The following information applies to the questions displayed below.] Now that op
ID: 2525660 • Letter: T
Question
The following information applies to the questions displayed below.] Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2019. All watches are sold for $310 each. Jul. 17 Purchased 60 watches for $9,600 ($160 per watch) on account. Jul. 31 Sold 50 watches for $15,500 cash. Aug. 12 Purchased 50 watches for $8,500 ($170 per watch) cash. Aug. 22 Sold 40 watches for $12,400 on account. Sep. 19 Paid for watches ordered on July 17. Sep. 27 Received full payment for watches sold on account on August 22. Oct. 27 Purchased 90 watches for $16,200 ($180 per watch) cash. Nov. 20 Sold 100 watches for $31,000 cash. Dec. 4 Purchased 120 watches for $22,800 ($190 per watch) cash. Dec. 8 Sold 50 watches for $15,500 on account.
Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2019, assuming Suzie uses FIFO to account for inventory.
1-b. Prepare the gross profit section of a partial income statement for transactions related to MU watches.
2. Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated net realizable value of MU watches is only $110 per watch.
a. Record any necessary adjustment on December 31, 2019, related to this information.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
2. No addditional entry is required. Only closing inventory value can be valued based on revised amount.
After adjustment of closign inventory based on 110, the following would be gross profit
Profit and Loss Account (relating to MU watches) Opening Balance - Sales 74,400 Purchases 57,100 Closing Balance 15,200 Gross Profit 32,500 TOTAL 89,600 TOTAL 89,600 Inventory Account Closing Balance QTY Amount Per unit Amt Purchase Jul.17 60 9,600 60 9,600 160 Sold Jul.31 50 3,000 10 1,600 160 Purchase Aug.12 50 8,500 10 1,600 160 50 8,500 170 Sold Aug.22 10 1,600 - - 30 5,100 20 3,400 170 Purchase Oct.27 90 16,200 20 3,400 170 90 16,200 170 Sold Nov.20 100 31,000 - 10 1,700 170 Purcahse Dec.4 120 22,800 10 1,700 170 120 22,800 190 Sold Dec.5 50 15,500 - - 80 15,200 190 Sales Account Jul.31 50 15,500 310 Aug.22 40 12,400 310 Nov.20 100 31,000 310 Dec.5 50 15,500 310 TOTAL 240 74,400 Purchase Account Jul.17 60 9,600 Aug.12 50 8,500 Oct.27 90 16,200 Dec.4 120 22,800 TOTAL 320 57,100Related Questions
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