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Female Narrator: Welcome to another recorded video
for Lions and Tigers.
Um...what you were asked to do this week was to assume
a perpetual inventory system with an average cost flow
and record the transactions.
Now, I went ahead and gave you that average cost,
um...because we hadn't learned how to do that yet.
Um...so please just follow along.
On the first entry,
you purchased 10 leashes for cash of $5,
so the first thing that you need to do
is record that cash entry... or that purchase.
So on January 3rd, you're going to debit inventory.
And you paid cash, so you're gonna credit cash.
And that's 10 leashes at $5 each--or a total of 50.
So you're gonna debit inventory for 50,
and you're going to credit cash for 50.
On January 8th, you sold leashes for $12 in cash...
I'm sorry, on January 5th, you sold 8 leashes.
We are going to debit cash, because we received cash of $96.
That's 12 leashes... $12 for 8 leashes.
And we're gonna record sales of $96.
When we sell inventory,
we have two entries under a perpetual system.
The first entry recognizes the sale.
The second entry recognizes the cost.
We sold these leashes.
We sold 8 of them, and we paid $5 each for them.
So 8 times 5 is 40, so our cost of goods sold is 40.
And then, we need to reduce our inventory for that same 40,
because we don't have that inventory anymore.
Okay?
So now, we're gonna go
through this process multiple times.
Now on January 10th, I purchased some more entry...inventory,
so I'm gonna debit inventory.
And this time, I bought it on account,
so I'm gonna credit accounts payable.
I purchased 12 leashes at $6 each--or $72.
Now, I'm gonna sell some leashes.
Now, I'm gonna sell 6 leashes on account,
So on the 15th, I don't get cash,
but I do have accounts receivable.
My customers owe me that amount of money.
So 12 times 6 is 72 is how much I sold them for,
and I have sales of 72.
But now I need to record the cost.
Now, I told you in the problem that they had an average cost
of $6...or $5 and 857,
so the cost was $5 and...$5...and 85.7 cents.
So I debit my cost of goods sold.
I credit my inventory.
And I'm going to take 6 times 5.857,
and I'm gonna get $35.14...
is how much my cost and reduction in inventory is.
Now that you're starting to get the idea of it,
if you didn't have it before,
pause the video, fill in what you know,
and then come back and see if you got it right.
On January 22nd, I purchased more inventory.
This time, I purchased 15 leashes at $7 each--
or a total of 105.
And I sold...or I purchased those on account,
so this would be accounts payable of 105.
Okay?
So you got to be really careful
that you read what it's telling you.
And then, when I sold my 9 leashes,
I sold them on account,
so on January 28th, I sold 9 leashes.
So accounts receivable,
9 at $12 each-- or a total of 108--
and I have sales of 108.
In the problem, I told you they sold...
the cost was $6 and 60.2 cents.
So we're gonna say cost of goods sold,
9 at 6.602-- or $59.42--
and inventory reduction of $59.42.
So what this is showing me is the cost was 59.42.
I sold it for 108.
The difference between the two would be gross profit.
Please let me know if you have any questions
via the discussion board.