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Chapter 6: 6SE_2 (page 359)

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries— Weighted-average

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.

Short Answer

Expert verified

The revenue generated through sales amounts to $3,400and the gross profit earned is $1,292.

Step by step solution

01

Step-by-Step-SolutionStep1: Journal entry for purchase of inventory

Date

Description

Debit

Credit

Oct 16

Merchandise Inventory (bicycles)

$2,720

Accounts Payable

$2,720

Being inventories purchased on credit

02

Journal entry for the sale of inventory

Date

Description

Debit

Credit

Oct 31

Accounts Receivables

$3,400

Sales Revenue

$3,400

Being inventories purchased on credit

Oct 31

Cost of goods sold

$2,108

Merchandise inventory (bicycles)

$2,108

Being goods sold valued based on the weighted average method

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Most popular questions from this chapter

What does the lower-of-cost-or-market (LCM) rule require?

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries—LIFO

Requirements

1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theLIFO inventory costing method.

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

4. Determine the company’s cost of goods sold for January using FIFO, LIFO, andweighted-average inventory costing methods.

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Question:Hot Bread Bakery reported Net sales revenue of \(44,000 and cost of goods sold of \)33,000. Compute Hot Bread’s correct gross profit if the company made either of thefollowing independent accounting errors. Show your work.

a. Ending merchandise inventory is overstated by $8,000.
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