Question 3 A Journal entries — periodic inventory system

Using the periodic inventory system, prepare general journal entries for the following transactions of
Heidelberg Housewares:

1. Purchased inventory on credit for $58 200.

2. Sold inventory for $18 800 in cash and $16 730 on credit.
3. A customer returned goods she had bought on credit for $1840.
4. Purchased a computer to be used in the business for $2400 cash.
5. Returned inventory for credit that was previously purchased for $1060.
6. Purchased inventory on credit with $12 800 list price. A 25% trade discount applies.
7. Sold inventory for $7600 on credit.

Question 3 B FIFO and moving average methods — perpetual

inventory

Chelsea’s Cameras Ltd records its inventory of digital cameras by using a perpetual inventory system on
a FIFO basis. The following details are supplied for one particular popular make and model for
the month of November..

Nov. 1 Inventory on hand consisted of 18 cameras costed at $160 each.

Purchases:
Nov. 2 10 cameras at $150 each
Nov. 20 20 cameras at $165 each
Nov. 25 30 cameras at $158 each

Sales:
Nov. 4 16 cameras at $290 each
Nov. 22 22 cameras at $290 each
Nov. 29 20 cameras at $310 each

Required
A. Prepare an inventory record showing the above transactions.
B. Assuming instead that the company uses the moving average method of recording cost of
sales, calculate the cost of sales and ending inventory balance for the month of November
and compare your answers with those from requirement A.
Question 4 Doubtful debts — net credit sales method

The following transactions relate to the business of Penrith Produce Ltd. Ignore GST.

June 30 Based on past experience, it was estimated that 1% of the year’s net credit sales
revenue of $330 000 will not be collected, and an allowance for doubtful debts was
established.
Oct. 5 After a concerted effort to collect, an account receivable of $550 from M. McGrath
was written off as a bad debt.

Nov. 15 M. McGrath unexpectedly paid $242 of the amount of his debt written off on 5
October.

Required
A. Record the transactions in general journal form.
B. What is the balance in the Allowance for Doubtful Debts accounts and the Bad Debts Recovered
account? Where are these accounts shown on the financial statements?

Question 5 Depreciation methods

Nevertire Ltd purchased a delivery van costing $52 000 net of GST. It is expected to have a residual
value of $12 000 at the end of its useful life of 4 years or 200 000 kilometres.

Required
A. Assume the van was purchased on 2 July 2015 and that the accounting period ends on 30 June.
Calculate the depreciation expense for the year 2015–16 using each of the following depreciation
methods:
1. straight-line
2. units of production (assume the van was driven 78 000 kilometres during the financial year).
3. diminishing balance
B. Assume the van was purchased on 1 October 2015 and that the accounting period ends on 30
June. Calculate the depreciation expense for the year 2015–16 using each of the following
depreciation methods:
1. straight-line
2. diminishing balance
3. units of production (assume the van was driven 60 000 kilometres during the financial year).