Question

Question 1

Presented below are selected transactions for Scotian Corporation during July.

Jul     1       Sold merchandise to Brunswick Inc. for $800, terms 3/10, n/30. The merchandise sold cost $400.

          2       Purchased merchandise from Founders Corporation for $4,500, terms 4/10, n/30.

          3       Paid freight charges of $100 on items purchased on July 2.

          4       Purchased merchandise from Edward Company Ltd. for $5,000, n/30.

        10       Received payment from Brunswick Inc. for purchase of July 1.

        11       Paid Founders Corporation for July 2 purchase.

Instructions

(a)   Record the above transactions for Scotian Corporation, assuming a perpetual inventory system is used. The cost of goods sold on July 1 was determined to be $400.

(b)   Record the above transactions for Scotian Corporation, assuming a periodic inventory system is used.

Question 2

Given the following information, prepare in good form the cost of goods sold section of an income statement, using the periodic inventory system.

...... Beginning inventory......................................................       $15,000

...... Ending inventory...........................................................         16,000

...... Freight in.......................................................................         4,000

...... Purchases.....................................................................         38,000

...... Purchase discounts.......................................................              500

...... Purchase returns and allowances.................................           1,800

Question 3

Owl Ltd. sells many products. Hoot is one of its popular items. Below is an analysis of the inventory purchases and sales of Hoot for the month of March. Owl uses the perpetual inventory system.

                                                                      Purchases                                       Sales                   

                                                            Units           Unit Cost              Units           Selling Price/Unit

Mar       1      Beginning inventory       600                  $40

             3      Purchase                        100                    60

             4      Sales                                                                              190                        $80

           10      Purchase                        100                    66

           16      Sales                                                                              275                        120

           19      Sales                                                                              220                        120

           25      Sales                                                                                75                        120

           30      Purchase                        460                    75

Instructions

(a)   Using the FIFO cost method, calculate the cost of goods sold for March. Show calculations.

(b)   Using the average cost method, calculate the ending inventory at March 31. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.

Answer 1

Ques 1

Perpetual					periodic
Date	Accounts	debit	credit		Date	Accounts	debit	credit
Jul-01	Accounts receivable	800			Jul-01	Accounts receivable	800
	sales		800			sales		800
	cost of goods sold	400
	inventory		400
Jul-02	Inventory	4500			Jul-02	Purchases	4500
	accounts payable		4500			accounts payable		4500
Jul-03	Inventory	100			Jul-03	Freight in	100
	cash		100			cash		100
Jul-04	Inventory	5000			Jul-04	Purchases	5000
	accounts payable		5000			accounts payable		5000
Jul-10	cash	776			Jul-10	cash	776
	sales discount	24				sales discount	24
	accounts receivable		800			accounts receivable		800
Jul-11	Accounts payable	4500			Jul-11	Accounts payable	4500
	Inventory		180			Purchase discounts		180
	cash		4320			cash		4320

Ques 2

Merchandise inventory beginning balance		15000
Purchases	38000
Less:purchase returns and allowances	500
less:purchase discounts	1800
Net purchases	35700
freight in	4000
net cost of purchases		39700
cost of goods available for sale		54700
Less:Merchandise inventory ending balance		16000
cost of goods sold			38700

Ques 3

Ques 3 FIFO Purchases Units sold Balance units rate units rate amount units rate amount amount 24000 Mar-01 600 40 600 Mar-03 100 60 6000 40 24000 6000 100 60 Mar-04 190 40 7600 410 40 16400 6000 100 60 6600 2Mar-10 100 66 410 40 16400 6000 100 60 6600 100 66 5Mar-16 40 275 11000 135 5400 6000 100 60 6600 100 66 60 Mar-19 135 40 5400 15 900 60 85 5100 100 66 6600 900 40 3960 3Mar-25 15 60 2640 60 66 5 Mar-30 460 40 2640 34500 66 460 34500 75 500 3total 37140 760 33960 66 40 75
​​​​​​
0 W.avg Purchases Units sold Balance units rate 1 units rate amount units rate amount amount 2 Mar-01 600 40 24000 3 4 Mar-03 100 6000 40 60 600 24000 100 5 60 6000 700 30000 6 43 7 8 Mar-04 510 190 43 8143 43 21857 0 Mar-10 1 2 100 6600 66 510 43 21857 6600 100 66 47 610 28457 3 4 Mar-16 12829 47 275 47 335 15628 5 6 Mar-19 47 220 47 10263 115 5365 7 8 Mar-25 47 3499 75 47 40 1866 47 0 Mar-30 460 75 34500 40 1866 460 1 75 34500 2 total 36366 760 34734 500