The risk-free rate is 4.2%, and the expected return on the market is 10%. A publicly-traded bond promises to return 8%. The expe
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Answer:
<u>Part 1 a</u>
jan 4
Debit ; Accounts Receivable (80 x $8.00) $640
Credit : Revenue $640
jan 11
Debit ; Purchases (150 x $6) $900
Credit : Accounts Payable $900
jan 13
Debit ; Accounts Receivable (120 x $8.75) $1,050
Credit : Revenue $1,050
jan 20
Debit ; Purchases (160 x $7) $1,120
Credit : Accounts Payable $1,120
jan 27
Debit ; Accounts Receivable (100 x $9.00) $900
Credit : Revenue $900
jan 31
Debit ; Cost of Sales (100 x $5 + 150 x $6 + 160 x $7) $2,520
Credit : Inventory $2,520
<u>Part 1 b</u>
<em>Gross Profit = Sales - Cost of Sales</em>
Sales = ( 80 x $8.00 + 120 x $8.75 + 100 x $9.00) = $2,590
Cost of Sales = (100 x $5 + 150 x $6 + 160 x $7) = $2,520
Therefore,
Gross Profit = $2,590 - $2,520
= $70
<u>Part 2 a</u>
jan 4
Debit ; Accounts Receivable (80 x $8.00) $640
Debit : Cost of Sales (80 x $5.00) $400
Credit : Revenue (80 x $8.00) $640
Credit : Inventory (80 x $5.00) $400
jan 11
Debit ; Purchases (150 x $6) $900
Credit : Accounts Payable $900
jan 13
Debit ; Accounts Receivable (120 x $8.75) $1,050
Debit : Cost of Sales (20 x $5.00 + 100 x $6) $700
Credit : Revenue (120 x $8.75) $1,050
Credit : Inventory (20 x $5.00 + 100 x $6) $700
jan 20
Debit ; Purchases (160 x $7) $1,120
Credit : Accounts Payable $1,120
jan 27
Debit ; Accounts Receivable (100 x $9.00) $900
Debit : Cost of Sales (50 x $6.00 + 50 x $7) $650
Credit : Revenue (100 x $9.00) $900
Credit : Inventory (50 x $6.00 + 50 x $7) $650
<u>Part 2 b</u>
<em>Gross Profit = Sales - Cost of Sales</em>
Sales = ( 80 x $8.00 + 120 x $8.75 + 100 x $9.00) = $2,590
Cost of Sales = ($400 + $700 + $650) = $1,750
Therefore,
Gross Profit = $2,590 - $1,750
= $840
Explanation:
<em>Hie, see the attached the full question as images below</em>
<u>Part 1</u>
Note that the question in this part requires us to use the Periodic Inventory System. In Periodic Inventory system, Inventory Valuation and calculation of Cost of Goods Sold is done at the <em>end of the Period</em>, in this case at the end of the month of January.
<u>Part 2 </u>
Again it is important to note that the question in this part requires us to use the Perpetual Inventory System. In Perpetual Inventory system, Inventory Valuation and calculation of Cost of Goods Sold is done at the <em>after each and every transaction made</em>.
<u>Overall Comment</u>
The Company use of FIFO should be considered in both the Periodic Inventory System in Part 1 and Perpetual Inventory System in Part 2. FIFO method assumes that the first goods received by the business will be the first ones to be delivered to the final customer.
That said, Cost of Sales for Part 1 are determined and recognized at the end of the period and Cost of Sales for Part 2 are determined and recognized after every sale transaction made
