Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-6A (continued)
Requirement 1 (continued)
October 20
Debit
Credit
Inventory
7,000
Accounts Payable
7,000
(Purchase inventory on account)
October 22
Cash
Cost of Goods Sold
6,840
($6,840 = ($54 × 10 units) + ($70 × 90 units))
Chapter 6 – Inventory and Cost of Goods Sold
6-62 Financial Accounting, 5e
Problem 6-6A (concluded)
Requirement 2
October 31
Debit
Credit
Cost of Goods Sold
350
Requirement 3
Bowser Co.
Multiple-step Income Statement (partial)
For the month of October
Net sales
$20,800
Cost of goods sold*
Gross profit
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-7A (LO 6-2, 6-7)
Requirement 1
Baskin-Robbins
Multiple-step Income Statement
For the month of July, 2021
Net sales:
Total sales revenue
$69,800
Less: Sales returns
(1,100)
Cost of goods sold
28,700
Gross profit
40,000
Utilities
Rent
Operating income
16,000
Non-operating items:
Interest income
3,300
Interest expense
(400)
6,000
Net income
Chapter 6 – Inventory and Cost of Goods Sold
6-64 Financial Accounting, 5e
Problem 6-7A (concluded)
Requirement 2
This ratio will likely be lower in December when inventory is being sold at a much
slower pace due to ice cream sales being less popular in colder months.
Requirement 3
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-8A (LO 6-7)
Requirement 1
Requirement 2
Company 1
Company 2
Gross
Requirement 3
Company 1 is likely St. Jude and Company 2 is likely Wawa. The reason is that
Problem 6-9A (LO 6-8)
Requirement 1
July 3
Debit
Credit
Purchases
2,300
Accounts Payable
2,300
(Purchase inventory on account)
July 4
Freight-In
110
Cash
(Pay freight-in)
July 9
Purchase Returns
(Return inventory on account)
July 11
Accounts Payable
2,100
Purchase Discounts
21
Cash
2,079
(Pay on account less 1% discount)
($21 = $2,100 × 1%)
July 12
Accounts Receivable
5,800
5,800
(Sell inventory on account)
July 15
Cash
5,800
Accounts Receivable
Purchases
3,100
Accounts Payable
(Purchase inventory on account)
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-9A (continued)
Requirement 1 (concluded)
July 22
Debit
Credit
Cash
4,200
Sales Revenue
4,200
(Sell inventory for cash)
July 28
Accounts Payable
July 30
Accounts Payable
2,800
(Pay cash on account)
Requirement 2
July 31
Debit
Credit
Inventory (ending)
2,889
Cost of Goods Sold
5,500
Purchase Returns
Purchase Discounts
(Record period-end adjustment)
Chapter 6 – Inventory and Cost of Goods Sold
6-68 Financial Accounting, 5e
Problem 6-9A (concluded)
Requirement 3
CD City
Multiple-step Income Statement (partial)
For the month of July
Net sales
$10,000
Cost of goods sold:
Beginning inventory
$3,400
Less: Ending inventory
Cost of goods sold
$4,500
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-10A (LO 6-7. 6-9)
Requirement 1
2018
2019
2020
2021
Gross profit
Requirement 2
2018
2019
2020
2021
Gross profit
Gross
a These amounts represent amounts that would have been reported had the $11,000
inventory error not occurred. The understatement of inventory in 2019 has the effect
of understating gross profit in 2019 and overstating gross profit in 2020 by $11,000.
Using the corrected amounts, the trend in gross profit is much more stable over time,
which is to be expected for most companies.
Requirement 3
Corrected gross profit from 2018-2021 = $28,000 + $31,000 + $35,000 + $42,000
Chapter 6 – Inventory and Cost of Goods Sold
6-70 Financial Accounting, 5e
PROBLEMS: SET B
Problem 6-1B (LO 6-3)
Requirement 1 Specific identification
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Jun. 1
Beginning inventory
1
$ 350
$ 350
Jun. 12
Purchase
1
Jun. 24
Purchase
3
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jun. 1
Beginning inventory
11a
$350
$ 3,850
Jun. 1
Beginning inventory
Jun. 12
Purchase
Jun. 1
Beginning inventory
31
$10,620
Requirement 2 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Jun. 24
Purchase
5
$330
$1,650
Jun. 29
Purchase
9
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jun. 1
Beginning inventory
16
$350
$ 5,600
Jun. 12
Purchase
10
Jun. 24
Purchase
$10,650
Chapter 6 – Inventory and Cost of Goods Sold
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-1B (concluded)
Requirement 3 LIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jun. 1
Beginning inventory
2
$350
$ 700
Jun. 12
Purchase
10
Jun. 24
Purchase
10
Jun. 29
Purchase
9
Requirement 4 Weighted average
Date
Transaction
Number
of units
Unit
cost
Total
Cost
Jun. 1
Beginning inventory
16
$350
$ 5,600
Jun. 12
Purchase
10
Jun. 24
Purchase
Jun. 29
Purchase
9
Weighted-average cost = $15,180 / 45 units = $337.3333 (rounded)
Problem 6-2B (LO 6-3, 6-4, 6-5)
Requirement 1 Specific identification
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Aug. 1
Beginning inventory
2
$160
$ 320
Aug. 11
Purchase
2
Aug. 29
Purchase
$2,050
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Aug. 1
Beginning inventory
5a
$160
$ 800
Aug. 11
Purchase
Aug. 1
Beginning inventory
1c
Aug. 20
Purchase
a From the August 4 sale; b From the August 13 sale; c From the August 26 sale.
Requirement 2 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Aug. 20
Purchase
4
$140
$ 560
Aug. 29
Purchase
$1,990
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Aug. 1
Beginning inventory
8
$160
$1,280
Aug. 20
Purchase
6
6-74 Financial Accounting, 5e
Problem 6-2B (continued)
Requirement 3 LIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Aug. 1
Beginning inventory
8
$160
$1,280
Aug. 11
Purchase
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Aug. 11
Purchase
3
$150
$ 450
Aug. 20
Purchase
Aug. 29
Purchase
* Last 24 units purchased are assumed sold
Requirement 4 Weighted average
Date
Transaction
Number
of units
Unit
cost
Total
Cost
Aug. 1
Beginning inventory
8
$160
$1,280
Aug. 11
Purchase
Aug. 20
Purchase
Aug. 29
Purchase
Weighted-average cost = $5,610 / 39 units = $143.8462 (rounded)
Chapter 6 – Inventory and Cost of Goods Sold
Problem 6-2B (concluded)
Requirement 5
Specific
Identification
FIFO
LIFO
Weighted-
average
Cost
Sales revenue
$5,795
$5,795
$5,795
$5,795.00
Cost of goods sold
Gross profit
Requirement 6
FIFO provides the more meaningful measure of ending inventory. The amount of
Requirement 7
August 31
Debit
Credit
Inventory
340
Problem 6-3B (LO 6-2, 6-5)
Requirement 1
June 2
Debit
Credit
Inventory
2,700
Accounts Payable
2,700
(Purchase inventory on account)
June 4
Inventory
Cash
(Pay freight-in)
June 8
Inventory
(Return inventory on account)
June 10
Accounts Payable
2,300
Inventory
23
Cash
2,277
(Pay on account less 1% discount)
($23 = $2,300 × 1%)
June 11
Accounts Receivable
5,000
(Sell inventory on account)
Cost of Goods Sold
Inventory
(Record cost of inventory sold)
June 18
Cash
Accounts Receivable
(Receive cash on account)
Problem 6-3B (concluded)
Requirement 1 (continued)
June 20
Debit
Credit
Inventory
3,800
Accounts Payable
3,800
(Purchase inventory on account)
June 23
Cash
5,300
Sales Revenue
Cost of Goods Sold
3,600
Inventory
(Record cost of inventory sold)
June 26
Inventory
(Return inventory on account)
June 28
Accounts Payable
3,300
Cash
3,201
Inventory
99
(Pay cash on account)
($99 = $3,300 × 3%)
Requirement 2
Circuit Country
Multiple-step Income Statement (partial)
For the month of June
Net sales
Cost of goods sold
Gross profit
6-78 Financial Accounting, 5e
Problem 6-4B (LO 6-6)
Requirement 1
Inventory items
Quantity
Unit
Cost
Total
Cost
Hammers
110
$ 8.00
$ 880
Saws
60
11.00
660
Screwdrivers
Drills
50
26.00
1-gallon paint cans
170
6.50
Paint brushes
190
7.00
$5,695
Requirement 2
Inventory items
Quantity
Unit
Cost
Unit
NRV
Lower of
Cost and
NRV
per unit
Total
Hammers
110
$ 8.00
$ 8.50
$ 8.00
$ 880
Saws
Screwdrivers
140
3.00
Drills
1-gallon paint cans
170
6.50
Paint brushes
190
7.00
$5,450
Requirement 3
Because the total of lower of cost and net realizable value ($5,450) is less than total
cost ($5,695), inventory is written down for the difference ($245).
Debit
Credit
Requirement 4
The write-down of inventory from cost to net realizable value reduces total assets and
Chapter 6 – Inventory and Cost of Goods Sold
Chapter 6 – Inventory and Cost of Goods Sold
6-80 Financial Accounting, 5e
Problem 6-5B (LO 6-3, 6-6)
Requirement 1 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 4
Purchase
9
$550
$4,950
Date
Transaction
of units
cost
Goods Sold
Jan. 1
Beginning inventory
$500
Apr. 9
Purchase
15,600
Number
Unit
Cost of
Requirement 2 LIFO
Date
Transaction
of units
cost
Inventory
Jan. 1
Beginning inventory
9
$500
Number
Unit
Ending
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jan. 1
Beginning inventory
$500
Apr. 9
Purchase
15,600
Oct. 4
Purchase