Solution-Final-F08 - CONCORDIA UNIVERSITY DEPARTMENT OF...

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CONCORDIA UNIVERSITY FINANCIAL ACCOUNTING DEPARTMENT OF ACCOUNTANCY COMM 217 ALL SECTIONS SUGGESTED SOLUTION FINAL EXAMINATION Fall 2008 Question 1 (21 marks) Multiple-choice (1.5 marks per correct answer) 1. c 2. c 3. c 4. b 5. b 6. d 7. a 8. c 9. d 10. c 11. b 12. b 13. c 14. d
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QUESTION 2 (20 marks) Req. 1 (5 marks) # units Unit Cost Total Cost Beginning inventory Jan. 1 5,000 $1.40 7,000 Purchase March 5 5,000 $1.60 8,000 Purchase Sept. 30 2,500 $2.00 5,000 Total available for sale 12,500 20,000 Weighted Average Cost = $20,000 / 12,500 units = $1.6 per unit Ending inventory (periodic, WAC): Number of units on hand = units available for sale – units sold = 5,000 + 5,000 + 2,500 – 8,000 – 2,500 = 2,000 units Cost of the ending inventory = 2,000 x $1.6 = $3,200 Cost of goods sold (periodic , WAC): Number of units sold = 8,000 + 2,500 = 10,500 COGS = 10,500 x WAC = 10,500 x $1.6 = $16,800 Or COGS = Cost of goods available for sale – Ending inventory = $20,000 – $3,200 = $16,800 Gross profit (periodic, WAC) : Sales = ( 8,000 x $4.50) + (2,500 x $4.80) = $36,000 + 12,000 = $48,000 Gross profit = Sales – COGS = $48,000 – 16,800 = $31,200 Req. 2 (2 marks) The gross profit will be higher if Janet Corporation used the FIFO method. The reason is that the weighted-average cost method produces a higher cost of goods sold than FIFO when unit costs are rising. Req. 3 (5 marks) (a) March 5 Purchases . ...................................................................................... 8,000 Cash (5,000 x $1.60). .............................................................. 8,000 (b) June 21 Cash . .............................................................................................. 40,680 Sales (8,000 x $4.50 ). ............................................................ 36,000 GST payable ($36,000 x 5%). ................................................. 1,800 PST payable ($36,000 x8%). .................................................. 2,880 Req. 4 (4 marks) 2
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The journal entries for transactions (a) and (b) will be different from those above if Janet Corporation uses a perpetual inventory system and the moving weighted-average cost method (1 mark). The differences are as follows: 1. For transaction (a), purchases would be debited to the “Inventory” account instead of the
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Solution-Final-F08 - CONCORDIA UNIVERSITY DEPARTMENT OF...

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