Question

The following information applies to the questions displayed below.] Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2019. All watches are sold for $310 each. Jul. 17 Purchased 60 watches for $9,600 ($160 per watch) on account. Jul. 31 Sold 50 watches for $15,500 cash. Aug. 12 Purchased 50 watches for $8,500 ($170 per watch) cash. Aug. 22 Sold 40 watches for $12,400 on account. Sep. 19 Paid for watches ordered on July 17. Sep. 27 Received full payment for watches sold on account on August 22. Oct. 27 Purchased 90 watches for $16,200 ($180 per watch) cash. Nov. 20 Sold 100 watches for $31,000 cash. Dec. 4 Purchased 120 watches for $22,800 ($190 per watch) cash. Dec. 8 Sold 50 watches for $15,500 on account.

Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2019, assuming Suzie uses FIFO to account for inventory.

1-b. Prepare the gross profit section of a partial income statement for transactions related to MU watches.

2. Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated net realizable value of MU watches is only $110 per watch.

a. Record any necessary adjustment on December 31, 2019, related to this information.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

	Profit and Loss Account (relating to MU watches)
	Opening Balance		-	Sales	74,400
	Purchases		57,100	Closing Balance	15,200
	Gross Profit		32,500
		TOTAL	89,600	TOTAL	89,600
	Inventory Account
				Closing Balance
				QTY	Amount	Per unit Amt
Purchase	Jul.17	60	9,600	60	9,600	160
Sold	Jul.31	50	3,000	10	1,600	160
Purchase	Aug.12	50	8,500	10	1,600	160
				50	8,500	170
Sold	Aug.22	10	1,600	-	-
		30	5,100	20	3,400	170
Purchase	Oct.27	90	16,200	20	3,400	170
				90	16,200	170
Sold	Nov.20	100	31,000		-
				10	1,700	170
Purcahse	Dec.4	120	22,800	10	1,700	170
				120	22,800	190
Sold	Dec.5	50	15,500	-	-
				80	15,200	190
	Sales Account
	Jul.31	50	15,500	310
	Aug.22	40	12,400	310
	Nov.20	100	31,000	310
	Dec.5	50	15,500	310
	TOTAL	240	74,400
	Purchase Account
	Jul.17	60	9,600
	Aug.12	50	8,500
	Oct.27	90	16,200
	Dec.4	120	22,800
	TOTAL	320	57,100

2. No addditional entry is required. Only closing inventory value can be valued based on revised amount.

After adjustment of closign inventory based on 110, the following would be gross profit

Profit and Loss Account (relating to MU watches)
Opening Balance		-	Sales	74,400
Purchases		57,100	Closing Balance	8,800
Gross Profit		26,100
	TOTAL	83,200	TOTAL	83,200