Question

Accountancy

Jim has recently opened a dry fruits wholesale company dedicated to the sale of peanuts, almonds and pistachios.
During its first month of activity, the company has made the following transactions:

Kg Price per Kg Amount
February 2: Purchase of Pistachios: 2500 $11 $27,500
Purchase of Almonds: 4000 $6 $24,000
Purchase of Peanuts: 6000 $4 $24,000
February 3: Purchase of Pistachios: 1500 $13 $19,500
Purchase of Almonds: 2000 $7 $14,000
Purchas of Peanuts: 2000 $5 $10,000
February 6: Sold to several clients:
Pistachios: 2000 $21 $42,000
Almonds: 2500 $12 $30,000
Peanuts: 3000 $8 $24,000
February 6: Sold to Fruits Lovers Inc.:

Pistachios: 500 $21 $10,500
Almonds: 1000 $12 $12,000
Peanuts: 1500 $9 $13,500
February 12 Purchase of Pistachios: 1500 $15 $22,500
Purchase of almonds: 2000 $9 $18,000
February 13: Sale of peanuts to Peanuts Lovers Inc.: 3500 $9 $31,500
February 14: Purchase of Peanuts 6000 $5 $30,000
February 19: Sold to several clients:
Pistachios: 1000 $22 $22,000
Almonds: 1500 $14 $21,000
Peanuts: 3000 $10 $30,000
February 25: Purchased from various suppliers:
Pistachios: 1000 $14 $14,000
Almonds: 1000 $10 $10,000
Peanuts: 1000 $5 $5,000
Besides these transactions, the company has had the following expenses:
Salaries: $3600
Electricity bill: $350
Renting of equipment: $900
Rent of warehouse and office: $1.600
Miscellaneous: $1.300
Jim’s accountant recommended that he should use the average cost method in order to determine the cost of the inventory sold but he is not sure about the
consequences it may have on his financial situation.
Relying on your accounting knowledge, Jim asks you the following questions:

1: Why in your opinion did Jim’s accountant recommend the average cost method and what difference is there with the three other methods? Explain the main
characteristics of each method of valuation of the inventory and the consequences they may have on the valuation of the inventory and determination of the net
income in case of price fluctuation. (20 points)
2: Prepare an Income statement of the company at the end of February using as method of valuation of the inventory the average cost method, FIFO and LIFO for
each one of the products sold by Jim, and calculate the balance of the inventory at the end of the month. Explain the calculations. (40 points: 30 points for the
calculation and 10 for explanations)
3: In order to compare with the records made by his accountant, Jim asks you to prepare the different journal entries for the purchases and sales mentioned above
for each one of the 3 different methods used above. (15 points)
4: Jim’s accountant insisted that he should use a perpetual inventory system instead of a periodic inventory system and the average cost method for valuating the
inventory. Do you agree with this advice (justify your answer)? Would the balance of the inventory at the end of the month be the same? And the net income? (15
points)
5: Jim would like to know a forecast of the number of days to sell the inventory based on the results of the month of February. Explain your calculation and the
steps followed. (10 points: 5 for calculation and 5 for explanation)
6. Jim expects that the prices of the merchandises will dramatically decrease in the next future as a result of the Covid 19 crisis. Which method of valuation of the
inventory would you thus recommend to Jim? Explain your answer. (5 points)


0 0
Add a comment Improve this question Transcribed image text
Request Professional Answer

Request Answer!

We need at least 9 more requests to produce the answer.

1 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Accountancy
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
  • BUSINESS CASE (100 points) Jim has recently opened a dry fruits wholesale company dedicated to the...

    BUSINESS CASE (100 points) Jim has recently opened a dry fruits wholesale company dedicated to the sale of peanuts, almonds and pistachios. During its first month of activity, the company has made the following transactions: February 2: Purchase of Pistachios: 2.500kg@10$/kg $ 25.000 Purchase of Almonds: 4.000Kg @ 5$/kg $ 20.000 Purchas of Peanuts: 6.000Kg @ 3$/kg $ 18.000 February 3: Purchase of Pistachios: 1.500kg@12$/Kg $18.000 Purchase of Almonds: $ 12.000 2.000Kg @ 6$/kg 2.000Kg @ 4$/kg Purchas of Peanuts:...

  • Accountancy

    Calculate monthly C.O.G.S. assuming a 30% mark-up and the following 6 month’s sales figures:$4000, $4500, $5000, $6000, $7500, $7500.Repeat calculations assuming gross contribution margin of 40%.Assuming average monthly sales of $50,000 and average monthly C.O.G.S. of $30,000, calculate the expected level ofReceivables if average collection period is 55 days.Inventory if you plan on average 40 days on hand.Assuming annual sales of $250,000 and a 50% gross (contribution) margin, calculate the followingAverage collection period if ending receivables total $45,000Ending days-on-hand of...

  • 1.(10 Points) Match each of the following terms a through j with the appropriate definition A....

    1.(10 Points) Match each of the following terms a through j with the appropriate definition A. Specific identification method B. Days' sales in inventory C. Conservatism constraint D. Inventory turnover E. Retail inventory method F. Interim statements G. Net realizable value H. LIFO method I. Weighted average inventory methocd J. FIFO method The accounting constraint that aims to select the less optimistic estimate when two or more estimates are about equally likely. ー1 . 2. The expected sales price of...

  • 25. Match each of the following terms a through j with the appropriate definition (a) Specific...

    25. Match each of the following terms a through j with the appropriate definition (a) Specific identification method (b) Days' sales in inventory (c) Conservatism principle (d) Inventory turnover (e) Retail inventory method (1) Interim statements (g) Net realizable value (h) LIFO method (1) Weighted average inventory method () FIFO method (1) The accounting principle that aims to select the less optimistic estimate when two or more estimates are about equally likely. _(2) The expected sales price of an item...

  • Unit selling prices are provided in the excel file for units sold. What is the amount...

    Unit selling prices are provided in the excel file for units sold. What is the amount of gross profit The Widget Depot, Inc. will report for 2018? What amount of gross profit would the Widget Depot, Inc. have reported for 2018 if it accounted for inventory using FIFO instead of LIFO? Inventory Information Purchases Purchase Returns Units Sold Selling Product Units Cost/Unit Iotal Cost Units Cost/Unit Total Units Cost/Unit 45,000 50,000 Handy Widget 5500 10 55,000 9 405,000 2000 918,000...

  • Inventory Costing Methods Carrington Inc. reported the following information for the month of February: Inventory, February...

    Inventory Costing Methods Carrington Inc. reported the following information for the month of February: Inventory, February 1 63 units @ $26 Purchase: February 7 55 units @ $27 February 18 60 units @ $29 February 27 45 units @ $31 During February, Carrington sold 142 units. The company uses a periodic inventory system. Required: What is the value of ending inventory and cost of goods sold for February under the following assumptions. Assumption Cost of Goods Sold Ending Inventory 1....

  • Question:A perpetual Inventory System is used by Black Hawk, Inc. Thefollowing transactions show beginning...

    Question:A perpetual Inventory System is used by Black Hawk, Inc. The following transactions show beginning inventory, purchases and sales of CT-300, a cellular telephone for the month of May:May   1: Balance on hand, 20 units, cost $50 each          $1000May   5: Sale, 10 units, sale price $80 each                    $ 800May   6: Purchase, 20 units, cost $60 each                      $1200May 21: Sale, 15 units, Sale Price $100 each                  $1500Instruction:Record beginning inventory, purchases, cost of goods sold, and running balance on an inventory subsidiary...

  • Inventory Costing Methods Carrington Inc. reported the following information for the month of February: February 1...

    Inventory Costing Methods Carrington Inc. reported the following information for the month of February: February 1 Inventory 59 units @ $18 February 7 54 units @ $19 Purchase February 18 Purchase 60 units @ $21 February 27 Purchase 39 units @ $22 During February, Carrington sold 137 units. The company uses a periodic inventory system. Required: What is the value of ending inventory and cost of goods sold for February under the following assumptions. Assumption Cost of Goods Sold Ending...

  • Could you please answer 2 + 3 as they were wrong in the last post? Inventory...

    Could you please answer 2 + 3 as they were wrong in the last post? Inventory Costing Methods Carrington Inc. reported the following information for the month of February: Inventory, February 1 63 units @ $26 Purchase: February 7 55 units @ $27 February 18 60 units @ $29 February 27 45 units @ $31 During February, Carrington sold 142 units. The company uses a periodic inventory system. Required: What is the value of ending inventory and cost of goods...

  • Weighted Average Cost Flow Method Under Perpetual Inventory System The following units of a particular item...

    Weighted Average Cost Flow Method Under Perpetual Inventory System The following units of a particular item were available for sale during the calendar year: Jan. 1 Inventory 30,000 units at $30.00 Mar. 18 Sale 24,000 units May 2 Purchase 54,000 units at $31.00 Aug. 9 Sale 45,000 units Oct. 20 Purchase 21,000 units at $32.10 The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT