Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-5B (concluded)
Requirement 3
Ending Inventory
Cost
NRV
Lower of Cost
and NRV
FIFO
a Ending inventory from Requirement 1 above.
FIFO
6-82 Financial Accounting, 5e
Problem 6-6B (LO 6-2, 6-3, 6-4, 6-5, 6-6)
Requirement 1
November 2
Debit
Credit
Inventory
9,000
Accounts Payable
9,000
(Purchase inventory on account)
November 3
Inventory
Cash
(Pay freight-in)
November 9
Inventory
1,300
(Return inventory on account)
November 11
Accounts Payable
7,700
Inventory
231
Cash
7,469
(Pay on account less 3% discount)
($231 = $7,700 × 3%)
November 16
Accounts Receivable
14,000
(Sell inventory on account)
Cost of Goods Sold
Inventory
(Cost of inventory sold)
($9,640 = ($94 × 60 units) + ($100 × 40 units))
November 20
Cash
14,000
Accounts Receivable
14,000
(Receive cash on account)
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-6B (continued)
Requirement 1 (continued)
November 21
Debit
Credit
November 24
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-6B (concluded)
Requirement 2
November 30
Debit
Credit
Cost of Goods Sold
391
Requirement 3
Yoshi Inc.
Multiple-step Income Statement (partial)
For the month of November
Net sales
$26,600
Cost of goods sold*
Gross profit
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-7B (LO 6-2, 6-7)
Requirement 1
Toys “R” Us
Multiple-step Income Statement
For the month of March, 2021
Net sales:
Total sales revenue
$77,300
Less: Sales discounts
(3,000)
Net sales revenue
$74,300
Cost of goods sold
Gross profit
Income before income taxes
Net income
Problem 6-7B (concluded)
Requirement 2
This ratio will likely be higher in December when inventory is being sold at a much
faster pace due to the holiday season.
Requirement 3
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-8B (LO 6-7)
Requirement 1
Company 1
Company 2
Requirement 2
Company 1
Company 2
Requirement 3
Company 1 is likely Dillard’s and Company 2 is likely Payless. The reason is that
6-88 Financial Accounting, 5e
Problem 6-9B (LO 6-8)
Requirement 1
June 2
Debit
Credit
Purchases
2,700
Accounts Payable
2,700
(Purchase inventory on account)
June 4
Cash
(Pay freight-in)
June 8
Purchase Returns
(Return inventory on account)
June 10
Accounts Payable
2,300
Purchase Discounts
23
Cash
2,277
(Pay on account less 1% discount)
($23 = $2,300 × 1%)
June 11
Accounts Receivable
5,000
(Sell inventory on account)
June 18
Cash
Accounts Receivable
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-9B (concluded)
Requirement 1 (continued)
June 20
Debit
Credit
Purchases
3,800
Accounts Payable
3,800
June 23
Cash
5,300
Sales Revenue
5,300
June 26
Accounts Payable
Purchase Returns
June 28
Accounts Payable
3,300
Cash
Purchase Discounts
Requirement 2
June 30
Debit
Credit
Inventory (ending)
2,078
Cost of Goods Sold
6,800
Purchase Returns
Purchase Discounts
Purchases
Inventory (beginning)
3,000
Problem 6-9B (concluded)
Requirement 3
Circuit Country
Multiple-step Income Statement (partial)
For the month of June
Net sales
$10,300
Cost of goods sold:
Gross profit
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-10B (LO 6-3, 6-9)
Requirement 1
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 29
Purchase
60
$46
$2,760
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jan. 1
Beginning inventory
35
$40
$ 1,400
Apr. 14
Purchase
80
42
Oct. 29
Purchase
35
46
Requirement 2
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 29
Purchase
50
$46
$2,300
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jan. 1
Beginning inventory
35
$40
$ 1,400
Apr. 14
Purchase
80
42
Oct. 29
Purchase
45
46
Requirements 3 and 4
2021
2022
(a) ending inventory
Overstate
No Effect
(b) retained earnings
Overstate
No Effect
(c) cost of goods sold
Chapter 6 – Inventory and Cost of Goods Sold
6-92 Financial Accounting, 5e
ADDITIONAL PERSPECTIVES
AP6-1
Requirement 1 (a)
Sales Revenue
Date
Number of units
Sale price
Total sales
Jul.
31
40
$500
$20,000
Aug.
22
Nov.
20
90
Dec.
Cost of Goods Sold*
Date
Number of units
Unit cost
Total cost
Jul.
17
50
$150
$ 7,500
Oct.
27
80
Dec.
4
$32,900
a First 200 units purchased are assumed sold. Only 30 of the 100 units purchased on
Ending Inventory
Date
Number of units
Unit cost
Total cost
4
Chapter 6 – Inventory and Cost of Goods Sold
AP6-1 (continued)
Requirement 1 (b)
Great Adventures, Inc.
Partial Income Statement
For the year ended December 31, 2022
Sales revenue
$100,000
Cost of goods sold
Requirement 2 (a)
Inventory
items
Cost
per unit
NRV
per unit
Lower of
Cost and
NRV
per unit
Quantity
Lower of
Cost and
NRV
MU
watches
$180
$100
$100
70
$7,000
Dec. 31, 2022
Debit
Credit
Requirement 2 (b)
Great Adventures reports its inventory in the balance sheet at the lower of cost and net
realizable value, which equals $7,000, as demonstrated in requirement 2(a).
Chapter 6 – Inventory and Cost of Goods Sold
AP6-1 (concluded)
Requirement 2 (c)
Great Adventures, Inc.
Partial Income Statement
For the year ended December 31, 2022
a Cost of goods sold includes the write-down of inventory of $5,600 calculated in