1.

Ending inventory = Beginning inventory + Inventory purchased - COGS

= 61,800 1,200 + 6,000 2,300 + 8,000
= $ 58,700

2.COGS = Beginning inventory + Inventory purchased - Ending inventory = $ 59,200

1. Periodic inventory system Goodmonth Tire Company
Journal Entries
For March 2009
Account title Debits Credits
a. Purchased 500 automobile tires $ 20,000
Accounts payable $ 20,000
$40/tire
b. Purchased 300 truck tires 24,000
Accounts payable 24,000
$80/tire
c. Returned 12 automobile tires 480
Accounts receivable 480
$40*12
d. Accounts payable 20,000
Cash 20,000
Paid automobile tires
e. Accounts payable 12,000
Cash 12,000
Paid 1/2 truck tires
f. Accounts payable 12,000
Cash 12,000
Paid remaning truck tires
g. Sales 36,000
Accounts receivable 36,000
Sold 400 automobile tires, $90/tires
h. Sales 30,000
Accounts receivable 30,000
Sold 200 truck tires, $150/tires
i. Accepted returned 630
Accounts payable 630
$90*7
Total $ 155,110 $ 155,110

2. Perpetual inventory system Goodmonth Tire Company

Journal Entries
For March 2009
Account Titles Debits Credits
a. Purchased 500 automobile tires $ 20,000
Accounts payable $ 20,000
$40/tire
b. Purchased 300 truck tires 24,000
Accounts payable 24,000
$80/tire
c. Returned 12 automobile tires 480
Accounts receivable 480
$40*12
d. Accounts payable 20,000
Cash 20,000
Paid automobile tires
e. Accounts payable 12,000
Cash 12,000
Paid 1/2 truck tires
f. Accounts payable 12,000
Cash 12,000
Paid remaning truck tires
g. Sales 36,000
Accounts receivable 36,000
Sold 400 automobile tires, $90/tires
Cost of goods sold 16,000
Inventory 16,000
$40*400
h. Sales 30,000
Accounts receivable 30,000
Sold 200 truck tires, $150/tires
Cost of goods sold 16,000
Inventory 16,000
$80*200
i. Accepted returned 630
Accounts payable 630
$90*7 automobiles tires
Cost of goods sold 280
Inventory 280
$40*7 automobile tires
Total $ 187,390 $ 187,390
3. Closing inventory
Date
Beginning of March

a.
b.
c.
d.
e.
f.
g.
h.
i.
Total

End of March

Goodmonth Tire Company

Closing Entries for Inventory

Accounts title
Ending inventory
Cost of goods sold
Purchased
Beginning
To create cost of goods sold
Income summary
Cost of goods sold
To close cost of goods sold

Revenues
Automobile tires
Truck tires
To create revenues
Income summary
Revenues
To close revenues

Income summary
Retained earnings
To close income summary
 Names Amount Cost/per Total
Automobile tires 100 $ 40 $ 4,000
Truck tires 70 $ 80 $ 5,600
Automobile tires 500 $ 40 $ 20,000
Truck tires 300 $ 80 $ 24,000
Automobile tires -12 $ 40 $ (480)

Automobile tires -400 $ 90 $ (36,000)

Truck tires -200 $ 150 $ (30,000)
Automobile tires 7 $ 90 $ 630
Automobile tires 195 $ (11,850)
Truck tires 170 $ 30,230

Automobile tires 184 $ 40 $ 7,360

Truck tires 164 $ 80 $ 13,120

Goodmonth Tire Company

Closing Entries for Inventory
For March 2009
Debits Credits
$ 20,480
$ 53,120
$ 43,520
$ 9,600
ost of goods sold
$ 53,120
$ 53,120
t of goods sold

$ 66,000
$ 36,000
$ 30,000

$ 66,000
$ 66,000

$ 12,880
$ 12,880
ome summary
1. Gross sales = sales (net of returns) + sales returns = $ 174,000
2. Net purchases = inventory balance (01.01.09) - purchase returns = $ 20,000
Gross purchases = net purchases + freight-in = $ 20,800
3. Cost of goods sold = gross sales : 250% = $ 69,600
4. Inventory balance (12.31.09) = total cost of goods available for sale - cost of goods sold =
5. Gross margin = sales (net of returns) - COGS = $ 100,200
6. Net income = gross margin - operating expenses = $ 92,700
$ 14,400
 Company A Company B Company C Company D
Sales revenue $ 2,000 $ 499 $ 480 $ 1,310
Beginning inventory 200 76 - 600
Purchases 1,320 423 480 249
Purchases returns (20) (19) - (19)
Ending inventory 300 110 155 195
Cost of goods sold 1,200 370 325 635
Gross margin 800 129 155 675
Operating expenses 108 22 34 129
Net income 692 107 121 546
1. Weight Sets Unit Cost Total Cost
Jan. 1 Beginning inventory 460 $ 30 $ 13,800
Jan. 16 Purchase 110 32 3,520
Feb. 16 105 36 3,780
Mar. 10 150 28 4,200
Total goods available for sale 825 $ 25,300

Jan. 25 Sales 216 45 9,720

Feb. 27 307 40 12,280
Mar. 30 190 50 9,500
Total 713 $ 31,500

Cost of goods sold

a. FIFO Total Units Unit Cost Total Cost Ending inventory = beginning invento
460 $ 30 $ 13,800 Gross margin = Net sales - COGS =
110 32 3,520
105 36 3,780
38 28 1,064
Total COGS 713 $ 22,164

b. LIFO Total Units Unit Cost Total Cost Ending inventory =

150 $ 28 $ 4,200 Gross margin =
105 36 $ 3,780
110 32 $ 3,520
348 30 $ 10,440
Total COGS 713 $ 21,940

c. Ave. Cost Unit Cost Total Units Total COGS Ending inventory =
25,300 : 825 $ 30.67 713 $ 21,865 Gross margin =

2. Highest gross margin? Why?

Average cost results in the highest gross margin because its' COGS is the cheapest.
ding inventory = beginning inventory + purchases - cost of goods sold = $ 3,136
oss margin = Net sales - COGS = $ 9,336

ing inventory = $ 3,360

ss margin = $ 9,560

ing inventory = $ 3,435

ss margin = $ 9,635
 Total Units Unit Cost Total Costs
1-May Beginning inventory 5,100 $ 10.50 $ 53,550
4-May Purchases 1,210 $ 12.00 14,520
13-May 1,050 $ 12.50 13,125
26-May 2,120 $ 13.00 27,560
Total goods available for sales 9,480 $ 108,755

9-May Sales 1,020 $ 19.65 $ 20,043

19-May 1,750 $ 19.65 34,388
30-May 2,340 $ 19.65 45,981
Total sales 5,110 $ 100,412

Cost of goods sold

1. FIFO 5,100 $ 10.50 53,550
10 $ 12.00 120
Total COGS 5,110 $ 53,670
Ending inventory $ 55,085

2. LIFO 2,120 $ 13.00 27,560

1,050 $ 12.50 13,125
1,210 $ 12.00 14,520
730 $ 10.50 7,665
Total COGS 5,110 $ 62,870
Ending inventory $ 45,885

3. Ave. Cost Total COGS 5,110 $ 11.47 $ 58,622

Ending inventory $ 50,133
Captain Geech Boating Company million
Beginning inventories $ 462
Ending inventories $ 653
COGS $ 1,578
Average inventories $ 558
Inventory turnover 0.35
Number of days' sales 1,033.13

Merchant Marine Company million

Beginning inventories $ 120
Ending inventories $ 90
COGS $ 1,100
Average inventories $ 105
Inventory turnover 0.10
Number of days' sales 3,823.81

2. Captain Geech Boating Company is managing its inventory more efficiently because number of days' sales was sho
e number of days' sales was shorter.