Question - Kramer Corp. reported the following sale and purchase transactions related to a specific product in January 2017:
Date Transaction Quantity Unit Cost Unit Sales Price
Jan 01 Beginning inventory 5 $90
Jan 03 Sale on account 3 $120
Jan 06 Purchase on account 11 $95
Jan 08 Sale on account 4 $120
Jan 09 Sale on account 5 $120
Jan 15 Sale on account Sales returned due to damage, $240 (two units that were sold on January 9). The units were in very poor condition and were destroyed.
Kramer Corp. uses a perpetual inventory system and the FIFO inventory costing method.
Required:
1. Compute net sales and gross profit for January 2017.
2. Determine the inventory turnover ratio and the average days to sell inventory for January 2017, and explain what the numbers mean.
3. Prepare the Journal Entries to record the purchase transaction on January 6, the sale transaction on January 8, and the sales return on January 15.
4. Compute the cost of sales for January 2017, assuming for this part only that Kramer uses the weighted-average cost method.