HMsolotion-ch8 - Chapter 8 Homework Solution and etc ES-l...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 8 Homework Solution and etc. ES-l: Perpetual Inventory System 1. To record purchase Inventory............................... 5‘000 Accounts payable 1000 Inventory............................... 300 300 Note thut no smaeiui uecountsfiir expenditures thut shouid he ineiuded in inventory cost are used under the perpetuui inventory .S‘IYSH’HL 2. To record purchase return Accounts payable. Inventory 3. To record sales Cash Sales revenue 5200 Cost of goods 1300 Inventory.......................... 2‘800 600 ES-Z: Periodic Inventory System 1. To record purchase Purchases 5‘000 Accounts payable 5‘000 Freight—in 300 300 Note thut u speeiui uceountr is ereutedfiar every expenditure thut shouid or .s‘houid not he inriuded in inventory under the perpetuoi inventory system, eg. freigt'tt—in, purehus‘e returns urtd criion-unt'es, purchase discount, etc'. 2. To record purchase return Accounts payable.................. 600 Purchase returns 600 3. To record sales Cash 5200 Sales revenue............... 5200 Note that no cost ofgoods .s'oid i 5‘ recorded under the periodic inventory system. E 8-3 Determine and Record Cost of Goods Sold for Periodic Inventory System 1. Calculate COGS: Beginning inventon $ 32,000 + Purchases $240,000 — Purchase discounts {(1000) — Purchases returns ( l0‘000] + Freight—in l7‘000 24 | ‘000 Cost of goods available for sale 273,000 7 Ending inventory £40000] Cost of goods sold $233,000 Note thut this is‘ u very hc'tndy 'iforutuiu". You might want to "nwntoriy" it. 2. Record COGS COGS .................................. .. 233,000 Purchase discounts................ 6,000 Purchase returns .................. .. 10,000 Inventory ............................. .. 8,000 (:15! 40,000 4 Bi 32,000) Purchases . 240,000 Freightein ....................... .. |7,000 ES-S: Purchase Discounts 1. Cross Method N ntc that trade discount should not be recorded. The acttiatr transaction price is $500 per unit it i 00 units .r 70% : $35, 000. Make sure you don ’t confuse trade discounts with cash discounts. November 17 Purchases ............................ .. 35,000 Accounts payable .......... .. 35,000 If paid on November 26 (i. 4’. within 1 0 days tgfparchasc. Tracy needs to pay $35,000 7 33549001295 : $34,300 only. J Accounts payable ................ .. 35,000 Cash .............................. .. 34,300 Purchase discounts ......... .. 700 Note that Purchase discounts is a contra purchases account. If paid on December I5 (if. after IO days afpnrchasc. Tracy needs to pay $35,000) Accounts payable........... 35,000 Cash .............................. .. 35,000 2. Net Method November 17 Purchases 34,300 (:35,000 — 35,000.1290 Accounts payable .......... .. 34,300 If paid on November 26 t i. 3. within 10 days t'tfparchasc. Tracy needs to pay $34,300) Accounts payable ................ .. 34,300 Cash .............................. .. 34,300 If paid on December I5 (if. after 10 days afpnrchasc. Tracy ncca's tr) pay $35,000) Accounts payable ................ .. 34,300 Interest expense ................... .. 700 Cash .............................. .. 35,000 ES-lD: Goods in transit and goods on consignment |. Raymond is the buyer and it is f.o.b. destination. Title is transferred to Raymond when the goods arrive on January 2, 2007. Raymond should not include the $30,000 goods in its 2006 inventory. Therefore, correct inventory should be $30,000 less. . Raymond is holdingY the inventory as a consignee. Raymond should not include the $|4,000 merchandise in its 2006 inventory. Therefore, correct inventory should be $|4,000 less. . Raymond is the seller and it is f.o.b. shipping point. Title is transferred to the buyer when the goods are shipped on December 29, 2006. Raymond did not include the $6,000 goods in its inventory. No adjustment is needed. 4. Raymond is the consignor. The $15,000 merchandise belongs to Raymond and should be included in its 2006 inventory. Therefore, inventory should be $| 5,000 more. Correct inventory : $2 | 0,000 — 30,000 from ( | ) — |4,000 from (2) + 15,000 from (4) : $181,000. Ix.) la.) 1...) ES-l 1: Inventory cost flow methods under the periodic inventory system Note that for the periodic inventory system, DO NOT pay attention to the dates sales were made because E1 (and thus COGS) is counted at year end. 1. FIFO: first purchases are assumed sold first Total units sold 2 8,000 + 7.000 = 15,000 COGS : 2,000 (BI) x $6.10 + 10,000 (8/8 purchase] x $5.5 + 3,00018/18 purchase1x $5 : EI has 3,000 units and they should be from the latest purchases: 3,000 (8/18 purchase1x $5 = Note that COGAFS = BI 2,000 it $0.10 + 8/8 purchase 10,000 x $5.5 + 8/18 purchase 6,000 x $5 : $97,200 : COGS $82,200 + EI $15,000 2. LIFO: latest purchases are assumed sold first New Ihur since inventoryprices were going (hm-n, we shanhr’ewec’r COGS be lower and E] be higher under UFO Ihun under FIFO. Total units sold : 8,000 + 7.000 : 15,000 COGS = (5000 (8/18 purchase) x $5 + 9,000 (8/8 purchase) x $55 = EI has 3,000 units and they shouch be from the earliest purchases: 2,000 {BI} is $6.1 + 1,000 (8/8 purchase) x $5.5 : Again, COGS $79,500 + E1 $17,700 : COGAFS $97,200 Note also that COGS under LIFO, $79,500 < COGS under FIFO $82,200, and EI under LIFO $17,700 > El under FIFO $15,000 5,; . Average cost: Average unit cost : COGAFS + units of GAFS COGAFS : $97,200 Units of GAFS : BI 2,000 + 8/8 purchase 10,000 + 8/18 purchase 6,000 : 18,000 units Average unit cost : $97,200 + 18,000 : $5.40 per unit COGS : 15,000 units sold x $5.4 : _ and EI : 3,000 units not sold x $5.4 : m Again, COGS + E1: COGAFS ES- 12: Inventory cost flow methods under the perpetual inventory system Note that for the perpetual inventory system, we have to keep track of the dates the sales were made! |. FIFO It‘s clearer to see the calculation from the following table: COGS Ending Inventory m m Units in Total Units in Total % 8/1 BI 2.000 $6.10 $12,200 (8/1) ____ 2.000 $6.10 $12,200 (8/1) 8/8 Purchase ,_---""'T ,_,-10,000 $5.50 $55,000 (8/8) 8/ | 4 Sale 2,0004" ' 5 ' $9.,L0 : $12,200 4,000 $5 .50 $22,000 (8/8] 6,000‘*"‘$5.50 $33,000 “fig-4,000 $5.50 $22,000 (8/8) 8/18 Purchase _.--—""'— _,-—-"(:»,000 $5.00 $30,000 (8/18) 3/25 Sale 4000 *::s5-50r—$2'2',000 3,000 3,000" $5.00 $15,000 Endmg Irw. Note that the amounts of COGS and EI under perpetual FIFO are the same as the amounts under periodic FIFO. 2. LIFO COGS Ending Inventory m m Units E Total Units M Total Date 8/1 El 2000 $6.|0 $12,200 (Bill 2000 $6. | 0 $12,200 {Bil} 8/8 Purchase _ ,,,,,,, "10.000 $5.50 $55,000 [8/81 8H4 Sale 8000 4“Ail—$5.50 $44,000 2,000 $6.10 $12,200 [Sill 2,000 $5.50 $| |,000 (8/81 2,000 $6. | 0 $12,200 (SH) _,.-2,000 $5.50 $11,000 (SIS) 8H8 Purchase 4,-;:Z:::-—-'6.000 $5.00 $30,000 (8.08) 8/25 Sale 6,000¢;'_1'—$5’.'00 $30,000 2,000 $6.10 $12,200 (Bil) "000 $5.50 $5500 1000 $5.50 $5.500 (8/8) COGS = $79,500 EI = $17,700 Note that it is by coincidence that the amounts of COGS and EI under perpetual LIFO are the same as the amounts under periodic LIFO. Usually, they are different! 3. Average Cost Note that the unit average cost changes when a new purchase is made. COGS Ending Inventory Unit Unit cost Total E Total 8/I BI 2,000 units @ 6.10 2000 $6. I0 $12.200 8.18 Purchase 10,000 units @ 5.50 12000 $5.60 $67,200 Average mst : [B] 312,200 + Purchases $5.51 [0,0001% (81' 2,000 units + Punjgasezr-{fiffltltl units) : $67,200+12,000mtit.r : $5.60 per unit _ ,. z— " ‘ ‘1' 004 Sale 3000 units 3,000 $5.00 $44300 4.0000.-.$5.00-—$22,400 8H8 Purchase 6000 units @ 5,00 -------------------- H X, 10000 $5.24 $52.400 A reruge cost = {Lust E! 322,400+ Purchases 35.0 .1 6,000).—’ (Mr! E! 4,000 units :1; Punfft'tires 6,000 units} = $52,400 .—' 10,000 units = $5. 24 per unit __ -— » —' ' ' " 3/25 Sale 7000 units 7:000 $5.24 $50,030 3000 $5.24 COGS = The following are not assigned homework problems. E 3-16 1. d The $90,000 merchandise should be included because the company is a buyer and the term is f.o.b. shipping point. The goods were shipped on 12/301‘2006. The $120,000 merchandise should be included in inventory because the company is the buyer and the term is f.o.b. shipping point. The goods were not shipped until 04/2007. $|,500,000 + 90,000 + 120,000 : $1,710,000 2. b Note that Metor uses the perpetual inventory system. Endmg Inv. The average unit cost afterthe 1/7 purchase Total units Total costs 1,000 BI x$l : $1,000 600 urchase on If? x '3 : 1,300 Total units : 1,600 $2,300 30, average unit cost : $2,300 + 1,600 : $1.75 900 units were sold on U20. Therefore, there were 1,600 7 900 : 7'00 units left with a total cost of$l .75 x 700: $1,225 The total cost of inventory after the purchase on 1/25 = $1,225 + 400 units x $5 per unit = $3,225 . b Under perpetual LIFO, 600 ofthe 1/7 purchase are all sold and 300 units from the B] are sold as well. Therefore, E1211,000— 300 : 700 Bl) x $1 + 400 x $5 from the 1/25 purchase : $2,700. 4. a “Purchase discount not taken" is the “Interest expense” used in this book. There will be “Interest expense” is an other expense account and should not be included in the cost of inventory. [.3 E 3-23 1. c. For FIFO, the perpetual figures are the same as periodic FIFO figures. Therefore, it will be much easier to just do periodic FIFO. Total units in E1 = BI 3,200 + 3,400 from March 4th purchase + 3,500 from March 25 purchase 4 3.600 sold on March 14 and 3,450 sold on March 28 = 3.050 units. Under FIFO. EI from the latest purchases. So. SE] = 3,050 units from the March 25 purchase x $66 : $201,300. L.) a. The ending inventory consists of 3.050 units. Under the periodic LIFO method, those units are valued at the oldest prices for the period, which is $64.30 ofthe beginning inventory. Multiplying $64.30 times 3,050 units produces a total inventory value of $19e| I5. 3. :1. Under the perpetual LIFO method, the company begins with 3,200 units at $64.30. To this is added the March 4 purchase of 3,400 units at $64.75. The March 14 sale uses all of the March 4 purchase and 200 of the original inventory units. Thus, the firm is left with 3,000 units at $64.30. The March 25 purchase of 3,500 at $66 is added to the previous 3,000 units. The March 28 sale of 3,450 units comes entirely from the March 25 purchase, leaving just 50 of those units at $66 each. Thus, at the end of the month, the inventory consists of two layers: 3,000 units at $64.30 ($192,200), and 50 units at $66 ( 3,300). Adding the two together produces a total ending inventory of $196,200. ...
View Full Document

This note was uploaded on 11/28/2009 for the course BUSINESS acct 3211 taught by Professor Lin during the Winter '09 term at Calhoun Community College.

Page1 / 5

HMsolotion-ch8 - Chapter 8 Homework Solution and etc ES-l...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online