Exercise 6-12 (LO 6-5)
August 6
Accounts Receivable 14,000
Cost of Goods Sold 12,600
August 10
Sales Returns 1,200
August 14
Cash 12,672
Sales Discounts 128
Exercise 6-13 (LO 6-6)
Requirement 1
Inventory Quantity
Lower-of-Cost
-or-Market
Ending
Inventory
Furniture 200 $ 85 $17,000
Electronics 50 300 15,000
Requirement 2
Debit Credit
Cost of Goods Sold 5,000
Requirement 3
The write-down of inventory has the effect of reducing total assets (inventory),
Exercise 6-14 (LO 6-6)
Requirement 1
Inventory Quantity
Lower-of-Cost
-or-Market
Ending
Inventory
Shirts 35 $ 60 $ 2,100
MegaDriver 15 250 3,750
MegaDriver II 30 350 10,500
Requirement 2
Debit Credit
Cost of Goods Sold 1,650
Requirement 3
The write-down of inventory has the effect of reducing total assets (inventory),
Exercise 6-15 (LO 6-2, 6-7)
Requirement 1
Lewis Clark
Beginning inventory $ 24,000 $ 50,000
Add: Purchases 261,000 235,000
Less: Purchase returns (15,000) (60,000)
Cost of goods available for sale 270,000 225,000
Less: Ending inventory (18,000) (60,000)
Requirement 2
Lewis Clark
Inventory
turnover
ratio
=Cost of goods sold $252,000 $165,000
Average inventory ($24,000 + $18,000) /2 ($50,000 + $60,000) /2
Requirement 3
Lewis Clark
Average
days in
inventory
=365 365 365
Inventory turnover
ratio
12.0 3.0
Requirement 4
Lewis seems to be managing its inventory more efficiently. For Lewis, inventory
turns over 12 times per year. In other words, inventory sells every 30.4 days. For
Clark, its inventory turns over only three times per year or every 121.7 days.
Exercise 6-16 (LO 6-2, 6-7)
Requirement 1
Gross
Profita
Operating
Incomeb
Income Before
Income Taxesc
Net
Incomed
Henry $27,200 $22,200 $20,200 $18,200
a Gross profit = Net sales − Cost of goods sold
b operating income = Gross profit − operating expenses
Requirement 2
Henry Grace James
Gross
profit
ratio
=Gross profit $27,200 $10,500 $15,200
Net sales $32,000 $35,000 $40,000
Henry has the most favorable gross profit ratio.
Exercise 6-17 (LO 6-8)
Requirement 1
May 2 Debit Credit
Purchases 3,300
May 3
Freight-In 200
May 5
Accounts Payable 400
May 10
Accounts Payable 2,900
Purchase Discounts 29
May 30
Accounts Receivable 4,000
Requirement 2
May 31 Debit Credit
Cost of Goods Sold 3,071
Purchase Returns 400
Purchase Discounts 29
Purchases 3,300
Note: Beginning and ending inventory
amounts are zero; no entry required.
Exercise 6-18 (LO 6-8)
Requirement 1
July 5 Debit Credit
Purchases 100,000
July 8
Accounts Payable 5,000
July 13
Accounts Payable 95,000
Purchase Discounts 2,850
July 28
Accounts Receivable 114,000
Requirement 2
July 31 Debit Credit
Cost of Goods Sold 92,150
Purchase Returns 5,000
Purchase Discounts 2,850
Note: Beginning and ending inventory
amounts are zero; no entry required.
Exercise 6-19 (LO 6-9)
August 6 Debit Credit
Purchases 14,000
August 7
Freight-In 400
August 10
Accounts Payable 1,200
August 14
Accounts Payable 12,800
Purchase Discounts 128
August 23
Accounts Receivable 11,000
Requirement 2
August 31 Debit Credit
Inventory (ending) 2,859.50
Cost of Goods Sold 10,212.50
Purchase Returns 1,200.00
Purchase Discounts 128.00
Purchases 14,000
Note: Beginning inventory was zero; no
entry required.
Exercise 6-20 (LO 6-9)
Requirement 1
When goods are shipped FOB shipping point, title transfers from the seller to the
buyer at the /me of shipment. This means that Mulligan corporation (buyer)
Requirement 2
Balance Sheet Income Statement
Year Assets Liabilities
Stockholders’
Equity Revenues
Cost of
Goods Sold Gross Profit
Current U N U N O U
Following N N N N U O
Problem 6-1A (LO 6-3)
Requirement 1 Specific identification
Date Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 1 Beginning inventory 1 $900 $ 900
Oct. 30 Purchase 7 930 6,510
8$7,410
Date Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Oct. 1 Beginning inventory 4a$900 $ 3,600
Oct. 1 Beginning inventory 1b900 900
Oct. 10 Purchase 2b910 1,820
Oct. 10 Purchase 3c910 2,730
a From the October 4 sale; b From the October 13 sale; c From the October 28 sale.
Problems: Set a
Requirement 2 FIFO
Date Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 20 Purchase 1 $920 $ 920
Oct. 30 Purchase 7 930 6,510
Date Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Oct. 1 Beginning inventory 6 $900 $ 5,400
Oct. 10 Purchase 5 910 4,550
a First 14 units purchased are assumed sold