Question

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 2022. All watches are sold for $500 each.

Purchased 50 watches for $7,500 ($150 per watch) on account. Record the purchase of inventory on account.

Sold 40 watches for $20,000 cash. Record the sale of inventory for cash.

Sold 40 watches for $20,000 cash. Record the cost of inventory sold.

Purchased 40 watches for $6,400 ($160 per watch) cash. Record the purchase of inventory for cash.

Sold 30 watches for $15,000 on account. Record the sale.

Sold 30 watches for $15,000 on account. Record the cost of the sale.

Paid for watches purchased on July 17. Record the payment of cash.

Receive cash of $9,000 for watches sold on account on August 22. Record the receipt of cash for the sale.

Purchased 80 watches for $13,600 ($170 per watch) cash. Record the purchase of inventory for cash.

Sold 90 watches for $45,000 cash. Record the sale of inventory for cash.

Sold 90 watches for $45,000 cash. Record the cost of inventory sold.

Purchased 100 watches for $18,000 ($180 per watch) on account. Record the purchase of inventory on account.

Sold 40 watches for $20,000 on account. Record the sale of inventory on account.

Sold 40 watches for $20,000 on account. Record the cost of inventory sold.

Record the write-down of inventory to net realizable value.

Record the closure of revenue accounts.

Record the closure of expense accounts.

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 $100 per watch.

Prepare the journal entries for transactions.

Complete the company's income statement.

Choose the appropriate accounts to complete the company's balance sheet.

Regarding your question about cost of goods sold, this is all the information that the question gives so it may need to be calculated from the information given.

Answer 1

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1. Journal Entries:					2. Income Statement:
Event	Account	Debit	Credit		Sales Revenue	2,00 units*$500	$   100,000
					Less: Cost of Goods Sold		$    -38,500
1	Inventory	$        7,500			Gross Profit		$     61,500
	Accounts Payable		$    7,500
	(To record purchase of inventory) 50*$150				3. Balance Sheet:
2	Cash	$     20,000			Cash		$     46,500
	Sales Revenue		$ 20,000		Accounts Receivable		$     26,000
	(To record sale) 40*$500				Inventory		$        7,000
					Total Assets		$     79,500
	Cost of Goods Sold	$        6,000
	Inventory		$    6,000
	(To record cost of goods sold) 40*$150				Accounts Payable		$     18,000
					Total Liabilities		$     18,000
3	Inventory	$        6,400
	Cash		$    6,400		Rest Balance sheet can not be completed as not details
	(To record purchase of inventory) 40*$160
4	Accounts Receivable	$     15,000
	Sales Revenue		$ 15,000
	(To record sale) 30*$500
	Cost of Goods Sold	$        4,700
	Inventory		$    4,700
	(To record cost of goods sold) (10*$150)+(20*$160)
5	Accounts Payable	$        7,500
	Cash		$    7,500
	(To record payment made)
6	Cash	$        9,000
	Accounts Receivable		$    9,000
	(To record payment received)
7	Inventory	$     13,600
	Cash		$ 13,600
	(To record purchase of inventory) 80*$170
8	Cash	$     45,000
	Sales Revenue		$ 45,000
	(To record sale) 90*$500
	Cost of Goods Sold	$     15,100
	Inventory		$ 15,100
	(To record cost of goods sold) (20*$160)+(70*$170)
9	Inventory	$     18,000
	Accounts Payable		$ 18,000
	(To record purchase of inventory) 100*$180
10	Accounts Receivable	$     20,000
	Sales Revenue		$ 20,000
	(To record sale) 40*$500
	Cost of Goods Sold	$        7,100
	Inventory		$    7,100
	(To record cost of goods sold) (10*$170)+(30*$180)
11	Cost of Goods Sold	$        5,600
	Inventory		$    5,600
	(To record write down of inventory)
	Inventory at cost (70 Units*$180)	$     12,600
	Less: Inventory at NRV (70 Units*$100)	$      -7,000
		$        5,600