Prepare the journal entries for the following transactions for Parties R Us. Par
ID: 2575424 • Letter: P
Question
Prepare the journal entries for the following transactions for Parties R Us. Parties R Us uses the gross method to record purchases.
January 2 – Purchased 5,000 cases of beads for the upcoming Gasparilla parade at $65 per case. The terms were 3/15, n/45.
January 5 – Paid the freight bill - $550.
January 6 – Returned 500 cases because the beads were purple, green, and gold the colors of Mardi Gras, not Gasparilla.
January 13 – Paid the invoice
February 4 – Sold 3,000 cases at $150 per case. The terms of the sale were 2/10, n/30. You can calculate the amount of cost of goods sold from the January transactions.
February 10 – Received payment for the February 4th sale.
2. Inventory information for Part 311 of Monique Aaron Corp. discloses the following information for the month of June:
June 1 Balance 300 units @ $10 June 10 Sold 200 units @ $24
11 Purchased 800 units @ $12 15 Sold 500 units @ $25
20 Purchased 500 units @ $13 27 Sold 300 units @ $27
Assuming that the perpetual inventory record is kept in dollars and costs are computed at the time of each sale, what is the value of the ending inventory under
(a) LIFO? (b) FIFO? What is gross profit for (c) LIFO (d) FIFO?
Explanation / Answer
purchases
closing inventory under FIFO = $7700
closing inventory under LIFO = $8500
Gross profit (FIFO)= Closing inventory + sales - purchases i.e. 25400+7700-19100=14000
Gross profit (LIFO)= Closing inventory + sales - purchases i.e. 25400+8500-19100=14800
Date particulars debit credit 2 janpurchases
325000 - accounts payable - 325000 5 jan freight 550 - cash - 550 6 jan accounts payable 32500 purchase returns - 32500 13 jan accounts payable 292500 - cash - 292500 4 feb accounts receivable 450000 - sales - 450000 10 feb cash 450000 - accounts receivable - 450000