Question

At the beginning of November, Yoshi Inc.’s inventory consists of 67 units with a cost per unit of $96. The following transactions occur during the month of November.

November		2		Purchase 75 units of inventory on account from Toad Inc. for $100 per unit, terms 1/10, n/30.
November		3		Pay cash for freight charges related to the November 2 purchase, $150.
November		9		Return 25 defective units from the November 2 purchase and receive credit.
November		11		Pay Toad Inc. in full.
November		16		Sell 100 units of inventory to customers on account, $12,300. [Hint: The cost of units sold from the November 2 purchase includes $100 unit cost plus $3 per unit for freight less $1 per unit for the purchase discount, or $102 per unit.]
November		20		Receive full payment from customers related to the sale on November 16.
November		21		Purchase 53 units of inventory from Toad Inc. for $106 per unit, terms 3/10, n/30.
November		24		Sell 65 units of inventory to customers for cash, $7,400. (Note: For calculating the cost of inventory sold, ignore the possible purchase discount on November 20.)

rev: 03_03_2020_QC_CS-202947

A. Assuming that Yoshi Inc. uses a FIFO perpetual inventory system to maintain its internal inventory records, record the transactions.

B. Suppose by the end of November that the remaining inventory is estimated to have a net realizable value per unit of $82, record any necessary adjustment for the lower of cost and net realizable value.

C. Prepare the top section of the multiple-step income statement through gross profit for the month of November after the adjustment for lower of cost and net realizable value.

Answer 1

Part A

Journal entries
Date	General Journal	Debit	credit
November 2	Merchandise inventory	7,500
	Accounts payable		7,500
	(To record purchased of inventory on account) (75*100)
November 3	Merchandise inventory	150
	Cash		150
	(To record fright paid for inventory purchase)
November 9	Accounts payable	2,500
	Merchandise inventory		2,500
	(To record goods returned to suppliers) (25*100)
November 11	Accounts payable	5,000
	Merchandise inventory (5000*1%)		50
	Cash (5000-50)		4,950
	(To record cash paid to supplier.) (net purchase on account = 7500-2500)
November 16	Accounts receivable	12,300
	Sales revenue		12,300
	(To record sales revenue on account.)
November 16	Cost of goods sold	9,798
	Merchandise inventory		9,798
	(To record cost of goods sold using FIFO method.) ((67*96)+(remaining 33*102) [Units on hand = (75-25)-33=17]
November 20	Cash	12,300
	Accounts receivable		12,300
	(To record cash received from customer.)
November 21	Merchandise inventory	5,618
	Accounts payable		5,618
	(To record purchased of inventory on account) (53*106)
November 24	Cash	7,400
	Sales revenue		7,400
	(To record sales revenue on cash.)
November 24	Cost of goods sold	6,822
	Merchandise inventory		6,822
	(To record cost of goods sold using FIFO method.) ((17*102)+ (48*106)) [Units on hand = 17+53-65=5]

Part B

Date	General Journal	Debit	credit
Nov 30	Cost of goods sold	120
	Merchandise inventory		120
	(To record write off inventory.) (5 units *(106-82))

Part C

Income statement (partial)
Sales revenue		19,700
Less: cost of goods sold		16,740
Gross profit		2,960