chapter 6 connect accounting

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $40,000 and then sells this inventory on account on March 17 for $60,000. Record transactions for the purchase and sale of inventory

2/2/ Inventory 40,000 Accounts payable 40,000 March 17 Accounts receivable 60,000 Sales revenue 60,000 March 17 Cost of goods sold 40,000 Inventory 40,000

During the year, Wright Company sells 470 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 60 $82 $ 4,920 May 5 Purchase 250 85 21,250 Nov. 3 Purchase 200 90 18,000 510 $ 44,170 Calculate ending inventory and cost of goods sold for the year, assuming the company uses FIFO.

FIFO Cost of Goods Available for Sale Cost of Goods Sold Ending Inventory # of units $/unit $ # of units $/unit $ # of units $/unit $ Beginning Inventory 60 $82 $4,920 60 $82 $4,920 Purchases: May 5 250 $85 21,250 250 $85 21,250 Nov. 3 200 $90 18,000 160 $90 14,400 40 $90 3,600 Total 510 $44,170 470 $40,570 40 $3,600

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $40,000. In addition to the cost of inventory, the company also pays $600 for freight charges associated with the purchase on the same day. Record the purchase of inventory on February 2, including the freight charges.

February 02 Inventory 40,000 Accounts payable 40,000 February 02 Inventory 600 Cash 600

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $40,000, with terms 3/10, n/30. On February 10, the company pays on account for the inventory. Record the inventory purchase on February 2 and the payment on February 10.

February 02 Inventory 40,000 Accounts payable 40,000 February 10 Accounts payable 40,000 Inventory 1,200 C ash 38,800

Inventory that has been substantially completed.

Finished goods

Bingerton Industries uses a perpetual inventory system. The company began the year with inventory of $94,000. Purchases of inventory on account during the year totaled $319,000. Inventory costing $344,000 was sold on account for $538,000. Required: Record transactions for the purchase and sale of inventory.

Inventory 319,000 Accounts payable 319,000 2 2 Accounts receivable 538,000 Sales revenue 538,000 3 3 Cost of goods sold 344,000 Inventory 344,000

For each item below, select whether FIFO or LIFO will generally result in a higher reported amount when inventory costs are rising versus falling.

Inventory Costs Higher Total Assets Higher Cost of Goods Sold Higher Net Income Rising FIFO LIFO FIFO Declining LIFO FIFO LIFO

During the year, Wright Company sells 470 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 60 $82 $ 4,920 May 5 Purchase 250 85 21,250 Nov. 3 Purchase 200 90 18,000 510 $ 44,170 Calculate ending inventory and cost of goods sold for the year, assuming the company uses LIFO

LIFO Cost of Goods Available for Sale Cost of Goods Sold Ending Inventory # of units $/unit $ # of units $/unit $ # of units $/unit $ Beginning Inventory 60 $82 $4,920 20 $82 $1,640 40 $82 $3,280 Purchases: May 5 250 $85 21,250 250 $85 21,250 Nov. 3 200 $90 18,000 200 $90 18,000 Total 510 $44,170 470 $40,890 40 $3,280

Wayman Corporation reports the following amounts in its December 31, 2018, income statement. Sales revenue $ 341,000 Income tax expense $ 43,000 Interest expense 13,000 Cost of goods sold 123,000 Salaries expense 33,000 Advertising expense 23,000 Utilities expense 43,000 Required: Prepare a multiple-step income statement

Multiple-step Income Statement For the year ended December 31, 2018 Sales revenue $341,000 Cost of goods sold 123,000 Gross profit $218,000 Salaries expense 33,000 Utilities expense 43,000 Advertising expense 23,000 Total operating expenses 99,000 Operating income 119,000 Interest expense 13,000 Income before income taxes 106,000 Income tax expense 43,000 Net income $63,000

Basic components used to build a product.

Raw materials

Records revenues when providing services to customers.

Service

Produces the goods they sell to customers.

Manufacturing

Purchases goods that are primarily in finished form for resale to customers.

Merchandising

During the year, Wright Company sells 470 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 60 $82 $ 4,920 May 5 Purchase 250 85 21,250 Nov. 3 Purchase 200 90 18,000 510 $ 44,170 Calculate ending inventory and cost of goods sold for the year, assuming the company uses weighted-average cost.

Weighted Average Cost Cost of Goods Available for Sale Cost of Goods Sold − Weighted Average Cost Ending Inventory − Weighted Average Cost # of units Average Cost per unit Cost of Goods Available for Sale # of units sold Average Cost per Unit Cost of Goods Sold # of units in ending inventory Average Cost per unit Ending Inventory Beginning Inventory 60 $4,920 Purchases: May 5 250 21,250 Nov.3 200 18,000 Total 510 $86.6078 $44,170 470 $86.6078 $40,705.67 40 $86.6078 $3,464.31

Cost of items not yet complete by the end of the period.

Work-in-process