SUI sells presses. At December 31, 2009, SUI\'s inventory amounted to $500,000.
ID: 2434685 • Letter: S
Question
SUI sells presses. At December 31, 2009, SUI's inventory amounted to $500,000. During the first week of January 2010, the comapny made only one purchase and one sale. These transcations were as follows:Jan 5 purchased 60 machines from Double, Inc. The total cost of these machines was $40,000, terms 3/10, n/60.
Jan 10 sold 30 different typesof products on account to Air Corporation. The total sales price was $28,000 terms 5/10 n/90. The total cost of these 30 units to SUI was $10,000 (net of purchase discount).
SUI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable.
A. Breifly describe the operating cycle of a merchandising company. Identify the assets and liabilities directly affected by this cycle.
B. Prepare journal entries to record these transactions, assuming SUI uses a perpetual inventory system.
C. Explain the information in part b that should be posted to subsidiary ledger accounts.
D. Compute the balance in the inventory control account at the close of business on January 10.
E. Prepare journal entries to record the two transactions, assuming that SUI uses a periodic inventory system.
F. Compute the cost of goods sold for the two weeks of January assuming use of the periodic system.
G. Which type of inventory system do you think SUI most likely would use? Explain your reasoning.
H. Compute the gross profit margin on the January 10 sales transaction.
Explanation / Answer
5-Jan inventory 40000 Accounts payable 40000 Being machines purchased 10-Jan Accounts receivables 28000 sales 28000 being sold diiferent types of products to Air corp., on account Cost of goods sold 10000 inventory 10000 To Balance b/d 500000 ByAccounts To Accounts receivable 28000 payable 40000 bycost of goods sold 10000 To balance c/d 502000 540000 540000 Accounts receivable to inventory 28000 Accounts payable by inventory 40000 cost of goods sold To inventory 10000 e. purchases 40000 Accounts payable 40000 being purchase of machineson account Accounts receivable 28000 sales 28000 being sales made f. cost of goods sold opening stock+purchases-closing stock 500000+40000-502000= 38000 g. perpetual inventory is thebest method of recording inventories, because it updates inventory account after each purchase or sale,and inventory subsidiary ledger is updated after each transaction, and inventory quantities are updated continuously. h. sales 28000 cost 10000 Gross profit 18000 5-Jan inventory 40000 Accounts payable 40000 Being machines purchased 10-Jan Accounts receivables 28000 sales 28000 being sold diiferent types of products to Air corp., on account Cost of goods sold 10000 inventory 10000Related Questions
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