Week 3 Homework Template
Instructions: Only enter data in the yellow boxes. The remaining areas are already completed
for you.
Save the file as follows: lastnamewk1.docx
Submit to the assignment box before the due date. (Late assignments will receive a late
penalty).
Remember to show your calculations where necessary! (Use empty space under the tables
to do so).
Exercise 5-2
(a) Journalize the transactions, including explanations. (Note, enter all accounts
in one box. The dates have been included to help with formatting).
Account Titles and Explanation
Date
Sept.
6
Debit
Credit
1,650
1,650
9
50
50
10
66
66
12
520
520
12
45
45
14
34
34
14
760
760
20
570
570
20
570
570
Exercise 5-6 is on the next page
Exercise 5-6
(a) Prepare an income statement using the format presented on page 243. Assume a
25% tax rate.
(b) Calculate the profit margin ratio and gross profit rate.
YU COMPANY
Income Statement
For the Month Ended January 31, 2012
Sales Revenues
Account title
Account title
Account title
Net Sales
Cost of goods sold
Gross profit
Operating Expenses
Account title
Account title
Account title
Account title
Total operating expenses
Income before income taxes
Income tax expense
Net Income
(b) Profit Margin Ratio
profit margin ratio 42%
Gross Profit Rate
Gross profit rate 38.0%
370,000
20,000
8,000
342,000
Amount (Total)
212,000
130,000
60,000
32,000
12,000
7,000
111,000
19,000
4,750
14,250
PROBLEM 5-5B
Prepare a correct detailed multiple-step income statement. Assume a tax rate of 25%.
KRITEK COMPANY
Income Statement
For the Month Ended December 31, 2012
Sales Revenues
Account title
Account title
Account title
Net Sales
Cost of goods sold
Gross profit
Operating Expenses
Account title
Account title
Account title
Account title
Account title
Account title
708,000
11,300
696,700
460,000
236,000
105,500
14,500
14,000
13,000
9,500
7,500
19,000
5,800
Account title
Total operating expenses
Income from operations
Other revenues and gains
Account title
Other expenses and losses
Account title
Income before income taxes
Income tax expense
Net Income
169,800
66,900
5,300
4,000
13,000
68,200
17,050
51,150
Problem 6-2B
(a) Determine the Cost of Goods Available for Sale
Date
Oct. 1
Explanation
Beginning
inventory
Units
1,200
Unit Cost
5
Total Cost
6,000
4,000
3,000
2,500
6
7
8
24,000
21,000
20,000
Total 89,000
(c)
2,000
12,700
9
18,000
8,900
Determine the ending inventory and cost of goods sold under each of the assumed
cost flow methods. Prove the accuracy of the cost of goods sold under FIFO and
LIFO.
FIFO
(1) Ending Inventory
Date
Units
Oct. 25
19
Total
28,400
2000
1300
3,300
Unit
Cost
9
8
Total
Total Cost
18,000
10,400
28,400
(2) Cost of Goods Sold
Cost of goods available
for sale
Less: ending inventory
Cost of Goods Sold
Amount
28,400
60,600
Proof of Cost of Goods Sold (FIFO)
Date
Units
Unit
Total Cost
Cost
Oct. 1
1,200
5
6,000
3
4,000
6
24,000
9
3,000
7
21,000
19
1,200
8
9,600
Total
Amount
Total
60,600
9,400
70,400
LIFO
(1) Ending Inventory
Date
Units
Oct . 1
Total
18,600
1,200
2,100
3,300
Unit
Cost
5
6
Total
Total Cost
6,000
12,600
18,600
Proof of Cost of Goods Sold (LIFO)
Date
Units
Unit
Total Cost
Cost
Oct . 25
2,000
9
18,000
2,500
8
20,000
3,000
7
21,000
(2) Cost of Goods Sold
Cost of goods available
for sale
Less: ending inventory
Cost of Goods Sold
89,000
18,600
70,400
Total
70,400
1,900
9,400
6
Total
11,400
70,400
AVERAGE COST (Round to the nearest decimal, i.e., $1.01)
(1) Ending Inventory
Units
Total
23,133
3,300
Amount
Unit
Cost
7.01
Total
Total Cost
23,133
Amount
(2) Cost of Goods Sold
Cost of goods available
for sale
Less: ending inventory
Cost of Goods Sold
89,000
23,133
65,867
(c) Which cost flow method results in (1) the highest inventory amount for the balance
sheet and (2) the highest cost of godos sold for the income statement?
LIFO results in the highest cost of goods sold 70,400
FIFO results in the highest inventory amount for the balance sheet 28,400
Problem 6-3B
(a) Determine the Cost of Goods Available for Sale
Date
Jan 1
Mar 15
July 20
Sept 4
Dec 2
Explanation
Beginning
inventory
Purchase
Purchase
Purchase
Purchase
Units
100
300
250
290
130
130
Unit Cost
20
23
25
28
30
Total Cost
2,000
6,900
6,250
8,120
3,900
Total27,170
1,070
27,170
(b) Determine the ending inventory and the cost of goods sold under each of the assumed
cost flow methods (FIFO, LIFO and average-cost). Prove the accuracy of the cost of goods
sold under each method.
FIFO
(1) Ending Inventory
Date
Units
Dec 2
Sept 4
Total
7,820
130
140
270
Unit
Cost
30
28
Total
Total Cost
3,900
3,920
7,820
(2) Cost of Goods Sold
Cost of goods available
for sale
Less: ending inventory
Cost of Goods Sold
27,170
7,820
19,350
Proof of Cost of Goods Sold (FIFO)
Date
Units
Unit
Total Cost
Cost
Jan 1
100
20
2,000
Mar 15
300
23
6,900
July 20
250
25
6,250
Sept 4
150
28
4,200
Total
800
Total
19,350
19,350
20,314
LIFO
(1) Ending Inventory
Date
Units
Jan 1
Mar 15
Total
5,910
100
170
270
Unit
Cost
20
23
Total
Total Cost
2,000
3,910
5,910
Proof of Cost of Goods Sold (LIFO)
Date
Units
Unit
Total Cost
Cost
Dec 2
130
30
3,900
Sept 4
290
28
8,120
(2) Cost of Goods Sold
Cost of goods available
for sale
Less: ending inventory
Cost of Goods Sold
27,170
5,910
21,260
July 20
Mar 15
Total
21,260
250
130
800
25
23
Total
106
6,250
2,990
21,260
AVERAGE COST (Round to the nearest decimal, i.e., $1.01)
(1) Ending Inventory
Units
Total
6,856
270
Amount
Unit
Cost
25,393
Total
Total Cost
20,314
Amount
(2) Cost of Goods Sold
Cost of goods available
for sale
Less: ending inventory
Cost of Goods Sold
27,170
6,856
20,314
(c) Which cost flow method results in the highest inventory amount for the balance sheet?
The highest cost of goods sold for the income statement?
FIFO produces the highest inventory amount for the balance sheet 7,820 LIFO produces the
highest cost of goods sold for the increase statement 21,260.