Exercise 8–24
Ending
Ending Inventory Inventory Layers Inventory Layers Inventory
Date at Base Year Cost at Base Year Cost Converted to Cost DVL Cost
12/31/2018 $200,000
= $200,000 $200,000 (base) $200,000 x 1.00 = $200,000 $200,000
1.00
12/31/2019 $231,000
= $220,000 Index = 1.05
Index
$200,000 (base) $200,000 x 1.00 = $200,000
20,000 (2019) 20,000 x 1.05 = 21,000 221,000
Exercise 8–25
Set the base year, 1/1/2018, equal to 1.00.
Cost index in layer year: 264 ÷ 240 = 1.10
Ending Inventory Inventory Layers Inventory Layers Inventory
Date at Base Year Cost at Base Year Cost Converted to Cost DVL Cost
1/1/2018 $720,000
_______ = $720,000 $720,000 (base) $720,000 x 1.00 = $720,000 $720,000
1.00
Exercise 8–26
List A List B
i 1. Perpetual inventory a. Legal title passes when goods are
system delivered to common carrier.
l 2. Periodic inventory system b. Goods are transferred to another
company
but title remains with transferor.
Problem 8–1
Requirement 1
a. To record the purchase of inventory on account and the payment of freight
charges.
October 12, 2018
Purchases (98% x $22,000)………………………………………… 21,560
…………………………………………..…..….Accounts payable
b. To record payment of accounts payable.
October 31, 2018
Accounts payable…………………………………………….….…. 21,560
PROBLEMS
Problem 8–1 (continued)
c. To record sales on account.
October 2018
No entry is made for the cost of goods sold.
Cost of goods sold:
Beginning inventory $15,000
Plus net purchases:
Adjusting entry:
October 31, 2018
Cost of goods sold (above)……………………………….…..….. 18,000
Inventory (ending)……………………………………..….…..….... 19,060
………………………………………..…..….Inventory (beginning)
Problem 8–1 (concluded)
Requirement 2
a. To record the purchase of inventory on account and the payment of freight
charges.
October 12, 2018
Inventory (98% x $22,000)……………………………………….... 21,560
…………………………………………..…..….Accounts payable
b. To record payment of accounts payable.
October 31, 2018
c. To record sales on account.
October 2018
Accounts receivable………………………………………..…..…. 28,000
…………………………………..…..…..…..…..…..Sales revenue
Problem 8–2
1. The transaction is not correctly accounted for. Inventory held on consignment
2. The transaction is not correctly accounted for. Legal title to merchandise
3. The transaction is not correctly accounted for. Since the merchandise was
4. The transaction is correctly accounted for. Merchandise held on consignment
5. The transaction is correctly accounted for. Since the merchandise was shipped
Problem 8–3
Accounts
Inventory Payable Sales
Initial amounts $1,250,000 $1,000,000
$9,000,000
Adjustments – increase (decrease):
1. (155,000) (155,000) NONE
2. (22,000) NONE NONE
3. NONE NONE 40,000