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This 0 page Study Guide was uploaded by an elite notetaker on Wednesday November 11, 2015. The Study Guide belongs to fin571 at Kaplan University taught by in Fall 2015. Since its upload, it has received 44 views.
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Date Created: 11/11/15
P61A Kirk Limited is trying to determine the value of its ending inventory as of February 28 2012 the company s yearend The accountant counted everything that was in the warehouse as of February 28 which resulted in an ending inventory valuation of 48000 However she didn t know how to treat the following transactions so she didn t record them Determine items and amounts to be recorded in inventory SO 1 AN a On February 26 Kirk shipped to a customer goods costing 800 The goods were shipped FOB shipping point and the receiving report indicates that the customer received the goods on March 2 b On February 26 Seller Inc shipped goods to Kirk FOB destination The invoice price was 350 plus 25 for freight The receiving report indicates that the goods were received by Kirk on March 2 c Kirk had 500 of inventory at a customer s warehouse quoton approvalquot The customer was going to let Kirk know whether it wanted the merchandise by the end of the week March 4 d Kirk also had 400 of inventory at a Balena craft shop on consignment from Kirk e On February 26 Kirk ordered goods costing 750 The goods were shipped FOB shipping point on February 27 Kirk received the goods on March 1 f On February 28 Kirk packaged goods and had them ready for shipping to a customer FOB destination The invoice price was 350 plus 25 for freight the cost of the items was 280 The receiving report indicates that the goods were received by the customer on March 2 g Kirk had damaged goods set aside in the warehouse because they are no longer saleable These goods originally cost 400 and originally Kirk expected to sell these items for 600 Instructions For each of the above transactions specify whether the item in question should be included in ending inventory and if so at what amount For each item that is not included in ending inventory indicate who owns it and what account if any it should have been recorded in P62A Turner Distribution markets CDs of numerous performing artists At the beginning of March Turner had in beginning inventory 2500 CDs with a unit cost of 7 During March Turner made the following purchases of CDs Determine cost of goods sold and ending inventory using FIFO LIFO and averagecost with analysis Mi AP w 7 March 5 2000 8 March 13 3500 9 March 21 5000 10 March 26 2000 11 During March 12000 units were sold Turner uses a periodic inventory system Instructions a Determine the cost of goods available for sale b Determine 1 the ending inventory and 2 the cost of goods sold under each of the assumed cost ow methods FIFO LIFO and average cost Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods Note For averagecost round cost per unit to three decimal places c Which cost ow method results in 1 the highest inventory amount for the balance sheet and 2 the highest cost of goods sold for the income statement Cost of goods sold FIFO 105000 LIFO 115500 Average 109601 SOLUTION a COST OF GOODS AVAILABLE FOR SALE Date Explanation Units Unit Cost Total Cost March 1 Beginning inventory 2500 7 17500 5 Purchase 2000 8 16000 13 Purchase 3500 9 31500 21 Purchase 5000 10 50000 26 Purchase 2000 11 22000 Total 15000 137000 b FIFO 1 Ending Inventory 2 Cost of Goods Sold Unit Total Cost of goods Date Units Cost Cost available for sale 137000 March 26 2000 11 22000 Less Ending 21 1000 10 10000 inventory 32000 3000 32000 Cost of goods sold 105000 15000 12000 3000 Proof of Cost of Goods Sold Unit Total Date Units Cost Cost March 1 2500 7 17500 5 2000 8 16000 13 3500 9 31500 21 4000 10 40000 12000 105000 LIFO 1 Ending Inventory 2 Cost of Goods Sold Unit Total Cost of goods Date Units Cost Cost available for sale 137000 March 1 2500 7 17500 Less Ending 5 500 8 4000 inventory 21500 3000 21500 Cost of goods sold 115500 Proof of Cost of Goods Sold Unit Total Date Units Cost Cost March 26 2000 11 22000 21 5000 10 50000 13 3500 9 31500 5 1500 8 12000 12000 115500 AVERAGECOST 1 Ending Inventory 2 Cost of Goods Sold Cost of goods 137000 15000 9133 available for sale 137000 Less Ending Unit Total inventory 27399 Units Cost Cost Cost of goods sold 109601 3000 9133 27399 c 1 As shown in b FIFO produces the highest inventory amount 32000 2 As shown in b LIFO produces the highest cost of goods sold 115500
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