15
Accounting for
Merchandise Inventory
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. The perpetual inventory system keeps continual track of the quantity and cost of
3. Merchandise inventory
4. We record a sale at retail as well as the cost of the merchandise sold. We debit
6. The flow of cost in inventory matches the physical movement of merchandise
only in the Specific Invoice method.
7. Specific Invoice: Actual costs of ending inventory known. Weighted-Average:
9. FIFO. It uses latest purchases to provide an up-to-date picture of inventory on the
balance sheet.
12. Retail method is often used to estimate ending inventory for interim reports.
13. Before switching back, the president should completely look at why the system is
SOLUTIONS TO CONCEPT CHECKS
Account Category
1.
Accounts Receivable or Cash
Asset
Sales
Revenue
Cost of Goods Sold
Expense
Merchandise Inventory
Asset
2.
GENERAL JOURNAL
Date
201X
Account Titles and Description
Dr.
Cr.
April
1
Accounts Receivable
1
2
3
0
00
1
2
3
0
1
Cost of Goods Sold
6
8
0
00
6
8
0
3.
GENERAL JOURNAL
Date
201X
Account Titles and Description
Dr.
Cr.
1
9
0
15
Merchandise Inventory
7
5
00
7
5
4.
GENERAL JOURNAL
Account Titles and Description
Dr.
Cr.
20
Accounts Payable
3
5
0
00
3
5
0
Date
CONCEPT CHECKS (CONTINUED)
5.
(a) FIFO
(b) LIFO
(c) Weighted-Average
Cost of good available for sale
Less: Ending inventory
Cost of goods sold
6.
Cost
Retail
Goods Available for Sale
Beginning Inventory
Net Purchases
64
Cost of Goods Available for Sale
Cost Ratio
Net Sales at Retail
Ending Inventory at Retail
Ending Inventory at Cost
7.
Goods Available for Sale
Inventory, January 1, 201X
$ 67
Net Purchases
23
Cost of Goods Available for Sale
Less: Estimated Cost of Goods Sold:
Net Sales at Retail
Cost Percentage
Estimated Cost of Goods Sold
Estimated Inventory, January 31, 201X
$ 52
15A–1.
SOLUTIONS TO SET A EXERCISES
Date
201X
Feb.
3
Merchandise Inventory
1
8
0
0
00
Accounts Payable, Nonstop Electric
1
8
0
0
00
5
Cash
2
5
2
00
Sales
2
5
2
00
5
Cost of Goods Sold
1
6
2
00
Merchandise Inventory
1
6
2
00
6
Sales Returns and Allowances
1
1
2
00
Cash
1
1
2
00
6
Merchandise Inventory
7
2
00
Cost of Goods Sold
7
2
00
Accounts Payable, Nonstop Electric
1
2
0
00
15A–2.
Inventory Record Form
Item U47
Date
201X
Purchased
Sold
Balance
Nov.
5
11 units @ $2
$22
00
6
00
7
00
19 units @ $2
00
EXERCISES (CONTINUED)
15A-3 Page 1
Date
201X
Account Titles and Description
PR
Dr.
Cr.
5
Merchandise Inventory
114
22
00
Accounts Payable
201
22
00
Purchased 11 units @ $2 each
6
Cash
111
16
30
Sales
401
16
30
Sold 1 unit
6
Cost of Goods Sold
501
2
00
Merchandise Inventory
114
2
00
Cost of Merchandise Sold
7
Cash
111
46
50
Sales
401
46
50
Sold 3 units
7
Cost of Goods Sold
501
6
00
Merchandise Inventory
114
6
00
Merchandise Inventory
114
38
00
Accounts Payable
201
38
00
Purchased 19 units @ $2 each
Cash
111
Accounts Payable
201
Nov
6
GJ1 16.30
Nov
5
GJ1 22.00
7
Bal. 62.80
Bal. 60.00
Merchandise Inventory
114
Sales
401
Nov
6
Bal. 62.80
Cost of Goods Sold
501
6
7
EXERCISES (CONTINUED)
15A-4.
Inventory Item 44BX
Date
201X
Received
Sold
Balance
Units
Cost
Total
Units
Cost
Total
Units
Cost
Total
8
20.00
2
8
23.00
184.00
8
20.00
8
23.00
344.00
5
3
20.00
60.00
5
20.00
8
23.00
284.00
6
5
20.00
100.00
6
23.00
138.00
2
23.00
46.00
8
9
24.00
216.00
2
23.00
9
24.00
262.00
15A–5.
(a) FIFO
(b) LIFO
(c) Weighted-Average
15A–6.
15A-7.Retail Method
Goods Available for Sale
Cost
Retail
Beginning Inventory
$ 59,500.00
$ 73,200.00
Net Purchases
405,000.00
Net Sales at Retail
227,800.00
15A-8.Gross Profit Method
Goods Available for Sale
Inventory, April 1, 201X
$33,000.00
Net Purchases
68,000.00
Less: Estimated Cost of Goods Sold:
Net Sales
Cost Percentage
15B–1.
SOLUTIONS TO SET B EXERCISES
Date
201X
Feb.
3
Merchandise Inventory
4
0
0
00
Accounts Payable, Flashing Electric
4
0
0
00
5
Cash
2
2
4
00
Sales
2
2
4
00
5
Cost of Goods Sold
1
4
4
00
Merchandise Inventory
1
4
4
00
6
Sales Returns and Allowances
1
4
0
00
Cash
1
4
0
00
6
Merchandise Inventory
9
0
00
Cost of Goods Sold
9
0
00
Accounts Payable, Flashing Electric
8
0
00
Merchandise Inventory
8
0
00
15B-2.
Inventory Record Form
Item U47
Date
201X
Purchased
Sold
Balance
Nov.
5
5 units @ $8
$40
00
6
00
7
00
00
EXERCISES (CONTINUED)
15B-3 Page 1
Date
201X
Account Titles and Description
PR
Dr.
Cr.
5
Merchandise Inventory
114
40
00
Accounts Payable
201
40
00
Purchased 5 units @ $8 each
6
Cash
111
32
80
Sales
401
32
80
Sold 2 units
6
Cost of Goods Sold
501
16
00
Merchandise Inventory
114
16
00
7
Cash
111
30
80
Sales
401
30
80
Sold 2 units
7
Cost of Goods Sold
501
16
00
Merchandise Inventory
114
16
00
Merchandise Inventory
114
00
Accounts Payable
201
00
Purchased 13 units @ $8 each
Cash
111
Accounts Payable
201
Nov
6
GJ1 32.80
Nov
5
GJ1 40.00
7
Bal. 63.60
Bal. 144.00
Merchandise Inventory
Nov
6
Bal. 112.00
Bal. 63.60
Nov
6
Bal.32.00
EXERCISES (CONTINUED)
15B-4.
Inventory Item 44BX
Date
201X
Received
Sold
Balance
Units
Cost
Total
Units
Cost
Total
Units
Cost
Total
Jan 1
7
19.00
133.00
2
14
23.00
322.00
7
19.00
14
23.00
455.00
5
3
19.00
57.00
4
19.00
14
23.00
398.00
6
4
19.00
76.00
8
23.00
184.00
6
23.00
138.00
14
446.00
15B–5.
(a) FIFO
(b) LIFO
(c) Weighted-Average
Less: Ending inventory
15B–6.
15B-7.Retail Method
Goods Available for Sale
Cost
Retail
Beginning Inventory
$ 59,800.00
$ 72,600.00
Net Purchases
405,200.00
Net Sales at Retail
15B-8.Gross Profit Method
Goods Available for Sale
Inventory, November 1, 201X
$32,000.00
Net Purchases
67,100.00
Less: Estimated Cost of Goods Sold:
Net Sales
Cost Percentage
SOLUTIONS TO SET A PROBLEMS
PROBLEM 15A-1
GENERAL JOURNAL
PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
July
5
Merchandise Inventory
0
0
0
00
Accounts Payable
2
0
0
0
00
6
Accounts Receivable, Tommy Donaldson
8
5
00
Sales
8
5
00
6
Cost of Goods Sold
7
6
00
Merchandise Inventory
7
6
00
8
Accounts Payable
1
0
0
00
Merchandise Inventory
1
0
0
00
9
Cash
1
7
0
00
Sales
1
7
0
00
9
Cost of Goods Sold
9
3
00
Merchandise Inventory
9
3
00
9
Sales Returns and Allowances
7
00
Accounts Receivable, Tommy Donaldson
7
00
9
Merchandise Inventory
6
00
Cost of Goods Sold
6
00
10
Merchandise Inventory
5
0
0
00
Accounts Payable, JJ Supply
5
0
0
00
12
Cash
7
8
00
Accounts Receivable, Tommy Donaldson
7
8
00
13
Cash
4
6
0
00
Sales
4
6
0
00
13
Cost of Goods Sold
3
3
0
00
Merchandise Inventory
3
3
0
00
PROBLEM 15A-2
STUREBRIDGE ELECTRONICS
GENERAL JOURNAL
PAGE 2
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Nov.
10
Merchandise Inventory
114/√
6
3
0
00
6
3
0
11
Cash
5
8
00
Sales
401
5
8
00
11
Cost of Goods Sold
501
4
0
00
4
0
00
13
Cash
101
7
7
6
00
Sales
401
7
7
6
00
13
Cost of Goods Sold
501
5
2
8
00
5
2
8
00
15
Sales Returns and Allowances
402
1
4
5
00
101
1
4
5
00
501
1
0
0
00
16
Accounts Payable
201
1
0
0
00
1
0
0
00
Inventory Item KT88
Date
201X
Received
Sold
Balance
Units
Cost
Total
Units
Cost
Total
Units
Cost
Total
Nov. 1
8
20.00
$160.00
580.00
20.00
540.00
20.00
220.00
(5)
320.00
(5)
220.00