Answer:
Fong Sai-Yuk Company
a. Journal Entries:
Debit Purchases $2,020
Credit Accounts payable $2,020
To record purchases of goods on account for the month.
Debit Accounts receivable $2,590
Credit Sales revenue $2,590
To record the sale of goods on account for the month.
Debit Sales revenue $2,590
Credit Income Summary $2,590
To close the account to the income summary.
Debit Income Summary $2,790
Credit Purchases $2,020
Credit Ending Inventory $770
To close the accounts to the income summary.
b. Computation of the Gross Profit using the periodic system:
Sales revenue $2,590
Cost of goods:
Opening inventory $500
Purchases 2,020
Less Ending inventory 770 1,750
Gross profit $840
c. Using the Perpetual system:
Journal Entries:
Jan. 4 Debit Accounts receivable $640
Credit Sales revenue $640
To record the sale of goods on account.
Jan. 4 Debit Cost of goods sold $400
Credit Inventory $400
To record the cost of goods sold.
Jan. 11 Debit Inventory $900
Credit Accounts payable $900
To record the purchase of goods on account.
Jan. 13 Debit Accounts receivable $1,050
Credit Sales revenue $1,050
To record the sale of goods on account.
Jan. 13 Debit Cost of goods sold $700
Credit Inventory $700
To record the cost of goods sold.
Jan. 20 Debit Inventory $1,120
Credit Accounts payable $1,10
To record the purchase of goods on account.
Jan. 27 Debit Accounts receivable $900
Credit Sales revenue $900
To record the sale of goods on account.
Jan. 27 Debit Cost of goods sold $650
Credit Inventory $650
To record the cost of goods sold.
Jan. 31:
Debit Income Summary $1,750
Credit Cost of goods sold $1,750
To close the account to the income summary.
Debit Sales Revenue $2,590
Credit Income Summary $2,590
To close the account to the income summary.
d. Computation of the gross profit:
Sales revenue $2,590
Cost of goods 1,750
Gross profit $840
Explanation:
a) Data and Calculations:
Date Description Units Unit Cost Unit Price Total Cost Total Revenue
Jan. 1 Inventory 100 $5 $500
Jan. 4 Sale 80 $8 $640
Jan. 11 Purchase 150 $6 900
Jan. 13 Sale 120 $8.75 1,050
Jan. 20 Purchase 160 $7 1,120
Jan. 27 Sale 100 $9 900
Total goods available 410 $2,520
Total goods sold 300 $2,590
Ending inventory 110
Using FIFO under periodic system:
Ending inventory = 110 * $7 = $770
Cost of goods sold = Cost of goods available minus cost of ending inventory
= $2,520 - $770
= $1,750
Using FIFO under perpetual system:
Cost of goods sold:
Jan. 4 Sale $400 (80 * $5)
Jan. 13 Sale 700 (20 * $5 + 100 * $6)
Jan. 27 Sale 650 (50 * $6 + 50 * $7)
Total cost of goods sold $1,750
Ending inventory = $2,520 - $1,750 = $770
