Question

Novak Company sells one product. Presented below is information for January for Novak Company.

Jan. 1		Inventory		125	units at $4 each
4		Sale		104	units at $8 each
11		Purchase		158	units at $6 each
13		Sale		130	units at $9 each
20		Purchase		149	units at $6 each
27		Sale		87	units at $11 each

Novak uses the FIFO cost flow assumption. All purchases and sales are on account.

Assume Novak uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 111 units.

Compute gross profit using the periodic system.

Gross profit

Assume Novak uses a perpetual system. Prepare all necessary journal entries

Compute gross profit using the perpetual system.

Gross profit

$

Answer 1

NOVAK COMPANY JOURNAL
Date	Particulars	Debit ($)	Credit ($)
Jan 4	Accounts receivable dr. To Sales	832	832
Jan 11	Purchases dr. To Accounts payable	948	948
Jan 13	Accounts receivable dr. To Sales	1,170	1,170
Jan 20	Purchases dr. To Accounts payable	894	894
Jan 27	Accounts receivable dr. To Sales	957	957
Jan 31	Trading dr. To Purchases	1,842	1,842
Jan 31	Closing inventory dr. To Trading	666	666

a) Cost of goods sold:

= Opening inventory + Purchases - closing inventory

= 500 + 1,842 - 666

= 1,676

b) Sales = 2,959

c) Gross profit:

= Sales - Cost of goods sold

= 2,959 - 1,676

= 1,283

.

NOVAK COMPANY JOURNAL
Date	Particulars	Debit ($)	Credit ($)
Jan 4	Accounts receivable dr. To Sales	832	832
Jan 4	Cost of goods sold dr. To Inventory	416	416
Jan 11	Inventory dr. To Accounts payable	948	948
Jan 13	Accounts receivable dr. To Sales	1,170	1,170
Jan 13	Cost of goods sold dr. To Inventory	738	738
Jan 20	Purchases dr. To Accounts payable	894	894
Jan 27	Accounts receivable dr. To Sales	957	957
Jan 27	Cost of goods sold dr. To Inventory	522	522

.

Date	Receipts	Issues	Balance
Jan 1							125	4	500
Jan 4				104	4	416	21	4	84
Jan 11	158	6	948				21	4	84
							158	6	948
Jan 13				21	4	84	49	6	294
				109	6	654
Jan 20	149	6	894				49	6	294
							149	6	894
Jan 27				49	6	294	111	6	666
				38	6	228
				321		1,676

a) Cost of goods sold = total of issues = 1,676

b) Sales = 2,959

c) Gross profit:

= Sales - Cost of goods sold

= 2,959 - 1,676

= 1,283

.

...

Feel free to ask any doubt.