CPI sells computer peripherals. At December 31, year 1, CPI’s inventory amounted to $670,000. During the first week in January, year 2, the company made only one purchase and one sale. These transactions were as follows. Jan. 2 Purchased 20 modems and 80 printers from Sharp. The total cost of these machines was $42,000, terms 3/10, n/60. Jan. 6 Sold 30 different types of products on account to Pace Corporation. The total sales price was $27,000, terms 5/10, n/90. The total cost of these 30 units to CPI was $14,040 (net of the purchase discount). CPI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable. Required: b. Prepare journal entries to record these transactions, assuming that CPI uses a perpetual inventory system. c. Compute the balance in the Inventory account at the close of business on January 6. d. Prepare journal entries to record the two transactions, assuming that CPI uses a periodic inventory system. e. Compute the cost of goods sold for the first week of January assuming use of the periodic system. (Use your answer to part c as the ending inventory.) g. Compute the gross profit margin on the January 6 sales transaction.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

CPI sells computer peripherals. At December 31, year 1, CPI’s inventory amounted to $670,000. During the first week in January, year 2, the company made only one purchase and one sale. These transactions were as follows.

Jan.	2		Purchased 20 modems and 80 printers from Sharp. The total cost of these machines was $42,000, terms 3/10, n/60.
Jan.	6		Sold 30 different types of products on account to Pace Corporation. The total sales price was $27,000, terms 5/10, n/90. The total cost of these 30 units to CPI was $14,040 (net of the purchase discount).

CPI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable.

Required:

b. Prepare journal entries to record these transactions, assuming that CPI uses a perpetual inventory system.

c. Compute the balance in the Inventory account at the close of business on January 6.

d. Prepare journal entries to record the two transactions, assuming that CPI uses a periodic inventory system.

e. Compute the cost of goods sold for the first week of January assuming use of the periodic system. (Use your answer to part c as the ending inventory.)

g. Compute the gross profit margin on the January 6 sales transaction.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Financial Reporting in Hyperinflationary Economies

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions