MNO Company purchased inventory costing $200,000 and sold 75% of the goods for $280,000. All purchases and sales were on account. MNO Company later collected 20% of the accounts receivable.

Required:

a. Prepare the journal entries for all these transactions considering that MNO Company uses the perpetual inventory system. (10 marks)

b. For these transactions, show what MNO Company will report for inventory, revenues, and expenses on its financial statements. Report gross profit on the appropriate statement. (5 marks)

c. Given the following data, calculate the cost of goods sold and ending inventory using both the weighted-average and the FIFO method for MNO Company that uses the perpetual inventory system. (10 marks)

Oct 1	Beginning inventory	40 units @	$10 =
15	Purchase	40 units @	$14 =
26	Sale	20 units @	$30 =

Answer:

a.

Accounts	Debit	Credit

b.

c.

Oct 1	Beginning inventory	40 units @	$10 =
15	Purchase	40 units @	$14 =
26	Sale	20 units @	$30 =

	Cost of Goods Sold	Ending Inventory
Weighted average cost
FIFO