Question

Exercise 1 W. White & Co. is a merchandising company that operates in the wholesale distribution of chemical products for research laboratories. Transactions are the following: a. Beginning inventory: 1,800 units at 16 b. Purchase of 2,800 units at 17. A few days later, White realized that 400 units have different characteristics from those expected. The company accepts the supplier's offer of a 3% allowance on the entire purchase, to avoid a return. c. Purchase of 1,700 units at 18 d. Credit sale of 5,000 units at 32 each to Twin Chickens Lab. e. The customer returns 200 units lamenting quality issues. white offers a 2% allowance on the remaining units. f. At the end of the year, a physical count of the inventory reveals that 20 units are missing from the warehouse g. The market value of the inventory at the end of the period drops to 16 per unit. Journalize the above described transactions using LIFO and periodic inventory, and then using FIFO and perpetual inventory, including the closing entries.

Answer 1

LIFO and Periodic Inventory FIFO and Perpetual Inventory Units Price Cost Urnits Price Cost Opening Balance- PO Purchase- P1 Purchase- P2 Total (A) Credit Sale (return adjusted) If LIFO P2 P1 PO Balance Total (B) Book Stock at year end Inventory Shortage Physical Stock at year end 1,800 16.00 28,800.00 3% allowance adjusted 2,800 16.49 46,172.00 in P1 as periodic 1,70018.00 30,600.00 inventory is used. Opening Balance- PO Purchase- P1 Purchase- P2 Total (A) Credit Sale (return adjusted If FIFO PO P1 P2 Total (D) Book Stock at year end Inventory Shortage Physical Stock at year end 1,80016.00 28,800.00 2,80017.0047,600.00 1,70018.00 30,600.00 105,572.00 107,000.00 (4,800) (4,800) 1,700 2,800 300 18.00 30,600.00) 16.49 4,172.00 16.00 (4,800.00 (81,572.00) 24,000.00 1,800 2,800 200 16.00 (28,800.00) 17.00 47,600.00) 18.00 (3,600.00 (80,000.00) 1,500 1,500 27,000.00 The shortage will be shown as loss of 20 20 18.00 1,48018.00 26,640.00 360.00 inventory in PL separately 1,48016.00 23,680.00 Closing Inventory cost under periodic inventory using LIFO Closing Inventory cost under perpetual inventory using FIFO The shortage will be part of burchase cost and not to be shown as loss of inventory in PL separately