inventory practic exam winter 2014
DESCRIPTION
accountingTRANSCRIPT
BUS 321 - Intermediate Financial Accounting 1
Burnett – Winter Quarter 2014
Exam 2
This exam is scheduled to be 110 minutes long. All questions are worth the same amount of points.
Please make sure you have 10 pages including this page. Do not start working on this exam until
instructed to do so. This is a closed book, closed notes exam. The use of any electronic device other than
a permitted calculator constitutes unauthorized assistance. Students found to be in possession of such a
device during the exam will be given a score of zero. You must show work to get credit (unless no
work is required)!
INVENTORY
PURCHASES – GROSS METHOD – PERIODIC INVENTORY SYSTEM On June 30
th, OUR
COMPANY purchased merchandise with an invoice price of $40,000 having terms
3/15, n/30 fob shipping point, which the supplier shipped on July 2nd
. We received the
merchandise on July 4th
. Prepare the entries for the next two problems:
1. Prepare the entry to record the purchase AND indicate the date on which we should record
the purchase.
2. On July 9th
when we pay our account in full.
Debit Credit
Change in
Total Assets
Change in
Total
Liabilities
Change in
Total Equity
Net Income for
the period
Cash Flow for
the period
PURCHASES – NET METHOD – PERPETUAL INVENTORY SYSTEM On July 13th
, OUR COMPANY
ordered merchandise with an invoice price of $70,000 having terms 3/15 n/30 fob shipping
point, which the supplier shipped on July 15th
and we received the merchandise on July 18th
.
Prepare the entries for the following two problems.
3. Prepare the entry to record the purchase AND indicate the date on which we should we
record the purchase.
4. On July 22nd
when we write a $30,000 check to pay on our account
5. GOODS IN TRANSIT The December 31, 2013, year-end inventory balance of Raymond
Corporation is $210,000. You have been asked to review the following transactions to
determine if they have been correctly recorded. Please write CORRECT if the transaction is
recorded correctly or NOT CORRECT if the transaction was not recorded
correctly.
a. Goods shipped to Raymond f.o.b. destination on December 26, 2013, were
received on January 2, 2014. The invoice cost of $30,000 is included in the
inventory balance.
b. At year-end, Raymond held $14,000 of merchandise on consignment from
Harrison Company. This merchandise is included in the inventory balance.
c. On December 29, merchandise costing $6,000 was shipped to a customer f.o.b.
shipping point and arrived at the customer’s location on January 3, 2014. The
merchandise is not included in the preliminary inventory balance.
d. At year-end, Raymond had merchandise costing $15,000 on consignment with
Joclyn Corporation. The merchandise is not included in the preliminary inventory
balance.
COST FLOW ASSUMPTIONS - PERIODIC During July, OUR COMPANY sold 40 units for $20
each. Use the following information for the next two problems
qty cost Total Cost
7/1 Beginning 10 15.00 150
7/14 Purchase 35 13.00 455
7/24 Purchase 20 12.00 240
Available 65 845
6. Use LIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.
7. Prepare the journal entry to record Cost of Goods Sold and Ending Inventory in the problem
above, if an entry is required. If no entry is required, please state no entry required.
8. COST FLOW ASSUMPTIONS - PERPETUAL Use AVERAGE COST - PERPETUAL to prepare the
journal entry for the July 15th
credit sale of 25 units at $20/unit. Purchases Sales average cost
Qty Cost qty price
1-Jul 10 15 150
4-Jul 5 20
14-Jul 35 13 455
15-Jul 25 20
24-Jul 20 12 240
25-Jul 10 20
9. LOWER OF COST OR MARKET Calculate Market for each of the products in the following
table and answer the question below.
A1 A2 B11 B12
Replacement cost 23.00 65.00 54.00 35.00
Selling price 40.00 100.00 80.00 60.00
Direct selling costs 12.00 30.00 28.00 18.00
Normal profit 4.00 10.00 8.00 6.00
MARKET (fill in)
Explain why the replacement cost is or is not appropriate to use as the Market for product B11.
(Two sentence maximum.)
.
Use this information for the next 2 Problems
part no qty cost mkt
101 3 20.00 19.00
201 5 9.00 10.00
301 2 17.50 20.00
401 1 35.00 33.00
Per Unit
10. LOWER OF COST OR MARKET Use the information in the above table to calculate Lower of
Cost or Market on an item by item basis.
Inventory at Lower of Cost or Market =