Exam 5: The Purchase and Sale of Inventory

Buy & Large,Inc.'s inventory activity in May was: Required: 1.What is the cost of goods sold for the May 18 sale using the weighted average (WA)cost flow method? 2.What is the cost of goods sold for the May 18 sale using the FIFO cost flow method? 3.Select which method is correct by choosing WA or FIFO,or Same,if both methods give the same result.

Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final,correct copy of the problem.Each team should turn in only one copy of the problem for grading.All team members will receive the same grade. Part A: Enter Tim's Tams,Inc.'s May transactions and adjustments in the accounting equation. 1.May 1 Paid $600 cash for 3 months of insurance coverage beginning May 1. 2.May 2 Collected $8,000 from customers for sales made in April. 3.May 6 Paid $7,200 of accounts payable from April purchases. 5.May 8 Paid $300 cash for supplies. 7.May 31 Tim's Tams declared and paid a $400 cash dividend to its shareholder. 10.May 31 Counted the office supplies and found that $100 of supplies have not been used. Part D: Complete the financial statement. Part E: Complete the financial statement. Part F: Using the Tim's Tam financial satatements,answer the following:

On June 1,beginning inventory consists of ten items that cost $100 each.On June 8,ten more items are purchased at $120 each.On June 12,fifteen items are sold for $200 each.On June 28,ten items are purchased at $130 each.Using perpetual LIFO,cost of goods sold for the month ended June 30 equals ________.

On May,2,Breyer,Inc.purchases $25,000 of merchandise from a vendor with credit terms of 2/10,n/30.If Breyer pays the vendor on May 10,the amount of the payment should be ________.

An error in ending inventory in 2011 will cause ending inventory in 2012 to be misstated as well.

Philipsburg Corporation sells mugs to fine retailers around the world.It uses a FIFO perpetual inventory system.Inventory data is presented in the table below. Determine gross profit for the period,assuming that 1,000 units were sold for $170 each.Operating expenses excluding cost of goods sold totaled $40,000.

On February 12,Horseshoe Bend Company purchases $25,000 of merchandise from a vendor with credit terms of 2/10,n/30.If Horseshoe Bend pays the vendor on February 21,the amount of the payment should be ________.

Credit terms of 2/10,n/30 provide for a 10 percent discount if the buyer pays within 30 days.

A company with a perpetual inventory system purchases inventory on account.What is the effect of this transaction on the accounting equation?

Niteco Company ended its fiscal year with inventory recorded at its cost of $10,000.Niteco believes it will be able to sell the inventory for approximately $12,000.Due to changes in the market,Niteco would be able to replace this inventory for $9,000.How much should Niteco show for inventory on its year-end balance sheet?

On February 12,Horseshoe Bend Company purchases $25,000 of merchandise from a vendor with credit terms of 2/10,n/30.On February 15,Horseshoe Bend Company returns $5,000 of the goods because they are defective.If Horseshoe Bend pays the vendor the full amount due on February 20,the amount of the payment is ________.

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a FIFO perpetual inventory system. Determine the cost of goods sold.

Rigby Company buys merchandise from Shoshone Company with an invoice cost of $10,000 and shipping terms of FOB destination.The freight costs amount to $7,000.Which of the following statements is TRUE?

Newcastle Company has the following inventory data for the current period: Assume that the ending inventory is overstated by $5,000.What is the effect on the current period's net income and on the following period's net income?

On December 12,Occident,Ltd.,a company in Singapore,ordered merchandise from San Francisco Exports.The merchandise was shipped to Occident on December 29,FOB destination.The merchandise arrived at Occident's warehouse on February 1.Occident paid for the merchandise on March 2.When should Occident record the purchase?

Net sales equals ________.

The accountants for Gonzalez Furniture Imports need to estimate the ending inventory balance so that they can prepare quarterly financial statements.The accountants have gathered the following information: Required: Use the gross profit method to estimate the ending inventory.

Inventory data for Army & Navy Wear Co.are provided below.Sales for the quarter were 220 units sold for $12 each. Required: 1.Calculate the cost of goods sold for the quarter assuming the company uses a FIFO perpetual inventory system. 2.Calculate the cost of goods sold for the quarter assuming the company uses a LIFO perpetual inventory system. 3.Which system (perpetual or periodic)do you think is increasing in use because of computer technology?