,000
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