Question

Bill’s Bakery’s Inventory account had a balance of $8,000 on April 1^st and a balance of $13,000 on April 30^th. Bill’s sold $62,000 worth of inventory for $85,000 during April. Complete the T account for Bill’s Inventory. How much Revenue does Bill’s have? _______________ How much expense? ___________________What is their Gross Margin? _______________ How much inventory did Bill’s purchase during April? ______________

Write the journal entry to record Bill’s purchases:

Write the journal entry to record Bill’s revenue:

Write the journal entry to record Bill’s expense:

Answer 1

Solution

In the books of Bill Bakery

All amount in US dollars ($)

Revenue would be the amoiunt of sales i.e. 85,000.

The expense would the the amount of cost of goods sold i.e. 65,000. ( provided in the question)

Gross Margin is the difference between Revenue and cost of goods sold i.e. 23,000 ( please see below ledger accounts)

The amount of purchases would be 67,000 as per below workings ( cost of good sold add closding inventory less opening inventory).

Journal Entries :

Purchases A/c.... Dr 67,000

To cash /bank/Creditors A/c ( Being cash/credit purchases made for the month)

Cash/Bank/Debtors A/c ... Dr 85,000

To Sales A/c ( Being cash/credit sales made for the month )

The net expense would be opening inventory add purchases less closing stock i.e 8,000+67,000-13,000 = 62,000

Cost of goods sold .... Dr 62,000

To inventory A/c 62,000 ( Being goods worth 62,000 sold during the month)

Ledger Accounts :

For the month of April
Dr	Inventory A/c (representation of the formula)		Cr
Opening Balance	8,000	Cost of goods sold ( provided)	62,000
Purchases (*)	67,000	Closing Balance	13,000
Total	75,000	Total	75,000
Dr	Profit & Loss A/c for the month		Cr
Cost of Good sold	62,000	Sales	85,000
Gross Margin( *)	23,000
Total	85,000	Total	85,000