Beruflich Dokumente
Kultur Dokumente
In your audit of Jose Oliva Company, you find that a physical inventory on December 31,
2017, 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.
Instructions
Based on the above information, calculate the amount that should appear on Oliva’s
balance sheet at December 31, 2017, for inventory.
Instructions
Based on the above information, calculate the amount that should appear on Oliva’s
balance sheet at December 31, 2017, for inventory.
The consigned goods of $61,000 are not owned by Jose Oliva and were properly excluded.
The goods in transit to a customer of $46,000, shipped f.o.b. shipping point, are properly
excluded from the inventory because the title to the goods passed when they left the seller
(Oliva) and therefore a sale and related cost of goods sold should be recorded in 2017.
The goods in transit from a vendor of $83,000, shipped f.o.b. destination, are properly
excluded from the inventory because the title to the goods does not pass to Oliva until the
buyer (Oliva) receives them.
E8-9 (L03) Periodic versus Perpetual Entries
Fong Sai-Yuk Company sells one product. Presented below is information for January for
Fong Sai-Yuk Company.
Dates Transaction
Jan. 1 Inventory 100 units at $5 each
4 Sale 80 units at $8 each
11 Purchase 150 units at $6 each
13 Sale 120 units at $8.75 each
20 Purchase 160 units at $7 each
27 Sale 100 units at $9 each
Fong Sai-Yuk uses the FIFO cost flow assumption. All purchases and sales are on account.
Instructions
(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.
(c) Assume Fong Sai-Yuk uses a perpetual system. Prepare all necessary journal entries.
Transaction
Jan. 1 Inventory 100 units at $5 each
4 Sale 80 units at $8 each
11 Purchase 150 units at $6 each
13 Sale 120 units at $8.75 each
20 Purchase 160 units at $7 each
27 Sale 100 units at $9 each
Fong Sai-Yuk uses the FIFO cost flow assumption. All purchases and sales are on account.
Instructions
(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.
Date Transaction
Aug. 10 Purchased merchandise on account, $12,000, terms 2/10, n/30.
13 Returned part of the purchase of August 10, $1,200, and received credit on
account.
15 Purchased merchandise on account, $16,000, terms 1/10, n/60.
25 Purchased merchandise on account, $20,000, terms 2/10, n/30.
28 Paid invoice of August 15 in full.
Instructions
(a) Assuming that purchases are recorded at gross amounts and that discounts are to be
recorded when taken:
(1) Prepare general journal entries to record the transactions.
(2) Describe how the various items would be shown in the financial statements.
(2)
(b) Assuming that purchases are recorded at net amounts and that discounts lost are
treated as financial expenses:
(1) Prepare general journal entries to enter the transactions.
(2) Prepare the adjusting entry necessary on August 31 if financial statements are
to be prepared at that time.
(3) Describe how the various items would be shown in the financial statements.
(2)
(3)
(c) Which of the two methods do you prefer and why?
Solution: P8-3 (L02) Purchases Recorded Gross and Net
Some of the transactions of Torres Company during August are listed below. Torres uses the
periodic inventory method.
Date Transaction
Aug. 10 Purchased merchandise on account, $12,000, terms 2/10, n/30.
13 Returned part of the purchase of August 10, $1,200, and received credit on
account.
15 Purchased merchandise on account, $16,000, terms 1/10, n/60.
25 Purchased merchandise on account, $20,000, terms 2/10, n/30.
28 Paid invoice of August 15 in full.
Instructions
(a) Assuming that purchases are recorded at gross amounts and that discounts are to be
recorded when taken:
(1) Prepare general journal entries to record the transactions.
(2) Describe how the various items would be shown in the financial statements.
The second method is better theoretically because it results in the inventory being
carried net of purchase discounts, and purchase discounts not taken are shown as an
expense. The first method is normally used, however, for practical reasons.
P8-4 (L03) Compute FIFO, LIFO, and Average-Cost
Hull Company’s record of transactions concerning part X for the month of April was as follows.
Instructions
(a) Compute the inventory at April 30 on each of the following bases. Assume that perpetual
inventory records are kept in units only. Carry unit costs to the nearest cent.
(1) First-in, first-out (FIFO)
(2) Last-in, first-out (LIFO)
(3) Average-cost
1. First-in, first-out
Date of Invoice No. Units Unit Cost Total Cost
Inventory, April 30 =
2. Last-in, first-out
Date of Invoice No. Units Unit Cost Total Cost
Inventory, April 30 =
3. Average-cost
Date of Invoice No. Units Unit Cost Total Cost
April 1 100
Inventory, April 30 =
(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each
withdrawal, what amount would be shown as ending inventory in (1), (2), and (3) above?
(Carry average unit costs to four decimal places.)
1. First-in, first-out
2. Last-in, first-out
Purchased Sold Balance
No. of Unit No. of No. of
Date units cost units Unit cost units Unit cost Amount
Inventory, April 30 =
3. Average-cost
Purchased Sold Balance
No. of Unit No. of No. of
Date units cost units Unit cost units Unit cost Amount
Apr. 1
Apr. 4
Apr. 5
Apr. 11
Apr. 12
Apr. 18
Apr. 26
Apr. 27
Apr. 28
Apr. 30
Inventory, April 30 =
Solution: P8-4 (L03) Compute FIFO, LIFO, and Average-Cost
Hull Company’s record of transactions concerning part X for the month of April was as follows.
Instructions
(a) Compute the inventory at April 30 on each of the following bases. Assume that perpetual
inventory records are kept in units only. Carry unit costs to the nearest cent.
(1) First-in, first-out (FIFO)
(2) Last-in, first-out (LIFO)
(3) Average-cost
1. First-in, first-out
Date of Invoice No. Units Unit Cost Total Cost
April 30 200 $ 5.80 $ 1,160
April 26 150 5.60 840
$ 2,000
2. Last-in, first-out
Date of Invoice No. Units Unit Cost Total Cost
April 1 100 $ 5.00 $ 500
April 4 250 5.10 1,275
$ 1,775
3. Average-cost
Date of Invoice No. Units Unit Cost Total Cost
April 1 100 $ 5.00 $ 500
April 4 400 5.10 2,040
April 11 300 5.30 1,590
April 18 200 5.35 1,070
April 26 600 5.60 3,360
April 30 200 5.80 1,160
Total available 1,800 $ 9,720
(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each
withdrawal, what amount would be shown as ending inventory in (1), (2), and (3) above? (Carry
average unit costs to four decimal places.)
1. First-in, first-out
The inventory would be the same in amount as in part (a), $2,000.
2. Last-in, first-out
Purchased Sold Balance
No. of Unit No. of
Date units cost units Unit cost No. of units Unit cost Amount
Apr. 1 100 $ 5.00 100 $ 5.00 $ 500
Apr. 4 400 5.10 100 5.00
400 5.10 2,540
Apr. 5 300 $ 5.10 100 5.00
100 5.10 1,010
Apr. 11 300 5.30 100 5.00
100 5.10
300 5.30 2,600
Apr. 12 200 5.30 100 5.00
100 5.10
100 5.30 1,540
Apr. 18 200 5.35 100 5.00
100 5.10
100 5.30
200 5.35 2,610
Apr. 26 600 5.60 100 5.00
100 5.10
100 5.30
200 5.35
600 5.60 5,970
Apr. 27 600 5.60
200 5.35
100 5.00
100 5.10
100 5.30 1,540
Apr. 28 100 5.30 100 5.00
50 5.10 50 5.10 755
Apr. 30 200 5.80 100 5.00
50 5.10
200 5.80 $ 1,915