QUESTION
- Beginning inventory, purchases, and sales data for Acme Co. is as follows:
|
Inventory |
Purchases |
Sales |
|
Dec. 1 (65 units @ $13) |
Dec. 2 (40 units @ $15 |
Dec. 11 (75 units) |
|
Dec. 24 (60 units @ $16) |
Dec. 18 (10 units) |
|
|
Dec. 29 (10 units) |
Complete the perpetual inventory sheets (following pages) assuming the following inventory costing methods:
- FIFO
- Moving weighted average
- Specific identification – units sold as follows:
- Dec. 11 – 50 units @ $13 and 25 units @ $15
- Dec. 18 – 7 units @ $13 and 3 units @ $15
- Dec. 29 – 10 units @ $16
- What is the journal entry to record the sale on December 18 if the company uses Specific Identification? Assume all the units are sold for $20 per unit.
FIFO
|
Date |
Purchases |
Sales at Cost |
Ending Inventory |
|
Total |
Moving Weighted Average
|
Date |
Purchases |
Sales at Cost |
Ending Inventory |
|
Total |
Specific Identification
|
Date |
Purchases |
Sales at Cost |
Ending Inventory |
|
Total |
Question 2
Wasson, Inc. had the following items in its unadjusted trial balance as of December 31:
Sales (Cash) $88,000
Sales (Credit) $120,000
Accounts Receivable $96,000
Allowance for doubtful accounts $1000 credit balance
Prepare the adjusting entry to estimate bad debts under each of the following independent situations. (Show all your work!)
(1) Bad debts are estimated to be 8% of credit sales.
(2) An analysis shows that 8% of Accounts receivable will not be collected.
Question 3
Record the following transactions:
|
May 1 |
Wrote off Eddie Kruger’s account receivable in the amount of $10,000. |
|||
|
June 1 |
Eddie Kruger phoned and agreed to pay off his entire balance owing with several payments, starting in August. Write back his account in full. |
|||
|
Aug. 2 |
Kruger paid $4,000 on his account. |
|||
Question 4
Record the following transactions:
|
Jan 5 |
Accepted an $8,000, 90-day, 10% note from Jackie Chan in granting a time extension on his past due account. |
|||
|
????? |
Jackie Chan dishonoured his note at the maturity date. |
|||
|
Dec. 31 |
Wrote off the Chan account (Allowance method) |
|||
Question 5
Acme Co. built their warehouse in a place where tornadoes frequently occur. On January 27 of the current year, a tornado destroyed the warehouse and all of the inventory it contained. Acme Co. hired you to calculate the cost of the inventory using the gross profit method. They give you the following data to help you:
Purchases $900,000 Purchase Returns $30,000
Sales $600,000 Transportation-In $12,000
Sales Discounts $25,000 Purchase Discounts $20,000
Beginning Inventory $85,000
The company also informed you that their gross profit rate has been 25% over the past 5 years. Calculate the value of the lost inventory.
——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————-
ANSWER
- Beginning inventory, purchases, and sales data for Acme Co. is as follows:
|
Inventory |
Purchases |
Sales |
|
Dec. 1 (65 units @ $13) |
Dec. 2 (40 units @ $15 |
Dec. 11 (75 units) |
|
Dec. 24 (60 units @ $16) |
Dec. 18 (10 units) |
|
|
Dec. 29 (10 units) |
Complete the perpetual inventory sheets (following pages) assuming the following inventory costing methods:
- FIFO
- Moving weighted average
- Specific identification – units sold as follows:
- Dec. 11 – 50 units @ $13 and 25 units @ $15
- Dec. 18 – 7 units @ $13 and 3 units @ $15
- Dec. 29 – 10 units @ $16
- What is the journal entry to record the sale on December 18 if the company uses Specific Identification? Assume all the units are sold for $20 per unit.
|
18-Dec |
Accounts receivable |
200 |
|
|
To sales |
200 |
||
|
Cost of goods sold |
150 |
||
|
To Merchandise inventory |
150 |
| FIFO | |||
|
Date |
Purchases |
Sales at Cost |
Ending Inventory |
|
1-Dec |
845 |
845 |
|
|
2-Dec |
600 |
1445 |
|
|
11-Dec |
995 |
450 |
|
|
18-Dec |
150 |
300 |
|
|
24-Dec |
960 |
1260 |
|
|
29-Dec |
150 |
1110 |
|
|
Total |
2405 |
1295 |
1110 |
| Moving Weighted Average | |||
|
Date |
Purchases |
Sales at Cost |
Ending Inventory |
|
1-Dec |
845 |
845 |
|
|
2-Dec |
600 |
1445 |
|
|
11-Dec |
1032.14 |
412.86 |
|
|
18-Dec |
137.62 |
275.24 |
|
|
24-Dec |
960 |
1235.24 |
|
|
29-Dec |
154.40 |
1080.83 |
|
|
Total |
2405 |
1324.2 |
1080.83 |
| Specific Identification | |||
|
Date |
Purchases |
Sales at Cost |
Ending Inventory |
|
1-Dec |
845 |
845 |
|
|
2-Dec |
600 |
1445 |
|
|
11-Dec |
995 |
450 |
|
|
18-Dec |
150 |
300 |
|
|
24-Dec |
960 |
1260 |
|
|
29-Dec |
150 |
1110 |
|
|
Total |
2405 |
1295 |
1110 |
Answer 2
Wasson, Inc. had the following items in its unadjusted trial balance as of December 31:
Sales (Cash) $88,000
Sales (Credit) $120,000
Accounts Receivable $96,000
Allowance for doubtful accounts $1000 credit balance
Prepare the adjusting entry to estimate bad debts under each of the following independent situations. (Show all your work!)
(1) Bad debts are estimated to be 8% of credit sales.
|
Bad debt expense |
9600 |
||
|
To Allowance for doubtful debts |
9600 |
||
(2) An analysis shows that 8% of Accounts receivable will not be collected.
|
Bad debt expense |
7680 |
||
|
To Allowance for doubtful debts |
7680 |
||
Answer 3
Record the following transactions:
|
May 1 |
Wrote off Eddie Kruger’s account receivable in the amount of $10,000. |
|||
|
June 1 |
Eddie Kruger phoned and agreed to pay off his entire balance owing with several payments, starting in August. Write back his account in full. |
|||
|
Aug. 2 |
Kruger paid $4,000 on his account. |
|||
|
1-May |
Allowance for doubtful debts |
10000 |
||
|
To Accounts receivable |
10000 |
|||
|
1-Jun |
Accounts receivable |
10000 |
||
|
To Allowance for doubtful debts |
10000 |
|||
|
2-Aug |
Cash |
4000 |
||
|
To Accounts receivable |
4000 |
|||
Answer 4
Record the following transactions:
|
Jan 5 |
Accepted an $8,000, 90-day, 10% note from Jackie Chan in granting a time extension on his past due account. |
|||
|
????? |
Jackie Chan dishonoured his note at the maturity date. |
|||
|
Dec. 31 |
Wrote off the Chan account (Allowance method) |
|||
|
5-Jan |
10% Notes receivable |
8000 |
||
|
To Accounts receivable |
8000 |
|||
|
5-Apr |
Interest receivable |
197.26 |
||
|
To Interest Income |
197.26 |
|||
|
31-Dec |
Bad debt expense |
8197.26 |
||
|
To Allowance for doubtful debts |
8197.26 |
|||
|
31-Dec |
Allowance for doubtful debts |
8197.26 |
||
|
To Notes receivable |
8000 |
|||
|
To Interest receivable |
197.26 |
|||
Answer 5
Acme Co. built their warehouse in a place where tornadoes frequently occur. On January 27 of the current year, a tornado destroyed the warehouse and all of the inventory it contained. Acme Co. hired you to calculate the cost of the inventory using the gross profit method. They give you the following data to help you:
Purchases $900,000 Purchase Returns $30,000
Sales $600,000 Transportation-In $12,000
Sales Discounts $25,000 Purchase Discounts $20,000
Beginning Inventory $85,000
The company also informed you that their gross profit rate has been 25% over the past 5 years. Calculate the value of the lost inventory.
—————————————————————————————————-Net purchases= purchases +inward transportation-returns-discounts
=900000+12000-30000-20000
=862000
Net sales=sales-discount
=600000-25000
=575000
So, Cost of goods sold= net sales/125*100
= 575000/125*100
=460000
Let closing inventory be “X”
So, Cost of goods sold=opening inventory+ purchases-closing inventory
= 460000=85000+862000-X
So, X = 487000
So, the closing inventory as per gross profit method is $ 487000.
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