Question

1 4. Beginning inventory and purchases and sales data for Commodity "X" for the month of July are as follow Inventory 25 units Br 50 Sales July 7 15 units rss 18 10 G Br 58 27 12 units Br 62 Purchases 20 units 51 20 15 units 52 1) Compute the cost of ending inventory and cost of goods sold using FIFO and AVC under a) Periodic inventory system b) Perpetual inventory system 2) Pass the necessary journal entry to record purchase, sale and end of year adjusting entry 5. Sun Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work. The accountant was assigned to totul a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Sun Corporation gave the machine plus Br 320 to Moon Company (dealer) in exchange for a new nuachine. Assume the following information about the machines. Moon Co. Br 1700 Machine cost Accumulated depreciation Fair value Required: Sun Corp. Br 2600 1-400 850 1400 a) Assuming the exchange has commercial substance, compute the cost of the new asset and pass the joumul entry to record the exchange for both Companies b) Assuming the exchange lacks commercial substance, compute the cost of the new asset and press the journal entry to record the exchange for both Companies f. Assume that Glory Company applies revaluation at the end of December 31. year to Building purchased on June 1. year 7 for Blir 2,000,000. The Building has a useful life of 20 years and no residual value. Required: a) Record adjusting entry for depreciation on December 31. year 7 using straight line method b) At the end of year 7. independent appraisers determine that the asset has a fair value of Birr 1.980.000 record the equipment at fair value c) At the end of year *, independent appraisers determine that the asset hus a fair valore of Bier 1.775.000 at the end of Year 8 record the equipment at fair value. d) At the end of year 9. independent appraisers determine that the asset hus a fair value of Birr 2.100.000 at the end of Year 9, record the equipment aut fair value.

Answer 1

Answer-4:

Periodic Inventory System:
Computation of Cost of goods sold-FIFO
Jul.01	Beginning inventory-25 units @ Br 50 p.u	1,250
Jul.03	20 units purchased @ Br 51 p.u	1,020
Jul.20	15 units purchased @ Br 52 p.u	780
Total cost of goods available for sale	3,050
Less:	Cost of goods in ending inventory	1,188
Total cost of 3,150 units sold	1,862
Computation of Ending inventory at July 31 under FIFO
Jul.03	8 units @ Br 51 p.u	408
Jul.20	15 units @ Br 52 p.u	780
Total	1,188

Average Cost Method (AVC):
	Unit	Unit Cost	Total
Jul.01 Beginning inventory	25	50	1,250
Jul.03 purchase	20	51	1,020
Jul.20 purchase	15	52	780
	60	50.83	3,050
Cost of goods sold (15 + 10 + 12) * Br 50.83	1,881
Ending inventory (23 * Br 50.83)	1,169

PERPETUAL INVENTORY RECORD-FIFO
Date	Purchase	Cost of goods sold	Inventory on hand
Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jul.01							25	50	1,250
Jul.03							25	50	1,250
20	51	1020				20	51	1020
Jul.07				15	50	750	10	50	500
						20	51	1020
Jul.18				10	50	500	20	51	1020
Jul.20							20	51	1020
15	52	780				15	52	780
Jul.27				12	51	612	8	51	408
							15	52	780
TOTAL						1862

Cost of goods sold = Br 1,862

Ending inventory = Br 1,188

PERPETUAL INVENTORY RECORD-AVC
Date	Purchase	Cost of goods sold	Inventory on hand
Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jul.01							25	50.00	1,250
	20	51	1020				45	50.44	2270
Jul.07				15	50.44	757	30	50.44	1513
Jul.18				10	50.44	504	20	50.44	1009
	15	52	780				35	51.11	1789
Jul.27				12	51.11	613	23	51.11	1176
TOTAL						1874

Cost of goods sold = Br 1,874

Ending inventory = Br 1,176