# 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.)

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