accounting problem

Comprehensive Problem – Test 2 BADM225 – Fall 2017

One spring, Jake and Chad Driller decided to earn money providing professional athletic coaching and training services.

In October, their third month of operation, they have decided to begin selling sporting equipment in response to customer requests. The company will extend credit terms of 2/10 n/30 FOB shipping point to all customers. The following transactions took place in October for purchases and sales relating to their merchandise inventory items.

Oct. 3 Purchased 11 units of merchandise at $183 per unit

6 Purchased 3 units of merchandise at $172 per unit

10 Sold 10 units of merchandise at $270 per unit

12 Purchased 15 units of merchandise at $164 per unit

18 Purchased 12 units of merchandise at $134 per unit

25 Sold 16 units of merchandise at $245 per unit

In addition, the following facts are provided:

· All sales are on credit. Assume all appropriate discounts are taken.

· Payment for the Oct. 10 sale was received on Oct. 19.

· A check was written on Oct. 15 for the Oct. 6 purchase.

· Payment for the Oct. 25 sale was received on November 11.

· All purchases are on credit with credit terms 2/10 n/30, FOB shipping point.

Required:

a. Determine the cost of goods available for sale, units available for sale, units in ending inventory, cost assigned to ending inventory and cost of goods sold using the FIFO, LIFO and weighted average costing methods. (Show all work).

b. Record journal entries for all transactions listed above for the month October. (Use the inventory costing method which yields the lowest cost of goods sold value in determining the cost of your sales for your journal entries).

c. Post Journal Entries to T-Accounts. (use the ending balances from your September balance sheet as your beginning balances in October). This is only a portion of the transactions for the month. We will complete the rest of the month nat a later date.

d. Prepare an interim trial balance as of the end of October.

e. Prepare an interim multi-step income statement for Drillmakers, Inc. for the month ended October 31, 2017 and classified balance sheet for Drillmakers, Inc. at October 31, 2017.