Suggestions based on the Question and Answer that you are currently viewing
Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company.
\r\nJan. 1 Inventory 100 units at $5 each
\r\n4 Sale 80 units at $8 each
\r\n11 Purchase 150 units at $6 each
\r\n13 Sale 120 units at $8.75 each
\r\n20 Purchase 160 units at $7 each
\r\n27 Sale 100 units at $9 each
\r\nFong Sai-Yuk uses the FIFO cost flow assumption. All purchases and sales are on account.
\r\nInstructions
\r\n(a) Assume Fong Sai-Yuk uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.
\r\n(b) Compute gross profit using the periodic system.
\r\n(c) Assume Fong Sai-Yuk uses a perpetual system. Prepare all necessary journal entries.
\r\n(d) Compute gross profit using the perpetual system.
Cruise Industries purchased $10,800 of merchandise on February 1, 2014, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.
\r\nInstructions
\r\n(a) Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
\r\n(b) Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
\r\n(c) At what amount would the purchase on February 1 be recorded if the net method were used?
Presented below are transactions related to Tom Brokaw, Inc.
\r\nMay 10 Purchased goods billed at $15,000 subject to cash discount terms of 2/10, n/60. 11 Purchasedgoods billed at $13,200 subject to terms of 1/15, n/30. 19 Paid invoice of May 10. 24 Purchasedgoods billed at $11,500 subject to cash discount terms of 2/10, n/30.
\r\nInstructions
\r\n(a) Prepare general journal entries for the transactions above under the assumption that purchases are to be recorded at net amounts after cash discounts and that discounts lost are to be treated as financial expense.
\r\n(b) Assuming no purchase or payment transactions other than those given above, prepare the adjusting entry required on May 31 if financial statements are to be prepared as of that date.
Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing.
\r\n2013 2014 2015
\r\nSales revenue $290,000 $ ? $410,000
\r\nSales returns and allowances 11,000 13,000 ?
\r\nNet sales ? 347,000 ?
\r\nBeginning inventory 20,000 32,000 ?
\r\nEnding inventory ? ? ? Purchases ? 260,000 298,000
\r\nPurchase returns and allowances 5,000 8,000 10,000
\r\nFreight-in 8,000 9,000 12,000 Cost of goods sold 233,000 ? 293,000
\r\nGross profi t on sales 46,000 91,000 97,000
Craig Company asks you to review its December 31,
\r\n2014, inventory values and prepare the necessary adjustments to the books. The following information is given to you.
\r\n1. Craig uses the periodic method of recording inventory. A physical count reveals $234,890 of inventory on hand at December 31, 2014.
\r\n2. Not included in the physical count of inventory is $13,420 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31.
\r\n3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $12,800 on December 31. The merchandise cost $7,350, and Champy received it on January 3.
\r\n4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $15,630. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded.
\r\n5. Not included in inventory is $8,540 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30.
\r\n6. Included in inventory was $10,438 of inventory held by Craig on consignment from Jackel Industries.
\r\n7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $18,900 on
\r\nDecember 31. The cost of this merchandise was $10,520, and Kemp received the merchandise on
\r\nJanuary 5.
\r\n8. Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $1,500 which had been sold to a customer for $2,600. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged.
\r\nInstructions
\r\n(a) Determine the proper inventory balance for Craig Company at December 31, 2014.
\r\n(b) Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2014.
\r\nAssume the books have not been closed.
Colin Davis Machine Company maintains a general ledger account for each class of inventory, debiting such accounts for increases during the period and crediting them for decreases. The transactions below relate to the Raw Materials inventory account, which is debited for materials purchased and credited for materials requisitioned for use.
\r\n1. An invoice for $8,100, terms f.o.b. destination, was received and entered January 2, 2014. The receiving report shows that the materials were received December 28, 2013.
\r\n2. Materials costing $28,000, shipped f.o.b. destination, were not entered by December 31, 2013, “because they were in a railroad car on the company’s siding on that date and had not been unloaded.”
\r\n3. Materials costing $7,300 were returned to the supplier on December 29, 2013, and were shipped f.o.b. shipping point. The return was entered on that date, even though the materials are not expected to reach the supplier’s place of business until January 6, 2014.
\r\n4. An invoice for $7,500, terms f.o.b. shipping point, was received and entered December 30, 2013. The receiving report shows that the materials were received January 4, 2014, and the bill of lading shows that they were shipped January 2, 2014.
\r\n5. Materials costing $19,800 were received December 30, 2013, but no entry was made for them because “they were ordered with a specified delivery of no earlier than January 10, 2014.”
\r\nInstructions
\r\nPrepare correcting general journal entries required at December 31, 2013, assuming that the books have not been closed.
Assume that in an annual audit of Harlowe Inc. at December 31, 2014, you find the following transactions near the closing date.
\r\n1. A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2014. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2015.
\r\n2. Merchandise costing $2,800 was received on January 3, 2015, and the related purchase invoice recorded
\r\nJanuary 5. The invoice showed the shipment was made on December 29, 2014, f.o.b. destination.
\r\n3. A packing case containing a product costing $3,400 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked “Hold for shipping instructions.” Your investigation revealed that the customer’s order was dated December 18, 2014, but that the case was shipped and the customer billed on January 10, 2015. The product was a stock item of your client.
\r\n4. Merchandise received on January 6, 2015, costing $680 was entered in the purchase journal on
\r\nJanuary 7, 2015. The invoice showed shipment was made f.o.b. supplier’s warehouse on December 31,
\r\n2014. Because it was not on hand at December 31, it was not included in inventory.
\r\n5. Merchandise costing $720 was received on December 28, 2014, and the invoice was not recorded. You located it in the hands of the purchasing agent; it was marked “on consignment.”
\r\nInstructions
\r\nAssuming that each of the amounts is material, state whether the merchandise should be included in theclient’s inventory, and give your reason for your decision on each item.
In your audit of Jose Oliva Company, you find that a physical inventory on
\r\nDecember 31, 2014, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000.
\r\n1. Merchandise of $61,000 which is held by Oliva on consignment. The consignor is the Max Suzuki Company.
\r\n2. Merchandise costing $38,000 which was shipped by Oliva f.o.b. destination to a customer on
\r\nDecember 31, 2014. The customer was expected to receive the merchandise on January 6, 2015.
\r\n3. Merchandise costing $46,000 which was shipped by Oliva f.o.b. shipping point to a customer on
\r\nDecember 29, 2014. The customer was scheduled to receive the merchandise on January 2, 2015.
\r\n4. Merchandise costing $83,000 shipped by a vendor f.o.b. destination on December 30, 2014, and received by Oliva on January 4, 2015.
\r\n5. Merchandise costing $51,000 shipped by a vendor f.o.b. shipping point on December 31, 2014, and received by Oliva on January 5, 2015.
\r\nInstructions
\r\nBased on the above information, calculate the amount that should appear on Oliva’s balance sheet at December 31, 2014, for inventory.
Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet.
\r\n1. Goods out on consignment at another company’s store.
\r\n2. Goods sold on an installment basis (bad debts can be reasonably estimated).
\r\n3. Goods purchased f.o.b. shipping point that are in transit at December 31.
\r\n4. Goods purchased f.o.b. destination that are in transit at December 31.
\r\n5. Goods sold to another company, for which our company has signed an agreement to repurchase at
\r\na set price that covers all costs related to the inventory.
\r\n6. Goods sold where large returns are predictable.
\r\n7. Goods sold f.o.b. shipping point that are in transit at December 31.
\r\n8. Freight charges on goods purchased.
\r\n9. Interest costs incurred for inventories that are routinely manufactured.
\r\n10. Costs incurred to advertise goods held for resale.
\r\n11. Materials on hand not yet placed into production by a manufacturing firm.
\r\n12. Office supplies.
\r\n13. Raw materials on which a manufacturing firm has started production but which are not completely processed.
\r\n14. Factory supplies.
\r\n15. Goods held on consignment from another company.
\r\n16. Costs identified with units completed by a manufacturing firm but not yet sold.
\r\n17. Goods sold f.o.b. destination that are in transit at December 31.
\r\n18. Short-term investments in stocks and bonds that will be resold in the near future.
\r\nInstructions
\r\nIndicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory, indicate how it should be reported in the financial statements.
Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow.
\r\nYear Ended December 31 Inventory at Current-Year Cost Price Index
\r\n2013 $19,750 100
\r\n2014 22,140 108
\r\n2015 25,935 114
\r\nInstructions
\r\nCompute the value of the 2014 and 2015 inventories using the dollar-value LIFO method.
Midori Company had ending inventory at end-of-year prices of $100,000 at December 31, 2013;
\r\n$119,900 at December 31, 2014; and $134,560 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 110 at 12/31/14, and 116 at 12/31/15. Compute the ending inventory for Midori Company for 2013 through 2015 using the dollar-value LIFO method.
Data for Amsterdam Company are presented in BE8-5. Compute the April 30 inventory and the
\r\nApril cost of goods sold using the LIFO method.
Data for Amsterdam Company are presented in BE8-5. Compute the April 30 inventory and the
\r\nApril cost of goods sold using the FIFO method.
\r\n
Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.
\r\nUnits Unit Cost Total Cost
\r\nApril 1 inventory 250 $10 $ 2,500
\r\nApril 15 purchase 400 12 4,800
\r\nApril 23 purchase 350 13 4,550 1,000 $11,850
\r\nCompute the April 30 inventory and the April cost of goods sold using the average-cost method.
Bienvenu Enterprises reported cost of goods sold for 2014 of $1,400,000 and retained earnings of
\r\n$5,200,000 at December 31, 2014. Bienvenu later discovered that its ending inventories at December 31,
\r\n2013 and 2014, were overstated by $110,000 and $35,000, respectively. Determine the corrected amounts for 2014 cost of goods sold and December 31, 2014, retained earnings
Stallman Company took a physical inventory on December 31 and determined that goods costing
\r\n$200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Pelzer
\r\nCorporation, f.o.b. shipping point, and $22,000 of goods sold to Alvarez Company for $30,000, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31 inventory?c
Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 50 units that cost $34 each. During June, the company purchased 150 units at $34 each, returned 6 units for credit, and sold 125 units at $50 each. Journalize the June transactions.
Included in the December 31 trial balance of Rivera Company are the following assets.
\r\nCash $ 190,000 Work in process $200,000
\r\nEquipment (net) 1,100,000 Accounts receivable (net) 400,000
\r\nPrepaid insurance 41,000 Patents 110,000
\r\nRaw materials 335,000 Finished goods 170,000
\r\nPrepare the current assets section of the December 31 balance sheet.
In an article that appeared in the Wall Street Journal, the phrases “phantom (paper) profits” and “high LIFO profits” through involuntary liquidation were used. Explain these phrases.
On December 31, 2013, the inventory of Powhattan Company amounts to $800,000. During 2014, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2014, the inventory is $1,053,000 at December 31, 2014, prices. Using the December 31, 2013, price level of 100 and the December 31, 2014, price level of 108, compute the inventory value at December 31, 2014, under the dollar-value LIFO method.
Explain the following terms.
\r\n(a) LIFO layer.
\r\n(b) LIFO reserve.
\r\n(c) LIFO effect.
Question:
\r\nWhat is the dollar-value method of LIFO inventory valuation?
\r\nWhat advantage does the dollar-value method have over the specific goods approach of LIFO inventory valuation? Why will the traditional LIFO inventory costing method and the dollar-value LIFO inventory costing method produce different inventory valuations if the composition of the inventory base changes?
As compared with the FIFO method of costing inventories, does the LIFO method result in a larger or smaller net income in a period of rising prices? What is the comparative effect on net income in a period of falling prices?
Describe the LIFO double-extension method. Using the following information, compute the index at December 31, 2014, applying the double-extension method to a LIFO pool consisting of 25,500 units ofproduct A and 10,350 units of product B. The base-year cost of product A is
\r\n$10.20 and of product B is $37.00. The price at December 31,
\r\n2014, for product A is $21.00 and for product B is $45.60. (Round to two decimal places.)
\r\n
How might a company obtain a price index in order to apply dollar-value LIFO?
The benefits of buying with AnswerDone:
Access to High-Quality Documents
Our platform features a wide range of meticulously curated documents, from solved assignments and research papers to detailed study guides. Each document is reviewed to ensure it meets our high standards, giving you access to reliable and high-quality resources.
Easy and Secure Transactions
We prioritize your security. Our platform uses advanced encryption technology to protect your personal and financial information. Buying with AnswerDone means you can make transactions with confidence, knowing that your data is secure
Instant Access
Once you make a purchase, you’ll have immediate access to your documents. No waiting periods or delays—just instant delivery of the resources you need to succeed.