# Week Three Exercise Assignment

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• Published : May 6, 2013

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Week Three Exercise Assignment
Inventory

1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows. Painting| Cost| 1/2 Beginning inventory | Woods | \$11,000 |

4/19 Purchase | Sunset | 21,800 |
6/7 Purchase | Earth | 31,200 |
12/16 Purchase | Moon | 4,000 |

Woods and Moon were sold during the year for a total of \$35,000. Determine the firm’s a. cost of goods sold.
Cash \$35,000
Sales \$35,000
Woods goods 11,000
Woods Inventory 11,000
Moon Goods 4,000
Moon Inventory 4,000
Total cost of goods \$15,000
b. gross profit.

Sales Revenue \$35,000 minus Cost of Goods \$15,000 = \$20,000 (Gross profit) c. ending inventory.
\$21,800 (Sunset) + \$31,200 (Earth) = \$53,000 (Ending Inventory) 2. Inventory valuation methods: basic computations. The January beginning inventory of the White Company consisted of 300 units costing \$40 each. During the first quarter, the company purchased two batches of goods: 700 Units at \$44 on February 21 and 800 units at \$50 on March 28. Sales during the first quarter were 1,400 units at \$75 per unit. The White Company uses a periodic inventory system. Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.

Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.

FIFO| LIFO | Weighted Average|
| | |
Goods available for sale | \$ | \$ | \$ | Ending inventory, March 31 |
Cost of goods sold |
1,800 units 82,800 1,800 units 82,800 1,800 units 82,800
400 units 20,000 400 units 12,400 400 units @ 46 = 64,400
1,400 units 62,800 1,400 units 70,400 1,400 units \$18,400
(42,200) (34,600) got confused here 3. 3. Perpetual inventory system: journal entries. At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions that occurred during 20X3 following. * Purchases on account: 500 units @ \$4 = \$2,000

* Sales on account: 300 of the above units = \$2,550
* Returns on account: 75 of the above unsold units

The company president examined the computer-generated journal entries for these transactions and was confused by the absence of a Purchases account. a. Duplicate the journal entries that would have prepared on the computer printout. Inventory 2,000

AP 2,000
AR 2,550
Sales 2,550
Goods Sold 1,200
Inventory 1,200
30 units @ 4
AP 300
Inventory 300
75 units @ 4
b. Calculate the balance in the firm’s Inventory account. 2,000 – 1,200 – 300 = \$500
c. Briefly explain the absence of the Purchases account to the company president. The reason for the missing purchase account is because the perpetual inventory system does not use it. 4. Inventory valuation methods: computations and concepts. Wave Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:

1/3: | 100 boards @ \$125 |
3/17: | 50 boards @ \$130 |
5/9: | 246 boards @140 |
7/3: | 400 boards @ \$150 |
10/23: | 74 boards @ \$160 |

Wave Riders sold 710 boards at an average price of \$250 per board. The company uses a periodic inventory system.

Instructions
a. Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods: * First-in, first-out
Goods sold 100 @ \$125 + 50 @ \$130 + 246 @ \$140 + 314 @ \$150 = \$100,540 Ending inventory 86 @ \$150 + 74 @ \$160 = \$24,740
Gross profit 710 @ \$250 – \$100,540...