Question

Option #2: The Accounting Cycle and Inventory Analysis

Portfolio Project Option #2 is for accounting students who are intuitive learners by nature. You learn best from abstract materials like theories and concepts, enjoy challenges, and tend to be more innovative. For this assignment, you are required to complete the accounting case for Friday Line in Part 1, Bolton Consulting in Part 2, and Aranas Manufacturing in Part 3. Follow the additional instructions provided below. (The templates can be found in Module 8, and by clicking "Next" at the bottom of this page.)

Part 1:

Friday Line, a modeling agency, completed the following transactions during the first month of operations:

April 1: Stockholders invested $65,000 cash along with equipment valued at $32,000 in the company in exchange for 1,000 shares of stock.

April 3: Friday Line paid $9,500 cash to settle accounts payable.

April 6: Friday Line completed services for a client and immediately received $2,500 cash.

April 9: Friday Line completed a $7,500 project for a client who must pay within 30 days.

April 12: Friday Line made credit purchases of $9,200 for office equipment and $4,100 for office supplies. Payment is due within 10 days.

April 19: Friday Line paid $3,200 cash for the premium on a 12-month insurance policy.

April 21: Friday Line pre-paid $12,000 for 12 months’ rent for their office space.

April 22: Friday Line received $6,000 cash as a partial payment for the work completed on April 9.

April 25: Friday Line purchased $725 of additional office supplies on credit.

April 26: Friday Line completed work for another client for $3,125 on credit.

April 27: Friday Line paid a dividend of $6,500 cash to its stockholders.

April 30: Friday Line paid $525 cash for this month’s utility bill.

Instructions:

Prepare journals for the above economic transactions and include the effect that each transaction has on the accounting equation. Use the following assignment template for Friday Line Co.

Part 2

The unadjusted trial balance of Bolton Consulting is entered on the partial worksheet below.

Bolton Consulting

Work Sheet

For the year ended December 31

Account

Unadjusted Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

Balance Sheet and Statement of Stockholders’ Equity

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Cash

31,000

Accounts Receivable

8,000

Supplies

12,500

Automobiles

175,000

Accum. Depr. - Autos

52,000

Accounts payable

17,500

Unearned fees

26,500

Salaries payable

Capital Stock

58,000

Dividends

42,500

Fees earned

241,750

Salary expense

91,000

Rent expense

35,750

Advertising expense

Supplies expense

Depreciation expense

______

______

Totals

395,750

395,750

Instructions

Complete the worksheet using the following information:

(a) Unpaid and unrecorded salaries earned by employees, $6,500.

(b) Unused supplies still on hand is $3,200.

(c) Machinery depreciation, $20,000.

(d) Customers who paid $12,750 in advance have received their services.

(e) Advertising for last quarter of the year in the amount of $5,200 remains unpaid and unrecorded.

(f) The rent expense incurred and not yet paid or recorded at fiscal year-end is $4,100.

Part 3

Aranas Manufacturing, a tool retailer, began year 20x7 with 21,500 units of product in its January 1 inventory, at a cost of $12.50 for each unit. It made successive purchases of its product in year 20x7, as follows. The company uses a periodic inventory system. On December 31, 20x7, a physical count reveals that 35,000 units of its product remain in inventory.

Mar. 7

25,000 units

@ $16 each

May 25

41,500 units

@ $19 each

Aug. 1

22,750 units

@ $23 each

Nov. 10

38,100 units

@ $24 each

Instructions

Using the template provided below.

Compute the number and total cost of the units available for sale in year 20x7.

Compute the amounts assigned to the 20x7 ending inventory, and the cost of goods sold for FIFO, LIFO, and weighted average.

The 113,850 units sold are $31 each. Prepare comparative income statements for the three inventory costing methods of FIFO, LIFO, and weighted average, which include a detailed cost of goods sold section as part of each statement. (Round your average cost per unit to 2 decimal places.)

As the chief accountant of Aranas Manufacturing, provide recommendations, giving all reasons based on your research on retail industry inventory best practices, management on:

Which inventory method (FIFO, LIFO, average cost, or specific identification) you should use.

Whether it is a good idea to keep using the periodic system as opposed to the perpetual inventory system.

Reminder: Your Part 3 paper should be two to three pages in length total and conform to CSU-Global Guide to Writing and APA. Include scholarly references as needed in addition to the course textbook to support your views. The CSU-Global Library is a good place to

1 ACT300 Principles of Accounting! 2 Module 8: Portfolio Project Template Option 2 (Part 3) 3 Aranas Manufacturing-Inventory Analysis Units Total Beginning Purchases: March 7 May 25 August 1 November10 Units available for sale $ Ending units Unit Cost UFO Weighted Average Weighted Average 26 Comparative Income Statement 27 Sales Cost of goods sold 29 Gross Profit

Answer 1

Date No. of units Perunith Total cost 21,500 12.50 16.00 1-Jan 7- Mar 25-May 1- Aug 10- Noul Particulars Beginning inventory Purchase Purchase Purchase Purchase Total units and cost of units available for sale 19.00 25,000 H1,500 22, 750 38,100 (148,850 268,750 400,000, 788,500 523, 250 914, 400 2,894,900 23.00 24.00 2. Compute the amounts assigned to 20x7 ending inventory and the cost of goods sold for FIFO, LIFO, and weighted average.

FIFO LIFO o Weighted Average Beginning inventory 268, 750 268,450 268,750 Add Purchases ( 25000X16 + 41,500x 19+ 38100x 24+ 22750X 23) 2626150 2626150 2626150 Total inventory available for sale 2,894,900 2,894,900 2,894,900 Less Ending inventory (148850-113850 - 35000 units) FIFO (35000X24) 840,000 LIFO (21500X12.50 +13500 x 16) 484,750 680, 750 Weighted Average (2894000/148850 X 35000) 148850 Cost of Goods Sold 2,054,900 /2, 410,150 | 2,214, 150 L ( 2894900-19.45)