Babies-World (Babies) is a public company with a December 31 year-end and is a large retailor of specialty baby and children's products. Babies uses a perpetual inventory system and a physical inventory count is conducted at the end of each year to ensure good internal control. Babies records any variance between the perpetual inventory records and the physical inventory count as an adjustment to Cost of Goods Sold. All purchases and sales were made on account. Car Seats: Below is some key information relating to one product, a car seat. The purchases and sales occurred in the order given. Unit Cost $111 Total Cost $4,995 $112 $3,808 Activity during 2019 Beginning Inventory Sale 1 Purchase 1 Sale 2 Purchase 2 Purchase 3 Purchase 4 Sale 3 Purchase 5 Units 45 (25) 34 (45) 65 20 15 (32) 13 $110 $108 $ 109 $7,150 $2,160 $1,635 $115 $1,495 . Additional information: The year-end inventory count showed 57 car seats on hand and the perpetual inventory records showed 62 car seats on hand at year-end. Purchase 4 was shipped by the vendor to Babies on a consignment basis. These car seats have been segregated in the warehouse and have not been included in the year-end inventory count numbers. Purchase 5 was shipped by the vendor f.o.b. destination on December 30, 2019 and it was still in transit as of year-end. The goods were received by Babies on January 2, 2020. Sale 3 was shipped by Babies f.o.b. shipping point on December 29, 2019 and it was received by the buyer on January 1, 2020. The selling price of car seats during 2019 was $145. Babies expects this price will remain the same for the foreseeable future. Stroller Systems: Below is some information relating to another product, a stroller system. Babies' cost to sell each stroller system includes a 10% sales commission on the selling price. Date Dec 31, 2019 Dec 31, 2020 Unit Quantity 1,525 1,235 Unit Cost $500 $500 Unit Selling Price $490 $650 Required: Start this question on a new page. Show all calculations and analysis to get full marks. Round unit costs in your formulas to the nearest cent ($0.00) and all other numbers to the nearest dollar. a) Calculate the December 31, 2019 cost of the car seats inventory using the FIFO formula. [4.5 marks] b) Calculate the balance of Cost of Goods Sold that will appear in the income statement relating to car seats for the year ending December 31, 2019. [3 marks] c) Prepare the journal entries relating to car seats Purchase 1 and Sale 2. [6 marks] d) Prepare the year-end adjusting journal entries relating to the valuation of the stroller systems inventory on December 31, 2019 and December 31, 2020 using the allowance method. Assume that 2019 was the first year the company sold this product. [6.5 marks] Babies-World (Babies) is a public company with a December 31 year-end and is a large retailor of specialty baby and children's products. Babies uses a perpetual inventory system and a physical inventory count is conducted at the end of each year to ensure good internal control. Babies records any variance between the perpetual inventory records and the physical inventory count as an adjustment to Cost of Goods Sold. All purchases and sales were made on account. Car Seats: Below is some key information relating to one product, a car seat. The purchases and sales occurred in the order given. Unit Cost $111 Total Cost $4,995 $112 $3,808 Activity during 2019 Beginning Inventory Sale 1 Purchase 1 Sale 2 Purchase 2 Purchase 3 Purchase 4 Sale 3 Purchase 5 Units 45 (25) 34 (45) 65 20 15 (32) 13 $110 $108 $ 109 $7,150 $2,160 $1,635 $115 $1,495 . Additional information: The year-end inventory count showed 57 car seats on hand and the perpetual inventory records showed 62 car seats on hand at year-end. Purchase 4 was shipped by the vendor to Babies on a consignment basis. These car seats have been segregated in the warehouse and have not been included in the year-end inventory count numbers. Purchase 5 was shipped by the vendor f.o.b. destination on December 30, 2019 and it was still in transit as of year-end. The goods were received by Babies on January 2, 2020. Sale 3 was shipped by Babies f.o.b. shipping point on December 29, 2019 and it was received by the buyer on January 1, 2020. The selling price of car seats during 2019 was $145. Babies expects this price will remain the same for the foreseeable future. Stroller Systems: Below is some information relating to another product, a stroller system. Babies' cost to sell each stroller system includes a 10% sales commission on the selling price. Date Dec 31, 2019 Dec 31, 2020 Unit Quantity 1,525 1,235 Unit Cost $500 $500 Unit Selling Price $490 $650 Required: Start this question on a new page. Show all calculations and analysis to get full marks. Round unit costs in your formulas to the nearest cent ($0.00) and all other numbers to the nearest dollar. a) Calculate the December 31, 2019 cost of the car seats inventory using the FIFO formula. [4.5 marks] b) Calculate the balance of Cost of Goods Sold that will appear in the income statement relating to car seats for the year ending December 31, 2019. [3 marks] c) Prepare the journal entries relating to car seats Purchase 1 and Sale 2. [6 marks] d) Prepare the year-end adjusting journal entries relating to the valuation of the stroller systems inventory on December 31, 2019 and December 31, 2020 using the allowance method. Assume that 2019 was the first year the company sold this product. [6.5 marks]
