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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 time of shipment. This means that Mulligan Corporation (buyer) receives
Requirement 2
Balance Sheet
Income Statement
Year
Assets
Liabilities
Stockholders’
Equity
Revenues
Cost of
Goods Sold
Gross Profit
Exercise 6-21
Requirement 1
January 3
Debit
Credit
Inventory
126,000
Accounts Payable
126,000
Accounts Payable
11,500
Inventory
11,500
(Return defective inventory)
($11,500 = $115×100 units)
January 19
Debit
Credit
Cash
580,000
Accounts Receivable
580,000
(Receive cash on account)
January 24
Debit
Credit
Accounts Payable
410,000
Chapter 6 - Inventory and Cost of Goods Sold
Exercise 6-21 (continued)
Requirement 1 (concluded)
January 27
Debit
Credit
Allowance for Uncollectible Accounts
2,500
Accounts Receivable
2,500
Requirement 2
(a) January 31
Debit
Credit
Cost of Goods Sold
1,500
Inventory
1,500
(b) January 31
Debit
Credit
Bad Debt Expense
3,000
Allowance for Uncollectible
Accounts
3,000
Exercise 6-21 (continued)
Requirement 3
Big Blast Fireworks
Adjusted Trial Balance
January 31, 2018
Accounts
Debit
Credit
Cash
$ 63,900
Accounts Receivable
54,000
Allowance for Uncollectible
Accounts
$ 3,600
Accounts Payable
40,900
Exercise 6-21 (continued)
Requirement 3 (concluded)
Accounts
Ending
Balance
Beginning balance in bold, entries during January in blue,
and adjusting entries in red.
Inventory
10,000
=
30,000+126,000+143,000+161,000−437,000−11,500−1,500
Land
61,600
=
61,600
Chapter 6 - Inventory and Cost of Goods Sold
Exercise 6-21 (continued)
Requirement 4
Big Blast Fireworks
Multiple-Step Income Statement
For the year ended January 31, 2018
Sales revenue
$600,000
Cost of goods sold
438,500
Gross profit
$161,500
Requirement 5
Big Blast Fireworks
Classified Balance Sheet
January 31, 2018
Assets
Liabilities
Cash
$ 63,900
Accounts payable
$ 40,900
Accounts receivable
54,000
Interest payable
200
Common stock
56,000
Retained earnings
46,500
*
Exercise 6-21 (continued)
Requirement 6
January 31, 2018
Debit
Credit
Sales Revenue
600,000
Retained Earnings
600,000
Exercise 6-21 (concluded)
Requirement 7
(a) The inventory turnover ratio is:
Inventory
Cost of Goods Sold
$438,500
(b) The gross profit ratio is:
Gross Profit
(Sales − Cost of Goods Sold)
($600,000 − $438,500)
(c) Based on the inventory turnover ratio and the gross profit ratio, Big Blast
Chapter 6 - Inventory and Cost of Goods Sold
PROBLEMS: SET A
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
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
Chapter 6 - Inventory and Cost of Goods Sold
Problem 6-1A (concluded)
Requirement 3 LIFO
Date
Transaction
Number
of units
Unit
Cost
Ending
Inventory
Oct. 1
Beginning inventory
6
$900
$5,400
Oct. 10
Purchase
2
910
1,820
Requirement 4 Weighted average
Date
Transaction
Number
of units
Unit
cost
Total
Cost
Oct. 1
Beginning inventory
6
$900
$ 5,400
Oct. 10
Purchase
5
910
4,550
Problem 6-2A (LO 6-3, 6-4, 6-5)
Requirement 1 Specific identification
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Mar. 1
Beginning inventory
1
$250
$ 250
Mar. 9
Purchase
2
270
540
Mar. 22
Purchase
2
280
560
Requirement 2 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Mar. 22
Purchase
5
$280
$1,400
Mar. 30
Purchase
9
300
2,700
Problem 6-2A (continued)
Requirement 3 LIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Mar. 1
Beginning inventory
6
$250
$1,500
Mar. 9
Purchase
10
270
2,700
Requirement 4 Weighted average
Date
Transaction
Number
of units
Unit
cost
Total
Cost
Mar. 1
Beginning inventory
20
$250
$ 5,000
Mar. 9
Purchase
10
270
2,700
Problem 6-2A (concluded)
Requirement 5
Specific
Identification
FIFO
LIFO
Weighted-
average
Cost
Sales revenue
$15,300
$15,300
$15,300
$15,300.00
Requirement 6
FIFO provides the more meaningful measure of ending inventory. The amount of
Requirement 7
March 31
Debit
Credit
Cost of Goods Sold
600
Inventory
600*
Chapter 6 - Inventory and Cost of Goods Sold
Problem 6-3A (LO 6-2, 6-5)
Requirement 1
July 3
Debit
Credit
Inventory
2,300
July 4
Inventory
110
Cash
110
(Pay freight-in)
July 9
July 11
Accounts Payable
2,100
July 12
Accounts Receivable
5,800
Sales Revenue
5,800
July 15
Problem 6-3A (concluded)
Requirement 1 (continued)
July 18
Debit
Credit
Inventory
3,100
Accounts Payable
3,100
(Purchase inventory on account)
July 22
July 28
Accounts Payable
300
Inventory
300
Requirement 2
CD City
Multiple-step Income Statement (partial)
For the month of July
Net sales
$10,000
Problem 6-4A (LO 6-6)
Requirement 1
Inventory
items
Quantity
Cost
Per unit
Total
Cost
Vans
4
$27,000
$108,000
Trucks
7
18,000
126,000
Requirement 2
Inventory
items
Quantity
Cost
Per unit
NRV
per unit
Lower of
Cost and
NRV
per unit
Total
Vans
4
$27,000
$25,000
$25,000
$100,000
Trucks
7
18,000
17,000
17,000
119,000
Requirement 3
Because the total of lower of cost and net realizable value ($548,000) is less than total
cost ($575,000), inventory is written down for the difference ($27,000).
Debit
Credit
Requirement 4
The write-down of inventory from cost to net realizable value reduces total assets and
increases total expenses, leading to lower net income and lower retained earnings.
6-58 Financial Accounting, 4e
Problem 6-5A (LO 6-3, 6-6)
Requirement 1 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Mar. 12
Purchase
40
$16
$ 640
Requirement 2 LIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jan. 1
Beginning inventory
20
$21
$ 420
Chapter 6 - Inventory and Cost of Goods Sold
Problem 6-5A (concluded)
Requirement 3
Ending Inventory
Cost
NRV
Lower of Cost
and NRV
Problem 6-6A (LO 6-2, 6-3, 6-4, 6-5, 6-6)
Requirement 1
October 4
Debit
Credit
Inventory
6,500
October 5
Inventory
600
Cash
600
(Pay freight-in)
October 9
October 12
Accounts Payable
6,000
Inventory
120
