Question

In 2018, Rogan LLC had the following information related to sales and inventory. Rogan uses a perpetual inventory system and the FIFO cost method. All sales and inventory purchases are on account.

On January 1, 2018, Rogan reported:

Inventory                                                         $30,000 (3,000 units at a cost of $10/unit)

In 2018, Rogan had the following inventory transactions (in chronological order):

Purchased, on account, 5,000 units at a cost of $12/unit.

Sold, on account, 6,000 units at a selling price of $25/unit; terms included sales discount.

Received $135,000 on account from customers who owed $140,000; $5,000 taken in discounts.

Purchased, on account, 8,000 units at a cost of $15/unit.

Sold, on account, 9,000 units at a selling price of $30/unit; terms included sales discount.

Received $250,000 on account from customers who owed $260,000; $10,000 taken in discounts

Requirement 1: Record the 2018 inventory transactions.

Requirement 2: Determine 2018 net sales.

Requirement 3: Determine 2018 gross profit.

Requirement 4: Determine the 12-31-18 balances for Accounts Receivable and Inventory.

Answer 1

Solution 1:

Journal Entries - Rogan LLC
Event	Particulars	Debit	Credit
1	Inventory Dr	$60,000.00
	To Accounts Payable (5000*$12)		$60,000.00
	(To record purchase of inventory on account)
2a	Accounts receivables Dr (6000*$25)	$150,000.00
	To Sales revenue		$150,000.00
	(To record sales)
2b	Cost of goods sold Dr (3000*$10 + 3000*$12)	$66,000.00
	To Inventory		$66,000.00
	(To record COGS)
3	Cash Dr	$135,000.00
	Sales Discount Dr	$5,000.00
	To Accounts receivables		$140,000.00
	(To record collection from customer)
4	Inventory Dr	$120,000.00
	To Accounts Payable (8000*$15)		$120,000.00
	(To record purchase of inventory on account)
5a	Accounts receivables Dr (9000*$30)	$270,000.00
	To Sales revenue		$270,000.00
	(To record sales)
5b	Cost of goods sold Dr (2000*$12 + 7000*$15)	$129,000.00
	To Inventory		$129,000.00
	(To record COGS)
6	Cash Dr	$250,000.00
	Sales Discount Dr	$10,000.00
	To Accounts receivables		$260,000.00
	(To record collection from customer)

Solution 2:

2018 net sales = Sales - Sales discounts

= $150,000 + $270,000 - ($5,000 +$10,000) = $405,000

Solution 3:

Cost of goods sold = $66,000 + $129,000 =$195,000

Gross profit = Net sales - COGS = $405,000 - $195,000 = $210,000

Solution 4:

Accounts receivable on 31.12.2018 = $150,000 + $270,000 - $140,000 - $260,000 = $20,000

Inventory balance on 31.12.2018 = Beginning inventory + Purchases - COGS

= $30,000 + $60,000 + $120,000 - $195,000 = $15,000