Question

Askew Company uses a periodic inventory system.

The June 30, 2018, year-end trial balance for the company contained the following information:

Account Debit Credit
Merchandise inventory, 7/1/17 32,900
Sales 389,000
Sales returns 12,900
Purchases 249,000
Purchase discounts 6, 900
Purchase returns 10, 900
Freight-in 18,800
In addition, you determine that the June 30, 2018, inventory balance is $40,900

Required:

1. Calculate the cost of goods sold for the Askew Company for the year ending June 30, 2018.

2. Prepare the year-end adjusting entry to record cost of goods sold.

Answer 1

1. $242,000

Step-by-step explanation:

(a) Net purchases:

= Purchases - Purchase discount - Purchase return + Freight - in

= 249,000 - 6,900 - 10,900 + 18,800

= 250,000

Cost of goods available for sale:

= Beginning inventory + Net purchases

= 32,900 + 250,000

= 282,900

Cost of goods sold:

= Cost of goods available for sale - Ending inventory

= $282,900 - $40,900

= $242,000

2. The journal entry is as follows:

Cost of goods sold A/c Dr. $242,000

Ending inventory A/c Dr. $40,900

Purchase discounts A/c Dr. $6,900

Purchase returns A/c Dr. $10,900

To beginning inventory $32,900

To Purchases $249,000

To Freight - in $18,800

(To record the cost of goods sold)