At the beginning of October, Bowser Co.’s inventory consists of 50 units with a cost per unit of $50. The following transactions occur during the month of October. October 4 Purchase 130 units of inventory on account from Waluigi Co. for $50 per unit,terms 2/10, n/30.October 5 Pay cash for freight charges related to the October 4 purchase, $600.October 9 Return 10 defective units from the October 4 purchase and receive credit.October 12 Pay Waluigi Co. in full.October 15 Sell 160 units of inventory to customers on account, $12,800. (Hint: The cost ofunits sold from the October 4 purchase includes $50 unit cost plus $5 per unit forfreight less $1 per unit for the purchase discount, or $54 per unit.)October 19 Receive full payment from customers related to the sale on October 15.October 20 Purchase 100 units of inventory from Waluigi Co. for $70 per unit, terms2/10, n/30.October 22 Sell 100 units of inventory to customers for cash, $8,000.Required:1. Assuming that Bowser Co. uses a FIFO perpetual inventory system to maintain its inventory records, record the transactions.2. Suppose by the end of October that the remaining inventory is estimated to have a net realizable value per unit of $35. Record any necessary adjustment for lower of cost and net realizable value.3. Prepare the top section of the multiple-step income statement through gross profit for the month of October after the adjustment for lower of cost and net realizable value.
At the beginning of October, Bowser Co.’s inventory consists of 50 units with a cost per unit of $50. The following transactions occur during the month of October.
October 4 Purchase 130 units of inventory on account from Waluigi Co. for $50 per unit,
terms 2/10, n/30.
October 5 Pay cash for freight charges related to the October 4 purchase, $600.
October 9 Return 10 defective units from the October 4 purchase and receive credit.
October 12 Pay Waluigi Co. in full.
October 15 Sell 160 units of inventory to customers on account, $12,800. (Hint: The cost of
units sold from the October 4 purchase includes $50 unit cost plus $5 per unit for
freight less $1 per unit for the purchase discount, or $54 per unit.)
October 19 Receive full payment from customers related to the sale on October 15.
October 20 Purchase 100 units of inventory from Waluigi Co. for $70 per unit, terms
2/10, n/30.
October 22 Sell 100 units of inventory to customers for cash, $8,000.
Required:
1. Assuming that Bowser Co. uses a FIFO perpetual inventory system to maintain its inventory records, record the transactions.
2. Suppose by the end of October that the remaining inventory is estimated to have a net realizable value per unit of $35. Record any necessary adjustment for lower of cost and net realizable value.
3. Prepare the top section of the multiple-step income statement through gross profit for the month of October after the adjustment for lower of cost and net realizable value.
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