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Chapter 6 Questions
6.4 Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had
a beginning balance of $6,450,000. Ranns engaged in the following transactions during the
year:
1. Purchased merchandise inventory for $9,500,000.
2. Generated net sales of $26,000,000.
3. Recorded inventory shrinkage of $10,000 after taking a physical inventory at year-end.
4. Reported gross profit for the year of $15,000,000 in its income statement.
a. At what amount was Cost of Goods Sold reported in the company's year-end income
statement?
b. At what amount was Merchandise Inventory reported in the company's year-end balance
sheet?
6.12 Sky Co. sells state-of-the-art telescopes to individuals and organizations interested in studying
the solar system. At December 31 last year, the company's inventory amounted to $250,000.
During the first week of January this year, the company made only one purchase and one sale.
These transactions were as follows:
Jan. 2 Sold one telescope costing $105,000 to Central State University for cash, $140,000.
Jan. 5 Purchased merchandise on account from Lunar Optics, $53,000. Terms, net 30 days.
a. Prepare journal entries to record these transactions assuming that Sky Company uses the
perpetual inventory system. Use separate entries to record the sales revenue and the cost of goods
sold for the sale on January 2.
b. Compute the balance of the Inventory account on January 7.
c. Prepare journal entries to record the two transactions, assuming that Sky Company uses the
periodic inventory system.
d. Compute the cost of goods sold for the first week of January assuming use of a periodic inventory
system.
e. Which inventory system do you believe that a company such as Sky Company would probably use?
6.10 Golf World sold merchandise to Mulligans for $10,000, offering terms of 1/15, n130.
Mulligans paid for the merchandise within the discount period. Both companies use perpetual
inventory systems.
Instructions:
a. Prepare journal entries in the accounting records of Golf World to account for this sale and the
subsequent collection. Assume the original cost of the merchandise to Golf World had been $6,500.
b. Prepare journal entries in the accounting records of Mulligans to account for the purchase and
subsequent payment Mulligans records purchases of merchandise at net cost.
c. Assume that because of a change in personnel, Mulligans failed to pay for this merchandise within
the discount period. Prepare the journal entry in the accounting records of Mulligans to record
payment after the discount period.