Question

Bramble Company sells one product. Presented below is information for January for Bramble Company.

Jan. 1		Inventory		114	units at $5 each
4		Sale		89	units at $8 each
11		Purchase		156	units at $7 each
13		Sale		126	units at $9 each
20		Purchase		158	units at $7 each
27		Sale		103	units at $11 each

Bramble uses the FIFO cost flow assumption. All purchases and sales are on account.

1. Assume Bramble uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

2. Compute gross profit using the periodic system.

3.Assume Bramble uses a perpetual system. Prepare all necessary journal entries. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

4. Compute gross profit using the perpetual system.

Answer 1

JOURNAL ENTRIES USING PERIODIC SYSTEM

DATE	ACCOUNT TITLE	DEBIT	CREDIT
JAN 4	ACCOUNTS RECEIVABLE (89*8)	$712
	SALES REVENUE		$712
JAN 11	PURCHASES (156*7)	$1092
	ACCOUNTS PAYABLE		$1092
JAN 13	ACCOUNTS RECEIVABLE (126*9)	$1134
	SALES REVENUE		$1134
JAN 20	PURCHASES (158*7)	$1106
	ACCOUNTS PAYABLE		$1106
JAN 27	ACCOUNTS RECEIVABLE (103*11)	$1133
	SALES REVENUE		$1133
JAN 31	INVENTORY (110*7)	$770
	COST OF GOODS SOLD ($2198+$570-$770)	$1998
	PURCHASES (1092+1106)		$2198
	INVENTORY (114*5)		$570
JAN 31	SALES REVENUE ($712+$1134+$1133)	$2979
	COST OF GOODS SOLD		$1998
	GRODD PROFIT		$981

JOURNAL ENTRIES USING PERPETUAL SYSTEM

DATE	ACCOUNT TITLE	DEBIT	CREDIT
JAN 4	ACCOUNTS RECEIVABLE (89*8)	$712
	SALES REVENUE		$712
JAN 4	COST OF GOODS SOLD (89*5)	$445
	INVENTORY		$445
JAN 11	INVENTORY (156*7)	$1092
	ACCOUNTS PAYABLE		$1092
JAN 13	ACCOUNTS RECEIVABLE (126*9)	$1134
	SALES REVENUE		$1134
JAN 13	COST OF GOODS SOLD (25*5+101*7)	$832
	INVENTORY		$832
JAN 20	INVENTORY (158*7)	$1106
	ACCOUNTS PAYABLE		$1106
JAN 27	ACCOUNTS RECEIVABLE (103*11)	$1133
	SALES RECEIVABLE		$1133
JAN 27	COST OF GOODS SOLD (55*7+48*7)	$721
	INVENTORY		$721
JAN 31	SALES REVENUE ($712+$1134+$1133)	$2979
	COST OF GOODS SOLD (445+832+721)		$1198
	GROSS PROFIT (2979-1198)		$981

CALCULATION OF COST OF GOODS SOLD

WHEN FIRST SALE INCURRED

In FIFO Method the goods which are purchased first are sold first

COGS when 1ST sale incurred

COGS = 89*&5 = $445

WHEN SECOND SALE NCURRED

Goods remain in Opening Stock = 114-89 = 25 @ 5 per unit , these are used first

Remaining from 1ST purchases = 126-25 = 101 @ 7

WHEN THIRD SALES INCURRED

Goods remain in 1ST Purchase = 156-101 = 55 @ 7

Remaning goods from 2ND Purchse = 103-55 = 48 @ 7