Chapter 6 2 marks

Del Sol Company, which uses the periodic inventory system, purchased merchandise on credit for $5,000. The entry to record this transaction is

1. Debit Purchases, $5,000, and credit Accounts Payable, $5,000

2. Debit Purchases, $5,000, and credit Cost of Goods Sold, $5,000

3. Debit Merchandise Inventory, $5,000, and credit Accounts Payable, $5,000

4. Debit Merchandise Inventory, $5,000, and credit Cost of Goods Sold, $5,000

Show your work in T-accounts;

Support your answer with theoretical explanations;

Chapter 8 4 marks

(1)

A Company recorded the following Purchases and Sales of fertilizer during the past year:

Jan. 1 Beginning Inventory 125 cases @ $23 $ 2,875

Feb. 25 Purchase 100 cases @ $26 2,600

June 15 Purchase 200 cases @ $28 5,600

Oct. 15 Purchase 150 cases @ $28 4,200

Dec. 15 Purchase 100 cases @ $30 3,000

GAFS 675 cases COGAFS $ 18,275

Total Sales 500 cases

Dec 31 Ending Inventory 175 cases

Assume:

That a Company sold all of the June 15 Purchase; 100 cases each from the January 1 Beginning Inventory, the October 15 Purchase, the December 15 Purchase;

Determine:

The cost that should be assigned to Ending Inventory and Cost of Goods Sold under each of the following assumptions:

(a) The Specific Identification Method

(b) The FIFO method

Assume The Periodic Inventory System

(2) For an extra mark!

Inventory turnover is computed by dividing:

1. Net sales by average inventory
2. Average inventory by cost of goods sold
3. Average inventory by net sales
4. Cost of goods sold by average inventory