On January 1,2018,the CD Warehouse Began Operations with a Cash

question 85

Essay

On January 1,2018,the CD Warehouse began operations with a cash balance of $67,328.During the year,the company purchased 14,500 CDs on credit at a unit cost of $12.Payment was made soon enough to obtain a 2% purchase discount.During the year the company sold 3,200 CDs at a unit sales price of $25.1,000 of CD sales were sold to customers who paid early to get the 3% discount.
Assuming a perpetual inventory system is used,show the journal entries for these transactions and the T-accounts for both cash and inventory.
$$\begin{array} { | l | r | r| } \hline \text { Irventory } & 174,000 & \\\hline \text { Accourts Payable } & & 174,000 \\\hline \text { Accounts Payable } & 174,000 & \\\hline \text { Cash } & & 170,520 \\\hline \text { Irventory } & & 3,480 \\\hline \text { Cash } & 79,250 & \\\hline \text { Sales Discourt } & 750 & \\\hline \text { Sales Reverue } & & 80,000 \\\hline \text { Sales } = \mathbf { 3 , 2 0 0 } @ \$ 25 = \$ 80,000 & & \\\hline \text { Cost of Goods Sold } & 37,632 & \\\hline \text { Irventory } & & 37,632 \\\hline \text { Unit Cost of Irvertory } = \$ 170,520 / 14,500 = \$ 11.76 & & \\\hline 3,200 \times \$ 11.76 = \$ 37,632 & & \\\hline\end{array}$$

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Definitions:

Systematic Risk

The danger associated with the overall market or a specific sector of the market that cannot be mitigated by spreading investments.

Capital Asset Pricing Model

A model used to determine the theoretical rate of return of an asset, considering the asset’s risk relative to that of the market.

Beta

A measure used in finance to describe the relationship of an investment's returns with those of the market; it indicates the investment's risk compared to the market.

Rate of Return

The increase or decrease in the value of an investment throughout a certain timeframe, represented as a portion of the investment's initial cost.