Jerome's Fashion Dezigns sells a variety of items of clothing including footwear for men and uses a perpetual inventory system. The business began the last quarter of 2017 with 25 pairs of the "Jordan" brand at a total cost of $152,500. The following transactions, relating to the Jordan brand, took place during the quarter. Purchased 100 pairs of sneakers on account at a cost of $5,945 per pair. In addition, Jerome paid $405 in cash on each pair of shoes to have the inventory shipped from the vendor's warehouse to Jerome's showroom. October 10 During the month 90 pairs were sold at a unit selling price of $8,255. A new batch of 60 pairs was purchased on account at a total cost of $406,500 October 30 November 1 November 14 5 pairs of the sneakers purchased on November 1 were found to be of the wrong description and returned to the supplier November 30 The sales for November were 60 pairs of sneakers which yielded total sales revenue of $430,000. December 2 Odail Thomas, a customer to whom 10 pairs were sold at the close of business on November 30, returned 4 pairs of the sneakers, as they were of the wrong colour. What is the accounting treatment if we are using the FIFO method for the transaction on November 14, 2017? a. 5 pairs would be taken out of COGS at the FIFO rate and inventory ending balance would be increased. b. 5 pairs would be taken out of COGS at a rate of $6,775 per pair and inventory balance would be increased c. 5 pairs would be taken out of purchases at a rate of $6,775 per pair and the inventory ending balance would be decreased. d. 5 pairs would be taken out of COGS at a rate of $6,775 per pair.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Transcribed Image Text:Jerome's Fashion Dezigns sells a variety of items of clothing including footwear for men and uses a perpetual inventory system. The business began the last quarter of 2017 with 25 pairs of the "Jordan" brand at a total cost of $152,500. The following transactions, relating to the Jordan brand, took place during the quarter. Purchased 100 pairs of sneakers on account at a cost of $5,945 per pair. In addition, Jerome paid $405 in cash on each pair of shoes to have the inventory shipped from the vendor's warehouse to Jerome's showroom. October 10 October 30 During the month 90 pairs were sold at a unit selling price of $8,255. A new batch of 60 pairs was purchased on account at a total cost of $406,500 November 1 November 14 5 pairs of the sneakers purchased on November 1 were found to be of the wrong description and returned to the supplier November 30 The sales for November were 60 pairs of sneakers which yielded total sales revenue of $430,000. December 2 Odail Thomas, a customer to whom 10 pairs were sold at the close of business on November 30, returned 4 pairs of the sneakers, as they were of the wrong colour. What is the accounting treatment if we are using the FIFO method for the transaction on November 14, 2017? a. 5 pairs would be taken out of COGS at the FIFO rate and inventory ending balance would be increased. b. 5 pairs would be taken out of COGS at a rate of $6,775 per pair and inventory balance would be increased c. 5 pairs would be taken out of purchases at a rate of $6,775 per pair and the inventory ending balance would be decreased. d. 5 pairs would be taken out of COGS at a rate of $6,775 per pair.

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