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Chapter 6 - Inventory and Cost of Goods Sold
Exercise 6-20 (LO 6-9)
Requirement 1
When goods are shipped FOB shipping point, title transfers from the seller to the
Requirement 2
Balance Sheet
Income Statement
Year
Assets
Liabilities
Stockholders’
Equity
Revenues
Cost of
Goods Sold
Gross
Profit
6-42 Financial Accounting, 5e
Exercise 6-21
Requirement 1
January 3
Debit
Credit
Inventory
126,000
Accounts Payable
126,000
(Purchase inventory on account)
January 15
Debit
Credit
Accounts Payable
11,500
Inventory
11,500
(Return defective inventory)
($11,500 = $115×100 units)
January 19
Debit
Credit
Accounts Receivable
600,000
units])
January 22
Debit
Credit
Cash
580,000
Accounts Receivable
580,000
(Receive cash on account)
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
Requirement 2
(a) January 31
Debit
Credit
Cost of Goods Sold
1,500
(b) January 31
Debit
Credit
Bad Debt Expense
3,000
Allowance for Uncollectible
3,000
(c) January 31
Debit
Credit
Interest Expense
200
Interest Payable
200
Chapter 6 - Inventory and Cost of Goods Sold
Exercise 6-21 (continued)
Requirement 3
Big Blast Fireworks
Adjusted Trial Balance
January 31, 2021
Accounts
Debit
Credit
Cash
$ 63,900
Accounts Receivable
54,000
Inventory
10,000
Land
61,600
Chapter 6 - Inventory and Cost of Goods Sold
6-46 Financial Accounting, 5e
Exercise 6-21 (continued)
Requirement 3 (concluded)
Accounts
Ending
Balance
Beginning balance in bold, entries during January in blue,
and adjusting entries in red.
Cash
$ 63,900
=
21,900+580,000−410,000−128,000
Accounts Receivable
54,000
=
36,500+600,000−580,000−2,500
Inventory
10,000
=
30,000+126,000+143,000+161,000−437,000−11,500−1,500
Land
61,600
=
61,600
Allow for Uncoll Accts
3,600
=
3,100−2,500+3,000
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, 2021
Sales revenue
$600,000
Cost of goods sold
438,500
Gross profit
$161,500
Requirement 5
Big Blast Fireworks
Classified Balance Sheet
January 31, 2021
Assets
Liabilities
Cash
$ 63,900
Accounts payable
$ 40,900
Accounts receivable
54,000
Interest payable
200
Less: Allowance
(3,600)
50,400
Income tax payable
12,300
Exercise 6-21 (continued)
Requirement 6
January 31, 2021
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
Ratio
=
(Sales − Cost of Goods Sold)
=
($600,000 − $438,500)
=
26.9%
Sales
$600,000
Chapter 6 - Inventory and Cost of Goods Sold
6-50 Financial Accounting, 5e
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
Date
Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Oct. 1
Beginning inventory
4a
$900
$ 3,600
Requirement 2 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 20
Purchase
1
$920
$ 920
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
Requirement 4 Weighted average
Date
Transaction
Number
of units
Unit
cost
Total
Cost
Oct. 1
Beginning inventory
6
$900
$ 5,400
Chapter 6 - Inventory and Cost of Goods Sold
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
Requirement 2 FIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Mar. 22
Purchase
5
$280
$1,400
Chapter 6 - Inventory and Cost of Goods Sold
Problem 6-2A (continued)
Requirement 3 LIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Mar. 1
Beginning inventory
14
$250
$3,500
Requirement 4 Weighted average
Date
Transaction
Number
of units
Unit
cost
Total
Cost
Mar. 1
Beginning inventory
20
$250
$ 5,000
6-54 Financial Accounting, 5e
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
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
Accounts Payable
2,300
July 11
Accounts Payable
2,100
Inventory
21
Cash
2,079
(Pay on account less 1% discount)
($21 = $2,100 × 1%)
July 12
Accounts Receivable
5,800
Problem 6-3A (concluded)
Requirement 1 (continued)
July 18
Debit
Credit
Inventory
3,100
Accounts Payable
3,100
(Purchase inventory on account)
July 22
Cash
4,200
(Record cost of inventory sold)
July 28
Accounts Payable
300
Inventory
300
(Return inventory on account)
July 30
Requirement 2
CD City
Multiple-step Income Statement (partial)
For the month of July
Net sales
$10,000
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Solutions Manual, Chapter 6 6-57
Problem 6-4A (LO 6-6)
Requirement 1
Inventory
items
Quantity
Unit
Cost
Total
Cost
Vans
4
$27,000
$108,000
Trucks
7
18,000
126,000
Requirement 2
Inventory
items
Quantity
Unit
Cost
Unit
NRV
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
Cost of Goods Sold
27,000
Inventory
27,000
(Write down inventory to net realizable value)
6-58 Financial Accounting, 5e
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
Sep. 17
Purchase
60
9
540
100
$1,180
Requirement 2 LIFO
Date
Transaction
Number
of units
Unit
cost
Ending
Inventory
Jan. 1
Beginning inventory
100
$21
$2,100
Chapter 6 - Inventory and Cost of Goods Sold
Problem 6-5A (concluded)
Requirement 3
Ending Inventory
FIFO
Debit
Credit
Chapter 6 - Inventory and Cost of Goods Sold
Problem 6-6A (LO 6-2, 6-3, 6-4, 6-5, 6-6)
Requirement 1
October 4
Debit
Credit
Inventory
6,500
Accounts Payable
500
Inventory
500
(Return inventory on account)
October 12
Accounts Payable
6,000
Inventory
120
Cash
5,880
(Pay on account less 2% discount)
($120 = $6,000 × 2%)
October 15
