2019T3 PQ_Ans_Wk9.pdf - UNSW Business School School of Accounting ACCT1501 Accounting and Financial Management 1A Term 3 2019 TUTORIAL WEEK 9 Solutions

2019T3 PQ_Ans_Wk9.pdf - UNSW Business School School of...

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1 TUTORIAL WEEK 9 Solutions to Preparation Questions Preparation Questions: ° DQ9.1, DQ9.3, DQ9.9, P9.1, P9.2, P9.4, P9.10, P9.12 ° DQ10.2, DQ10.5, DQ10.6, P10.2, P10.4, P10.6, P10.15, P10.16 DQ9.1 The periodic inventory system is a method of calculating inventory that uses data on beginning inventory, additions to inventory and an end-of-period count to deduce the cost of goods sold. No records are maintained for individual inventory items. By contrast, the perpetual inventory system is a method of controlling inventory that maintains continuous records on the flow of units of inventory. DQ9.3 Under the perpetual inventory system, it is necessary to make an assumption regarding the flow of costs through the business, for example, whether the first items acquired are the first ones sold or whether ending inventory and cost of goods sold are composed of a mixture of old and new items. At the time of sale a record is made of the cost price of the goods based on the cost flow assumption. Thus, the accounting records provide a record of the cost of goods sold. However, under the periodic inventory system there is no continuous record of cost of goods sold. At the end of the accounting period, this is calculated by adding purchases for the period to opening inventory and then deducting closing inventory. DQ9.9 FIFO, weighted average and LIFO are assumptions made about the order in which units of inventory flow through the business. FIFO assumes that the first items acquired are the first ones sold and, therefore any ending inventory on hand consists of the most recently acquired units. Thus the older costs will appear in cost of goods sold and the more recent costs on the balance sheet. Weighted average assumes that ending inventory and cost of goods sold are composed of a mixture of old and new units. LIFO assumes the opposite of FIFO. Recent costs will appear in cost of goods sold and the older costs in the balance sheet. The three methods will give similar profit figures if inventory prices are fairly constant. They would give identical profit figures if cost prices of opening inventory and purchases remain unchanged throughout the financial period. UNSW Business School School of Accounting ACCT1501 Accounting and Financial Management 1A Term 3 2019
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2 P9.1 1 FIFO: In Out Balance Date # $ per $ # $ per $ # $ per $ 1 July 300 6.00 1 800.00 300 6.00 1 800.00 8 July 50 6.00 300.00 250 6.00 1 500.00 12 July 150 6.00 900.00 100 6.00 600.00 13 July 500 5.00 2 500.00 100 6.00 600.00 500 5.00 2 500.00 20 July 100 6.00 600.00 300 5.00 1 500.00 200 5.00 1 000.00 22 July 100 5.00 500.00 100 5.00 500.0 24 July 200 4.00 800.00 100 5.00 500.00 200 4.00 800.00 29 July 100 5.00 500.00 50 4.00 200.00 150 4.00 600.00 COGS 4 500.00 Sales 200 @ $7 1 400 400 @ $6 2 400 100 @ $5.50 550 150 @ $5 750 5 100
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  • Three '09
  • Helen
  • Expense, COGS, Cost of Goods

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