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In: Accounting

On December 1, 2020, Lily Company had the account balances shown below. Debit Credit Cash $5,000...

On December 1, 2020, Lily Company had the account balances shown below.

Debit

Credit
Cash $5,000 Accumulated Depreciation—Equipment $1,100
Accounts Receivable 3,200 Accounts Payable 3,200
Inventory 2,700* Owner’s Capital 28,600
Equipment 22,000
$32,900 $32,900


*(4,500 x $0.60)

The following transactions occurred during December:

Dec. 3 Purchased 4,400 units of inventory on account at a cost of $0.70 per unit.
5 Sold 4,900 units of inventory on account for $0.86 per unit. (Lily sold 4,500 of the $0.60 units and 400 of the $0.70.)
7 Granted the December 5 customer $198 credit for 200 units of inventory returned costing $132. These units were returned to inventory.
17 Purchased 2,100 units of inventory for cash at $0.76 each.
22 Sold 3,500 units of inventory on account for $0.91 per unit. (Lily sold 3,500 of the $0.70 units.)


Adjustment data:

1. Accrued salaries payable $700.
2.

Depreciation $240 per month.

Enter the December 1 balances in the ledger T-accounts and post the December transactions. (Post entries in the order of journal entries presented above.)

Solutions

Expert Solution

To post the transactions in t-accounts it is necessary to prepare journal entries and adjusting entries related to this month.


When inventory is purchased on account, inventory account is debited and accounts payable is credited. When sales is made on account, sales revenue is credited and accounts receivable is debited. Similarly, Cost of goods sold is debited and inventory is credited to effect the amount of inventory sold.
Adjusting entries are made at the end of the accounting period, to effect the adjustment of revenues and expenses.

December 3 - Cost of inventory purchased:

4,400 × $0.70 = $3,080

December 5 - Sales amount and cost of goods sold:

Sales amount = 4,900 × $0.86 = $4,214
Cost of goods sold = (4,500 × $0.60) + (400 × $0.70) = $2,980

December 17 - Cost of inventory purchased:
2,100 × $0.76 = $1,596

December 22 - Sales amount and cost of goods sold:

Sales amount = 3,500 × $0.91 = $3,185
Cost of goods sold = 3,500 × $0.70 = $2,450

T-accounts:

ekkarill92 answered 2 years ago
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