1 answer

P5-3A Presented here are selected transactions for Norlan Inc. during September of the current year. Norlan...

Question:

P5-3A Presented here are selected transactions for Norlan Inc. during September of the current year. Norlan uses a perpetual inventory system.

Sept.   2

Purchased equipment on account for $65,000, terms n/30, FOB destination.

3

Freight charges of $950 were paid by the appropriate party on the September 2 purchase of equipment.

4

Purchased supplies for $4,000 cash.

6

Purchased inventory on account from Hillary Corp. at a cost of $65,000, terms 1/15, n/30, FOB shipping point.

7

Freight charges of $1,600 were paid by the appropriate party on the September 6 inventory purchase.

8

Returned damaged goods costing $5,000 that were originally purchased from Hillary on September 6. Received a credit on account.

9

Sold goods costing $15,000 to Fischer Limited for $20,000 on account, terms 2/10, n/30, FOB destination.

10

Freight charges of $375 were paid by the appropriate party on the September 9 sale of inventory.

17

Received the balance due from Fischer.

20

Paid Hillary the balance due.

21

Purchased inventory for $6,000 cash.

22

Sold inventory costing $20,000 to Kun-Tai Inc. for $27,000 on account, terms n/30, FOB shipping point.

23

Freight charges of $500 were paid by the appropriate party on the September 22 sale of inventory.

28

Kun-Tai returned goods sold for $10,000 that cost $7,500. The merchandise was restored to inventory.

Instructions

(a) Record the September transactions on Norlan’s books.

(b) Assume that Norlan did not take advantage of the 1% purchase discount offered by Hillary Corp. and paid Hillary on October 3 instead of September 20. Record the entry that Norlan would make on October 3 and determine the cost of missing this purchase discount to Norlan.

P5-12A Data for Norlan Inc. are presented in P5–3A.

Instructions

(a) Record the September transactions on Norlan’s books, assuming it uses a periodic inventory system instead of a perpetual inventory system.

(b) Assume that Norlan did not take advantage of the 1% purchase discount offered by Hillary Corp. and paid Hillary on October 3 instead of September 20. Record the entry that Norlan would make on October 3 and determine the cost of missing this purchase discount to Norlan.

P6-4A Sandoval Skateshop Ltd. reports the following inventory transactions for its skateboards for the month of April. The company uses a perpetual inventory system.

Date

Explanation       

Units

Unit Cost

Total Cost

Apr. 1

Beginning inventory

30

$50

$1,500

6

Purchases

15

 45

   675

9

Sales

(35)

14

Purchases

20

 40

   800

20

Sales

(25)

28

Purchases

20

 35

   700

Instructions

(a) Determine the cost of goods sold and cost of ending inventory using FIFO.

(b) Assume that Sandoval wants to change to the average cost formula. What guidelines must it consider before making this change?

(c) If the company does change to the average cost formula and prices continue to fall, would you expect the cost of goods sold and ending inventory amounts to be higher or lower than these amounts when using FIFO?

P6-5A Information for Sandoval Skateshop Ltd. is presented in P6-4A. Use the same inventory data and assume that the company uses the perpetual inventory system.

Instructions

(a) Determine the cost of goods sold and cost of ending inventory using average cost. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

(b) When the company counted its inventory at the end of April, it counted only 24 skateboards on hand. What journal entry, if any, should the company make to record this shortage?

(c) If the company had not discovered this shortage, identify what accounts would be overstated or understated and by what amount. Ignore the effect of income taxes.

P6-9A Tascon Corporation sells coffee beans, which are sensitive to price fluctuations. The following inventory information is available for this product at December 31, 2018:

Coffee Bean

Units

Unit Cost

Net Realizable Value

Coffea arabica

13,000 bags

$5.60

$5.55

Coffea robusta

5,000 bags

3.40

3.50

(a) Calculate Tascon’s inventory at the lower of cost and net realizable value.

(b) Prepare any journal entry required to record the LCNRV, assuming that Tascon uses a perpetual inventory system.

(c) Explain whether Tascon should consider each type of coffee bean separately when determining the lower of cost and net realizable value. Identify an argument in support of both types of coffee beans being considered as part of one inventory grouping.

P6-13A Kane Ltd. had a beginning inventory on January 1 of 250 units of product SXL at a cost of $160 per unit. During the year, purchases were as follows:

Units

Unit Cost

Total Cost

Mar. 15

700

$150

$105,000

July 20

500

  145

   72,500

Sept. 4

450

  135

   60,750

Dec.  2

100

  125

   12,500

Kane uses a periodic inventory system. At the end of the year, a physical inventory count determined that there were 200 units on hand.

Instructions

(a) Determine the cost of goods available for sale.

(b) Determine the cost of the ending inventory and the cost of the goods sold using (1) FIFO and (2) average cost. (Use unrounded numbers in your calculation of the average unit cost but round to the nearest cent for presentation purposes in your answer.)


Answers

P5-3A
(a)

Date Account Titles Debit Credit
Sep-02 Equipment $              65,000
      Accounts Payable $            65,000
(Equipment purchased on account)
Sep-03 Equipment $                    950
      Cash $                  950
(Payment of freight on equipment)
Sep-04 Supplies $                4,000
      Cash $              4,000
(Supplies purchased for cash)
Sep-06 Inventory $              65,000
     Accounts Payable $            65,000
(Payment of inventory on account)
Sep-07 Inventory $                1,600
     Cash $              1,600
(Paid freight in cash)
Sep-08 Accounts Payable $                5,000
      Inventory $              5,000
(Returnd damaged goods)
Sep-09 Accounts Receivable $              20,000
      Sales Revenue $            20,000
(Sales made on account)
Cost of Goods Sold $              15,000
      Inventory $            15,000
(Cost of goods sold recorded)
Sep-10 Delivery Expense $                    375
      Cash $                  375
(Paid freight on FOB Destination sale)
Sep-17 Cash $              19,600 =20000*98%
Sales Discount $                    400 =20000*2%
       Accounts receivable $            20,000
(Cash collected net of 2% discount)
Sep-20 Accounts Payable $              60,000 =65000-5000
      Cash $            59,400 =60000*99%
      Inventory $                  600 =60000*1%
(Paid net of 1% discount)
Sep-21 Inventory $                6,000
      Cash $              6,000
(Purchased inventory for cash)
Sep-22 Accounts Receivable $              27,000
      Sales Revenue $            27,000
(Sales made on account)
Cost of Goods Sold $              20,000
      Inventory $            20,000
(Cost of goods sold recorded)
Sep-23 No entry
Sep-28 Sales Returns and allowances $              10,000
      Accounts receivable $            10,000
(Sales returns)
Inventory $                7,500
      Cost of Goods Sold $              7,500
(Inventory added back)

(b)

Date Account Titles Debit Credit
Oct-03 Accounts Payable $              60,000
      Cash $            60,000

Purchase discount missing = $60000 x 1% = $600

As per HOMEWORKLIB RULES we are supposed to answer 1 and first question, i have solved 1, so kindly post other questions separately

.

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