Acct304 Week 6

Exercise 8-1

1. To record the purchase of inventory on account and the payment of freight charges

Inventory 5,000
Accounts payable 5,000

Inventory 300
Cash 300

2. To record purchase returns

Accounts payable 600
Inventory 600

3. To record cash sales and cost of goods sold

Cash 5,200
Sales revenue 5,200

Cost of goods sold 2,800
Inventory 2,800

Exercise 8-9
Requirement 1

Purchase price = 1,000 units x $50 = $50,000

July 15, 2013
Purchases 50,000
Accounts payable 50,000


July 23, 2013
Accounts payable 50,000
Cash (98% x $50,000) 49,000
Purchase discounts (2% x $50,000) 1,000
Requirement 2

August 15, 2013
Accounts payable 50,000
Cash 50,000
Requirement 3
The July 15 entry would include a debit to the inventory account instead of to purchases, and the July 23 entry would include a credit to the inventory account instead of to purchase discounts.

Exercise 8-13
Cost of goods available for sale:
Beginning inventory (2,000 x $6.10) $12,200
Purchases:
10,000 x $5.50 $55,000
6,000 x $5.00 30,000 85,000
Cost of goods available (18,000 units) $97,200

First in, first out (FIFO)

Cost of goods available for sale (18,000 units) $97,200
Less: Ending inventory (determined below) (15,000)
Cost of goods sold $82,200

Cost of ending inventory:

Date of 
purchase Units Unit cost Total cost
August 18 3,000 $5.00 $15,000


Last-in, first-out (LIFO)

Cost of goods available for sale (18,000 units) $97,200
Less: Ending inventory (determined below) (17,700)
Cost of goods sold $79,500

Cost of ending inventory:

Date of 
purchase Units Unit cost Total cost
Beg. Inv. 2,000 $6.10 $12,200
August 8 1,000 5.50 5,500
Total $17,700


Exercise 8-13 (concluded)

Average cost

Cost of goods available for sale (18,000 units) $97,200
Less: Ending inventory (determined below) (16,200)
Cost of goods sold $81,000 *

Cost of ending inventory:
$97,200
Weighted-average unit cost = = $5.40
18,000 units

3,000 units x $5.40 = $16,200

* Alternatively, it could be determined by multiplying the units sold by the average
cost: 15,000 units x $5.40 = $81,000