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Inferring Purchases Using Cost of Goods Sold and Inventory Balances Penno Company reported ending inventories of...

Inferring Purchases Using Cost of Goods Sold and Inventory Balances

Penno Company reported ending inventories of $942,400 in 2017 and $1,031,600 in 2016. Cost of goods sold totaled $5,711,600 in 2017.
a. Prepare the journal entry to record cost of goods sold.

Description Debit Credit
AnswerCost of Good SoldRetained EarningsInventoryCashAccounts Receivable Answer Answer
AnswerCost of Good SoldRetained EarningsInventoryCashAccounts Receivable Answer Answer

b. Set up a T-account for inventory and post the cost of goods sold entry from part a. to this account.

Inventory
Balance Answer Answer
a. Answer Answer
c. Answer Answer
Balance Answer Answer

c. Using the T-account from b, determine the amount of inventory that was purchased in 2017. Prepare a journal entry to record those purchases. Assume the inventory was purchased using cash.

Description Debit Credit
AnswerCost of Good SoldRetained EarningsInventoryCashAccounts Receivable Answer Answer
AnswerCost of Good SoldRetained EarningsInventoryCashAccounts Receivable Answer Answer

d. Using the financial statement effects template, show the effects of the entries in parts a and c on the balance sheet and income statement.

Note: Use negative signs with your answers, when appropriate.

Balance Sheet Income Statement
Transaction Cash Asset + Noncash
Asset		 = Liabilities + Contrib.
Capital		 + Earned
Capital		 Revenues - Expenses = Net Income
a. Answer + Answer = Answer + Answer + Answer Answer - Answer = Answer
c. Answer + Answer = Answer + Answer + Answer Answer - Answer = Answer
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