Concept introduction:
Cost of goods sold:
Cost of goods sold is the costs incurred for manufacturing or acquiring the products sold by a company in a given year. It includes all the direct costs incurred for the products sold. It can be calculated using the following formulas:
Requirement 1:
To calculate:
Cost of goods sold section of partial income statement at December 31, 2015 for both the companies.
Answer to Problem 5PSA
Cost of goods sold as at December 31, 2015:
For Music World Retail = $3, 25,000
For Wave- Board Manufacturing = $11, 50,000
Explanation of Solution
To calculate cost of goods sold for Music World Retail, following formula would be used:
In the given problem, following information is given:
Beginning merchandise inventory = $2, 00,000
Cost of purchases = $3, 00,000
Ending merchandise inventory = $1, 75,000
Therefore, Cost of goods sold for Music world Retail would be:
Further for calculation of cost of goods sold for Wave- Board Manufacturing, below- mentioned formula would be used:
Following information is given in the given problem:
Beginning finished goods inventory = $5, 00,000
Cost of goods manufactured = $8, 75,000
Ending finished goods inventory = $2, 25,000
Cost of goods sold section of the Income statement at December 31, 2015 for both the companies as asked in the given problem is tabulated below:
Schedule of cost of goods sold for both the companies (Amount in $):
Particulars | Music World Retail | Wave- Board Manufacturing |
Beginning inventory | 2,00,000 | 5,00,000 |
Add: Cost of purchases/ Cost of goods manufactured | 3,00.000 | 8,75,000 |
Goods available for sale | 5,00,000 | 13,75,000 |
Less: Ending inventory | (1,75,000) | (2,25,000) |
Cost of goods sold | 3,25,000 | 11,50,000 |
Thus, Cost of goods sold for Music World Retail is coming out to be $3, 25,000 and that of Wave- Board Manufacturing as $11, 50,000.
Concept introduction:
Cost of goods sold:
Cost of goods sold is the costs incurred for manufacturing or acquiring the products sold by a company in a given year. It includes all the direct costs incurred for the products sold.
Requirement 2:
Memorandum to instructor (a) identifying inventory accounts and (b) describing where each item is reported on income statement and
Answer to Problem 5PSA
- Beginning inventory is shown in the Income Statement
- Cost of purchases or cost of goods manufactured is charged to Income Statement. Further, the ending Accounts Payables are listed as Liabilities in the Balance Sheet.
- Ending inventory is shown at credit side as Income in the Income statement and as Current Asset in the Balance Sheet.
Explanation of Solution
Memorandum to instructor To: Instructor
Subject: Memorandum identifying inventory accounts and describing where each item is reported
Details:
All the account heads are listed below:
When the goods are purchased or manufactured, following entry would be passed in the accounting books:
Date | Particulars | L.F. | Debit Amount (in $) | Credit Amount (in $) |
Cost of purchases | XXX | |||
Account Payable | XXX | |||
(Being goods purchased or manufactured) |
Want to see more full solutions like this?
Chapter 1 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
- Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated), are as follows: During May, the last month of the fiscal year, the following transactions were completed: Instructions 1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark () in the Posting Reference column. Journalize the transactions for July, starting on Page 20 of the journal. 2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). 5. (Optional) Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of owners equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the owners capital account. 10. Prepare a post-closing trial balance.arrow_forwardThe following select account data is taken from the records of Carnival Express for 2019. A. Use the data provided to compute net sales for 2019. B. Prepare a simple income statement for the year ended December 31, 2019. C. Compute the gross margin for 2019. D. Prepare a multi-step income statement for the year ended December 31, 2019.arrow_forwardOn March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, are as follows: a. Prepare a multiple-step income statement for the year ended March 31, 2019. b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.arrow_forward
- The following select account data is taken from the records of Reese Industries for 2019. A. Use the data provided to compute net sales for 2019. B. Prepare a simple income statement for the year ended December 31, 2019. C. Compute the gross margin for 2019. D. Prepare a multi-step income statement for the year ended December 31, 2019.arrow_forwardUse a spreadsheet and the following excerpts from Hileah Companys financial information to build a template that automatically calculates (A) inventory turnover and (B) number of days sales in inventory, for the year 2018.arrow_forwardGolden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows: Purchases: Sales: The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system. Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the companys financial statements.arrow_forward
- Bay Book and Software has two sales departments: Book and Software. After recording and posting all adjustments, including the adjustments for merchandise inventory, the accountant prepared the adjusted trial balance (shown on the next page) at the end of the fiscal year. Merchandise inventories at the beginning of the year were as follows: Book Department, 53,410; Software Department, 23,839. The bases (and sources of figures) for apportioning expenses to the two departments are as follows (rounded to the nearest dollar): Sales Salary Expense (payroll register): Book Department, 45,559; Software Department, 35,629 Advertising Expense (newspaper column inches): Book Department, 550 inches; Software Department, 450 inches Depreciation Expense, Store Equipment (property and equipment ledger): Book Department, 7,851; Software Department, 2,682 Store Supplies Expense (requisitions): Book Department, 205; Software Department, 199 Miscellaneous Selling Expense (volume of gross sales): Book Department, 240; Software Department, 110 Rent Expense and Utilities Expense (floor space): Book Department, 9,000 square feet; Software Department, 7,000 square feet Bad Debts Expense (volume of gross sales): Book Department, 1,029; Software Department, 441 Miscellaneous General Expense (volume of gross sales): Book Department, 364; Software Department, 156 Required Prepare an income statement by department to show income from operations, as well as a nondepartmentalized income statement (using the Total columns) to show net income for the entire company.arrow_forwardReese Manufacturing Company manufactures and sells a limited line of products made to customer order. The company uses a perpetual inventory system and keeps its accounts on a calendar year basis. A 6-column spreadsheet is presented on page 1100. Additional information needed to prepare the income statement and schedule of cost of goods manufactured is as follows: REQUIRED 1. Prepare an income statement and schedule of cost of goods manufactured for the year ended December 31,20--. 2. Prepare a statement of retained earnings for the year ended December 31,20--. 3. Prepare a balance sheet as of December 31, 20--. 4. Prepare the adjusting, closing, and reversing entries.arrow_forwardThe beginning inventory for Funky Party Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A. Instructions 1. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system. 2. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system. 3. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the nearest cent. 4. Compare the gross profit and the March 31, 2016, inventories, using the following column headings:arrow_forward
- The following data pertain to 2012 activities of Twisp Industries: Use your completed worksheet to determine the firms cost of goods sold for 2012. Remember to change the year in row 24 and to enter new beginning inventory balances. Save the 2012 file as MFG3. Print the worksheet when done. If sales and other expenses were identical in 2011 and 2012, during which year did Twisp earn more income? Why?arrow_forwardPalm Tree Furniture began June with merchandise inventory of 48 sofas that cost a total of $36,960. During the month, Palm Tree Furniture purchased and sold merchandise on account as follows: View the inventory_records. Prepare a perpetual inventory record, using the LIFO inventory costing method, and determine the company's Cost of Goods Sold, ending merchandise inventory, and gross profit. Start by entering the beginning inventory balances. Enter the transactions in chronological order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual record, calculate the quantity and total cost of inventory purchased, sold, and on hand at the end of the period. (Enter the oldest inventory layers first.) Purchases Cost of Goods Sold Inventory on Hand Unit Total Unit Total Unit Total Date Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost June 1 June 7 June 14 June 18 June 27 Totals The gross profit is Inventory…arrow_forwardDirections: Prepare a schedule of cost of goods sold for the three-month period and a statement of income for the period ended March 31, 2020. Prepare also a closing entry with the given data below. Write your answer on the space provided. II. Below are some of the accounts relating to the income of Ken Merchandising (owWned by Thara Ken) for the one month period ended March 31, 2020: Sales 170,100 500,000 Merchandise Inventory, beginning Sales Returns and 165,000 15,000 Merchandise Inventory, Ending Allowances Sales Discounts 7,800 Purchase Discounts 1,800 Purchases 302,000 Freight-In 5,000 Purchase Returns and 4,9000 Rental Expense 5,000 Allowances Supplies Expense 1,200 Delivery Expense 2,100 Salaries Expense 18,000 Utilities Expense 8,000 A. Cost of Goods Soldarrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengagePrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage Learning