Financial Accounting, Student Value Edition (5th Edition)
5th Edition
ISBN: 9780134728520
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Textbook Question
Chapter 5, Problem 1COP
Comprehensive Problem
The Accounting Cycle for a Merchandiser, Including
Bike World, Inc., wholesales a line of custom road bikes. Bike World s inventory as of November 30, 2018. consisted of 22 mountain bikes costing $1,650 each. Bike World's
| Bike World. Inc. Trial Balance November 30, 2018 |
||||
| ACCOUNT | DEBIT | CREDIT | ||
| Cash | $ 9,150 | |||
| Accounts Receivable | 12,300 | |||
| Inventory | 36,300 | |||
| Supplies | 900 | |||
| Office Equipment | 18,000 | |||
| $ 3,000 | ||||
| Accounts Payable | 1,325 | |||
| Note Payable, Long-Term | 5,000 | |||
| Common Stock | 8,500 | |||
| Retained Earnings | 21,425 | |||
| Dividends | 4,250 | |||
| Sales Revenue | 147,975 | |||
| Cost of Goods Sold | 78,900 | |||
| Sales Commissions Expense | 11,300 | |||
| Office Salaries Expense | 7,425 | |||
| Office Rent Expense | 5,500 | |||
| Shipping Expense | 3,200 | |||
| Total | $187,225 | $187,225 | ||
During the month of December 2018. Bike World, Inc , had the following transactions:
| Dec 4 | Purchased 10 hikes for $1,575 each from Truspoke Bicycle, Co., on account. Terms, 2/15, n/45, FOB destination. |
| 6 | Sold 14 bikes for $2,100 each on account to Allsport. Inc. Terms, 3/10, n/30, FOB destination. |
| 8 | Paid $375 freight charges to deliver goods to Allsport, Inc. |
| 10 | Received $7,200 from Cyclemart as payment on a November 17 sale. Terms were n/30. |
| 12 | Purchased $450 of supplies on account from Office Express. Terms, 2/10, n/30, FOB destination. |
| 14 | Received payment In full from Allsport, Inc., for the December 6 sale. |
| 16 | Purchased 15 hikes for $1,600 each from Truspoke Bicycle, Co., on account. Terms, 2/15, n/45, FOB destination. |
| 18 | Paid Truspoke Bicycle, Co., the amount due tram the December 4 purchase in full. |
| 19 | Sold 18 bikes for $2,125 each on account to Columbia Cycle, Inc. Terms, 2/15, n/45, FOB shipping point. |
| 20 | Paid for the supplies purchased on December 12. |
| 22 | Paid sales commissions, $1,850. |
| 30 | Paid current month’'s rent, $500. |
| 31 | Paid Truspoke Bicycle, Co., the amount due from the December 16 purchase in full. |
Requirements
- 1. Using the transactions previously listed, prepare a perpetual inventory record for Bike World, Inc., for the month of December Bike World, Inc., uses the FIFO inventory costing method. (Bike World records inventory in the perpetual inventory record net of any discounts, as it is company policy to take advantage of all purchase discounts.)
- 2. Open four-column general ledger accounts and enter the balances from the November 30 trial balance.
- 3. Record each transaction in the general journal using the “net” method for purchases and sales. Explanations are not required Post the
journal entries to the general ledger, creating new ledger accounts as necessary. Omit posting references. Calculate the new account balances. - 4. Prepare an unadjusted trial balance as of December 31, 2018.
- 5. Journalize and post the
adjusting journal entries based on the following information, creating new ledger accounts as necessary:Depreciation expense on office equipment, $1,875
Supplies on hand, $245
Accrued salary expense for the office receptionist, $845
Estimated refund liability, $1,320
Cost of estimated inventory returns, $742
- 6. Prepare an adjusted trial balance as of December 31, 2018. Use the adjusted trial balance to prepare Bike World, Inc.’s multistep income statement and statement of retained earnings for the year ending December 31, 2018. Also, prepare the
balance sheet at December 31, 2018. - 7. Journalize and post the closing entries.
- 8. Prepare a post-closing trial balance at December 31, 2018.
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Instructions:
a. Calculate cost of goods sold, ending inventory, and gross profit under perpetual and
periodic method for each of the following cost flow assumptions (no rounding):
1. FIFO
2. Average-costing,
b. Compare results between the two cost flow assumptions and give your conclusion.
Required information
Trey Monson starts a merchandising business on December 1 and enters into the following three inventory purchases.
Also, on December 15, Monson sells 25 units for $25 each.
Purchases on December 7
Purchases on December 14
Purchases on December 21
15 units @ $1.00 cost
30 units ē $15.00 cost
25 units @ $18.00 cost
Required:
Monson uses a perpetual inventory system. Determine the costs assigned to the December 31 ending inventory based on the FIFO
method.
Perpetual FIFO:
Goods Purchased
Cost of Goods Sold
# of
Units
Sold
Inventory Balance
# of
Units
Cost Per
Unit
Goods
Purchased
Cost Per Cost of Goods
Unit
# of Units Cost Per
Unit
Inventory
Balance
Date
Sold
December 7
December
14
Chapter 5 Solutions
Financial Accounting, Student Value Edition (5th Edition)
Ch. 5 - Prob. 1DQCh. 5 - How are the financial statements of a manufacturer...Ch. 5 - What is a cost-flow assumption? Why is a cost-flow...Ch. 5 - If a company had two units that cost 1 each in its...Ch. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - During April, Bargain Hardware made sales of...Ch. 5 - Prob. 2SCCh. 5 - Prob. 3SCCh. 5 - Prob. 4SCCh. 5 - Prob. 5SCCh. 5 - Prob. 6SCCh. 5 - Prob. 7SCCh. 5 - Prob. 8SCCh. 5 - Prob. 9SCCh. 5 - Prob. 10SCCh. 5 - Prob. 11SCCh. 5 - Prob. 12SCCh. 5 - Prob. 1SECh. 5 - Prob. 2SECh. 5 - Prob. 3SECh. 5 - Prob. 4SECh. 5 - Prob. 5SECh. 5 - Prob. 6SECh. 5 - Prob. 7SECh. 5 - Prob. 8SECh. 5 - Lower-of-cost-or-market rule (Learning Objective...Ch. 5 - Prob. 10SECh. 5 - Inventory principles and terminology (Learning...Ch. 5 - Prob. 12SECh. 5 - Prob. 13SECh. 5 - Prob. 14SECh. 5 - Prob. 15SECh. 5 - Prob. 16AECh. 5 - Prob. 17AECh. 5 - Prob. 18AECh. 5 - Prob. 19AECh. 5 - Prob. 20AECh. 5 - Prob. 21AECh. 5 - Prob. 22AECh. 5 - Prob. 23AECh. 5 - Prob. 24AECh. 5 - Prob. 25AECh. 5 - Prob. 26AECh. 5 - Prob. 27AECh. 5 - FIFO (Learning Objective 2) 10-15 min. Tee Time,...Ch. 5 - LIFO (Learning Objective 2) 10-15 min. Refer to...Ch. 5 - Prob. 30BECh. 5 - Prob. 31BECh. 5 - Prob. 32BECh. 5 - Prob. 33BECh. 5 - Prob. 34BECh. 5 - Prob. 35BECh. 5 - Prob. 36BECh. 5 - Prob. 37BECh. 5 - Prob. 38BECh. 5 - Prob. 39BECh. 5 - Computing LIFO and journalizing inventory...Ch. 5 - Prob. 41APCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 43APCh. 5 - Prob. 44APCh. 5 - Prob. 45APCh. 5 - Estimating ending inventory (Learning Objective 7)...Ch. 5 - Prob. 47APCh. 5 - Prob. 48BPCh. 5 - Prob. 49BPCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 51BPCh. 5 - Prob. 52BPCh. 5 - Prob. 53BPCh. 5 - Prob. 54BPCh. 5 - Prob. 55BPCh. 5 - Continuing Exercise This exercise continues the...Ch. 5 - Prob. 1CPCh. 5 - Prob. 1CFSAPCh. 5 - Prob. 1EIACh. 5 - Prob. 2EIACh. 5 - Prob. 1FACh. 5 - Prob. 1IACh. 5 - Prob. 1SBACh. 5 - Prob. 1WCCh. 5 - Comprehensive Problem The Accounting Cycle for a...
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