Introduction:
The first in, first out (FIFO) method of
The average cost method is an inventory costing method in which the cost of every thing in an inventory is determined on the basis of the average cost of every comparative great in the inventory. The average cost method is determined by partitioning the cost of products in inventory by the absolute number of things accessible available to be purchased.
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Compute ending inventory and cost of goods sold using the FIFO, LIFO and average cost method.
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Cornerstones of Financial Accounting
- CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT In addition to developing online fan communities, Cam and Anna believe that they could increase Front Row Entertainments revenue by selling live-performance DVDs at the concert. Front Row records the following activity between May and August 2019 for one of its artists: Front Row sells all of its DVDs for $15 each and uses a perpetual inventory system. Required: Discuss the advantages and disadvantages of each method.arrow_forwardOn January 5, 2019, ShoeKing Corp. sells for cash 500 pairs of volleyball shoes to FootAction, a shoe retailer, for 70 each. FootAction has the right to return the shoes for any reason up to March 31, 2019, for a full refund. The cost of each pair of shoes is 32. ShoeKing predicts that it is probable that 40 pairs of the shoes will be returned. ShoeKing uses the perpetual method for inventory. Required: 1. Prepare ShoeKings journal entry on January 5, 2019, to account for this transaction. 2. Assume that FootAction returns 35 pairs of shoes on March 31, 2019. Prepare the journal entry to record this return.arrow_forwardRecording Sale and Purchase Transactions Alpharack Company sells a line of tennis equipment to retailers. Alpharack uses the perpetual inventory system and engaged in the following transactions during April 2019, its first month of operations: a. On April 2, Alpharack purchased, on credit, 360 Wilbur T-100 tennis rackets with credit terms of 2/10, n/30. The rackets were purchased at a cost of S30 each. Alpharack paid Barker Trucking $195 to transport the tennis rackets from the manufacturer to Alpharacks warehouse, shipping terms were F.O.B. shipping point, and the items were shipped on April 2. b. On April 3, Alpharack purchased, for cash, 115 packs of tennis balls for $10 per pack. c. On April 4, Alpharack purchased tennis clothing, on credit, from Designer Tennis Wear. The cost of the clothing was $8,250. Credit terms were 2/10, n/25. d. On April 10, Alpharack paid for the purchase of the tennis rackets in Transaction a. e. On April 15, Alpharack determined that $325 of the tennis clothing was defective. Alpharack returned the defective merchandise to Designer Tennis Wear. f. On April 20, Alpharack sold 1 18 tennis rackets at $90 each, 92 packs of tennis balls at $12 per pack, and $5,380 of tennis clothing. All sales were for cash. The cost of the merchandise sold was $7,580 and no sales returns are expected. g. On April 23, customers returned $860 of the merchandise purchased on April 20. The cost of the merchandise returned was $450. h. On April 25, Alpharack sold another 55 tennis rackets, on credit, for $90 each and 15 packs of tennis balls at $12 per pack, for cash. The cost of the merchandise sold was $1,800. i. On April 29, Alpharack paid Designer Tennis Wear for the clothing purchased on April 4 minus the return on April 15. j. On April 30, Alpharack purchased 20 tennis bags, on credit, from Bag Designs for $320. The bags were shipped F.O.B. destination and arrived at Alpharack on May 3. Required: 1. Prepare the journal entries to record the sale and purchase transactions for Alpharack during April 2019. 2. Assuming operating expenses of $8,500 and income taxes of $1,180, prepare Alpharacks income statement for April 2019.arrow_forward
- O'Brien Company is a manufacturer of purses. They sell products to Maureen, Inc., a women's clothing store. Both companies use perpetual inventory systems. On June 2, 2020, O'Brien Company sold 400 purses on account to Maureen, Inc. O'Brien's cost was $40,000 ($100 each) and the selling price was $60,000 ($150 each) with terms of 1/15, n/30. Maureen paid O'Brien on June 8, 2020 for the June 2 transaction that had terms of 1/15, n/30. Question 5 of 8 What follows is a fill in the blank question with 21 blanks. Prepare the June 8 journal entry(ies) for O'Brien Company. Date Account Names DR CR 6/8 Blank 1. Fill in the blank, read surrounding text. Blank 2. Fill in the blank, read surrounding text. Blank 3. Fill in the blank, read surrounding text. Blank 4. Fill in the blank, read surrounding text. Blank 5. Fill in the blank, read surrounding text. Blank 6. Fill in the blank, read surrounding text. Blank 7. Fill in the blank, read surrounding text.…arrow_forwardSee Through Incorporated retails hand blown glass vases and uses a perpetual inventory system. A statement of their purchases and sales of these vases for the month of June 2019 is given below. June 1 Opening stock of 30 vases valued at a total cost of$27,000. June 3 Purchased 45 vases at a cost of $980 each. June 5 Sold 55 vases at $1,600 each. June 6 Purchased 70 vases at $1,200 each but a trade discount of 3% was received. June 10 Sold 60 vases for $114,000. June 14 Purchased 80 vases at $1,100 each but additionally there was a shipping cost of $200 per vase. June 18 Sold 65 vases for $2,300 each. June 23 Purchased 75 vases at a total cost of $108,750. June 25 5 of the vases last sold were returned, as the customer purchased an incorrect quantity. June 27 Sold…arrow_forwardDenise’s Boutique uses the perpetual inventory method for its wristlet purses. It has provided the following inventory information for October: Oct. 1 On hand, 40 units @ $20 each $ 800Oct. 8 Purchased 200 units @ $21 each 4,200Oct. 14 Sold 190 units @ $50 each 9,500Oct. 19 Purchased 100 units @ $27 each 2,700Oct. 28 Sold 120 units @ $50 each 6,000 Denise’s Boutique has a 30% effective income tax rate. A. How much is the cost of ending inventory at October 31 and the cost of goods sold for Octoberusing FIFO?B. How much is the cost of ending inventory at October 31 and the cost of goods sold for Octoberusing LIFO?C. How much will Denise’s Boutique save in income taxes if it uses LIFO?D. Calculate Denise’s Boutique’s inventory-on-hand period under both LIFO and FIFO.arrow_forward
- How much is the premium inventory (prepaid expense) reported as of December 31, 2021 With the goal of attracting as much customers as possible in the CAR region, LISA Appliance Co. engaged in a customer satisfaction program and marketing strategy for two of their major lines of products: (1) electrical appliances and (2) household and office furniture. All branches in the region are participating in the company’s promotions. In the customer satisfaction program, LISA provides one-year warranty replacement of parts and labor of the electrical appliances sold. Based on past experience, the estimated warranty cost is 3% of sales. During 2021, total sales of electrical appliances was ₱7,200,000. Replacement parts and labor for warranty work totaled ₱184,000 during 2021. In the company’s marketing strategy for the household and office furniture section, customers are given a coupon for every ₱1,000 spent on these items. Customers may exchange 10 coupons plus ₱500 for a “hot and cold” water…arrow_forwardAll Things Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries of the “DieHard” brand at a total cost of $168,200. The following transactions, relating to the “DieHard” brand were completed during the quarter:October 5: Purchased 15 batteries at a cost of $17,020 each.October 14: Sold 18 batteries at $22,250 per batteryOctober 22: Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount.November 10: Sold 15 batteries to Orion Auto Ltd and 10 batteries to Brown’s Auto Detailing at a price of $23,990 each.November 12: Owing to an increased demand for this brand of batteries, 30 batteries were purchased on account at a cost of $17,612 each. In addition, All Things Auto paid $288 in cash on eachbattery to have the inventory shipped from the vendor’s warehouse to their location.November…arrow_forwardYou have just graduated with a business diploma in management and have been hire as the inventory management and have been hire as the inventory manager for a local sporting goods store. Your first task is to review and assess the following information: 2023 2022 Cost of merchandise sold to customers in sales transactions $480,000 $320,000 Merchandise inventory balance, beginning of year ? 84,000 Invoice cost of merchandise purchases 510,000 240,000 Shrinkage determined at end of year 2,500 14,000 Cost of transportation-in 25,500 12,000 Cost of merchandise returned by customers and restored to inventory 115,000 22,400 Purchase discounts received…arrow_forward
- Question: Assume a Watercrest Sports outlet store began October 2020 with 47 pairs of water skis that cost the store $38 each. The sale price of these water skis was $67. During October, the store completed these inventory transactions: 1. The preceding data are taken from the store’s perpetual inventory records. Which cost method does the store use? Explain how you arrived at your answer. 2. Determine the store’s cost of goods sold for August under the periodic inventory system. Assume the FIFO method. The Answer: Cost of goods sold: (image) For the part, Sales [(47 units x $67)+(44 units x $68)] I don't understand what is in bolded, please explain where you get the numbers incuding the ones in dollars please. 3. What is the cost of the store’s October 31 inventory of water skis? The Answer: Cost of October 31 inventory (39 × $40) + (24 × $42) Please explain what is in bolded, how you get those numbers including the ones in dollars, because I don't understand.arrow_forwardAll Things Auto is retailers who purchase and sell vehicle parts & accessories, including batteries. The business uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries of the “DieHard” brand at a total cost of $168,200. The following transactions, relating to the “DieHard” brand were completed during the quarter: October 5 Purchased 15 batteries at a cost of $17,020 each. October 14 Sold 18 batteries at $22,250 per battery October 22 Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount. November 10 Sold 15 batteries to Orion Auto Ltd and 10 batteries to Brown’s Auto Detailing at a price of $23,990 each. November 12 Owing to an increased demand for this brand of batteries, 30 batteries were purchased on account at a cost of $17,612 each. In addition, All Things Auto paid $288 in cash on each battery to have the inventory shipped from the vendor’s warehouse…arrow_forward
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