LO 12 P6-60A. (Learning Objectives 1, 2: Accounting for inventory in a perpetual system using average costing method) Nice Buy purchases inventory in crates of merchandise; each crate of inventory is a unit. The fiscal year of Nice Buy ends each February 28. Assume you are dealing with a single Nice Buy store in Taipei, Taiwan. The Taiwan store began 20X6 with an inventory of 23,000 units that cost a total of $1,150,000. During the year, the store purchased merchan- dise on account as follows: April (31,000 units at $51)..... August (51,000 units at $55)... November (61,000 units at $61). Total purchases.... $1,581,000 2,805,000 3,721,000 $8,107,000 Cash payments on account totaled $7.907,000. During fiscal year 20X6, the store sold 150,000 units of merchandise for $14,700,000, of which $4,800,000 was for cash and the balance was on account. Nice Buy uses the average cost method for inventories. Operating expenses for the year were $3,550,000. Nice Buy paid 70% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 30%. Requirements 1. Make summary journal entries to record the store's transactions for the year ended February 28, 20X6. Nice Buy uses a perpetual inventory system. 2. Prepare a T-account to show the activity in the Inventory Account. 3. Prepare the store's Income Statement for the year ended February 28, 20X6. Show totals for gross profit, income before tax, and net income.
LO 12 P6-60A. (Learning Objectives 1, 2: Accounting for inventory in a perpetual system using average costing method) Nice Buy purchases inventory in crates of merchandise; each crate of inventory is a unit. The fiscal year of Nice Buy ends each February 28. Assume you are dealing with a single Nice Buy store in Taipei, Taiwan. The Taiwan store began 20X6 with an inventory of 23,000 units that cost a total of $1,150,000. During the year, the store purchased merchan- dise on account as follows: April (31,000 units at $51)..... August (51,000 units at $55)... November (61,000 units at $61). Total purchases.... $1,581,000 2,805,000 3,721,000 $8,107,000 Cash payments on account totaled $7.907,000. During fiscal year 20X6, the store sold 150,000 units of merchandise for $14,700,000, of which $4,800,000 was for cash and the balance was on account. Nice Buy uses the average cost method for inventories. Operating expenses for the year were $3,550,000. Nice Buy paid 70% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 30%. Requirements 1. Make summary journal entries to record the store's transactions for the year ended February 28, 20X6. Nice Buy uses a perpetual inventory system. 2. Prepare a T-account to show the activity in the Inventory Account. 3. Prepare the store's Income Statement for the year ended February 28, 20X6. Show totals for gross profit, income before tax, and net income.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:LO 12
P6-60A. (Learning Objectives 1, 2: Accounting for inventory in a perpetual system using
average costing method) Nice Buy purchases inventory in crates of merchandise; each crate of
inventory is a unit. The fiscal year of Nice Buy ends each February 28. Assume you are dealing
with a single Nice Buy store in Taipei, Taiwan. The Taiwan store began 20X6 with an inventory
of 23,000 units that cost a total of $1,150,000. During the year, the store purchased merchan-
dise on account as follows:
April (31,000 units at $51)....
August (51,000 units at $55).....
November (61,000 units at $61)
Total purchases......
$1,581,000
2,805,000
3,721,000
$8,107,000
Cash payments on account totaled $7.907,000. During fiscal year 20X6, the store sold 150,000
units of merchandise for $14,700,000, of which $4,800,000 was for cash and the balance was
on account. Nice Buy uses the average cost method for inventories. Operating expenses for the
year were $3,550,000. Nice Buy paid 70% in cash and accrued the rest as accrued liabilities.
The store accrued income tax at the rate of 30%.
Requirements
1. Make summary journal entries to record the store's transactions for the year ended
February 28, 20X6. Nice Buy uses a perpetual inventory system.
2. Prepare a T-account to show the activity in the Inventory Account.
3. Prepare the store's Income Statement for the year ended February 28, 20X6. Show totals
for gross profit, income before tax, and net income.
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