Question

Cozelle, Inc., purchased inventory costing $125,000 and sold 80% of the goods for $200,000. All purchases and sales were on account. Cozelle later collected 25% of the accounts receivable. Assume that sales retums are nonexistent.

a. Journalize these transactions for Cozelle, which uses the perpetual inventory system
b. For these transactions, show what Cozelle will report for inventory, revenues, and expenses on its financial statements at the end of the month.

Required:
For theseâ transactions, show what will report forâ inventory, revenues, and expenses on its financial statements at the end of the month.

Answer 1

A. Dr Inventory 125,000

Cr Accounts Payable 125,000

B. Dr Accounts Receivable 200,000

Cr Sales Revenue 200,000

C. Dr Cost of Goods Sold 100,000

Cr Inventory 100,000

D. Dr Cash 50,000

Cr Accounts Receivable 50,000

2. BALANCE SHEET $25,000

INCOME STATEMENT $100,000

Step-by-step explanation:

Preparation of the journal entry

A. Preparation of the journal entry for the purchase of inventory.

Dr Inventory 125,000

Cr Accounts Payable 125,000

(Being to record the purchase of inventory)

B. Preparation of the journal entry for sale

Dr Accounts Receivable 200,000

Cr Sales Revenue 200,000

(Being to record sale revenue)

C. Preparation of the journal entry to

Record the cost of goods sold portion of the sale.

Dr Cost of Goods Sold 100,000

Cr Inventory 100,000

(80%*125,000)

(Being to record cost of goods sold portion of the sale)

D. Preparation of the journal entry to Record the collection of 30% of the accounts receivable.

Dr Cash 50,000

Cr Accounts Receivable 50,000

(25%*200,000)

(Being to record the collection of 25% of the accounts receivable)

2. Calculation to Determine what the company will report on the balance​ sheet

BALANCE SHEET

Current Assets:

Inventory $25,000

(125,000-100,000)

Therefore the company will report $25,000 on the balance​ sheet

Calculation to Determine what the company will report on the income​ statement:

INCOME STATEMENT

Sales revenue 200,000

Less Cost of Goods Sold 100,000

Gross profit $100,000

Therefore the company will report $100,000 on the income​ statement