Lecture sheet (1)

Chapter 5
Accounting for Merchandising Operations
Ex:1

If the following transactions occurred during May ,2013.

3: Purchased Inventory for cash $ 300.
7: Purchased Inventory on credit For $2000 , terms 3/10,net 30.
8:Returned half the inventory purchased on May 7th.
10:Sold goods for cash $450.
13: Sold Inventory on credit for $ 3900 terms 2/15,n/45.
16:Paid the amount owe on account from the purchase of May7, less the
discount & the return.
17: Received defective inventory returned from May13 sale for $900.
18:Purchased inventory $4000 on account, terms 2/10, net 30.
26:Paid supplier for goods purchased on May 18,less the discount.
28:Received cash in full settlement of the account from the customer who
purchased inventory on May 13, less the discount & the return.
Required: Prepare the journal entries using the periodic inventory
system.

Ex:2
If the following transactions occurred during April 2013:
April 5 Purchased Golf bags, balls on account from Bata Co. $1700, FOB shipping point,
terms 2/ 10, n/60.
7 Paid freight on the purchases $80
9 Sent a credit memorandum for the merchandise returned $200
10 Sold merchandise on account to members $950, terms n/30.
12 Purchased golf shoes, sweaters on account from Arrow sportswear $660, terms
1/10,n/30
14 Paid Bata Co in full.
17 Received credit memorandum from Arrow Sportswear for merchandise returned
$60.
20 Made sales on account to members $700, terms n/30.
21 Paid Arrow Sportswear in full.
27 Granted credit to members for clothing that did not fit $75.
30 Received payments on account from members $1,100.
Required: Prepare the journal entries using the periodic inventory
system.
 Chapter 6
Inventories and Cost of Sales

Ex: 1
Harper Co., reported the following current year purchases and sales data for its only product.
Date Activities Units Acquired Units Sold at Retail
at cost
Jan. 1 Beginning inventory 20units @$10= 200
Jan. 5 Purchase 50units @$11= 550
Jan 6 Sale 30units @ $45
Jan. 9 Purchase 40units @$12= 480
Jan.15 Purchase 20units @$13= 260
Jan.20 Sale 60 units@$ 60
Jan.28 Purchase 10 units@ $15=150
Required: If Harper uses a periodic inventory system, compute the cost assigned to the cost of
goods sold & ending inventory using a) Specific Identification (If 30 units were sold on Jan. 6
come from Jan 5, and 60 units sold on Jan. 20 come from beginning inventory (20 units) and
Jan 9 (40 units), b) Weighted Average, c) FIFO, d) LIFO.

Ex: 2
Liberty Company reported the following Jan. purchases and sales data for its only product.
Date Activities Units Acquired at Units Sold at Retail
cost
Aug.1 Beginning inventory 10 units@$91= 910
Aug 3 Purchase 15 units @106=1590
Aug 14 Sale 20 units @$130
Aug 17 Purchase 20 units @$115= 2300
Aug 28 Purchase 10 units@$119= 1190
Aug 31 Sale 23 units @ $150
Total 55 units $ 5990 43 units
Liberty uses 1- periodic inventory system. Aug 14, sold 8 units costing $91 and 12 units costing
$106.Aug 31, sold 2 units costing $91, 3 units costing $106, 15 units costing $115 and 3 units costing
$119. Determine the cost assigned to ending inventory and to cost of goods sold using a) specific
identification, b) weighted average, c) FIFO, d) LIFO.
2- Compute gross profit under the four methods.

Ex: 3
Liberty Company reported the following Jan. purchases and sales data for its only product.
Date Activities Units Acquired at cost Units Sold at Retail
Jan.1 Beginning inventory 126 units@$8= 1008
Jan.10 Sale 113 units @40
March14 Purchase 315units @$13= 4095
March 15 Sale 180 units@40
July 30 Purchase 250units@$18= 4500
Oct 5 Sale 378 units @ $40
Oct 26 Purchase 50 units@ $23=1150
Total 147 Units $ 10753 671 units
Liberty uses periodic inventory system. Determine the cost assigned to ending inventory and to cost of
goods sold using a) FIFO, b) LIFO. Compute the gross margin.