Course Objectives: 1) Given a set of transactions of a merchandiser for a specified period, prepare an inventory record to determine the value of ending inventory & cos of goods sold

2) Prepare an income statement for a merchandising entity

3) Use journal entries to demonstrate the difference between a perpetual & a periodic inventory system

4) Demonstrate how sales returns & purchases returns are treated in the inventory record and how they impact the income statement

Scottie Computers & Electronics sell a variety of gadgets including tablets. The business uses a

perpetual inventory system and the FIFO method to account for inventory and began the third

quarter of 2017 with merchandise inventory of 10 PIXI 3G 7 tablets at a total cost of $136,600.

The following transactions relating to the PIXI 3G 7 brand were completed during the quarter.

July 8 Purchased 38 tablets at a total cost of $528,200.

July 31 The sales for July were 18 tablets which yielded total sales revenue of $332,640.

August 12 Owing to an increased demand for this product, 30 tablets were purchased on

account at a cost of $13,905 per unit. In addition, Scottie paid $350 in cash on

each tablet to have the inventory shipped from the vendors warehouse to Fullers

warehouse.

August 27 6 of the tablets purchased on August 12 were returned to the supplier, as they were

defective.

August 31 During the month 44 tablets were sold at a price of $19,960 each. (10 of these units

sold were on account to a longstanding customer of the business)

September 4 A customer, to whom 8 tablets were sold during the first business day of August,

returned 4 of the units, as they were not of the brand ordered.

September 10 In preparation for the new school year, Scottie purchased 35 tablets at a cost of

$15,500 each; these were subject to a trade discount of 2% each.

September 30 30 tablets were sold during September at a unit selling price of $22,275.

September 30 An actual count of inventory was carried out which revealed that there were 15 units

of the merchandise in the store room.

(Unless otherwise stated, assume that all purchases are on account and all sales are for cash.)

Required:

i) Prepare a perpetual inventory record for this merchandise, to determine the ending

inventory at September 30, 2017 and the total amount to be assigned to cost of goods sold for

the period. (22 marks)

ii) Given that selling, distribution and administrative costs for the quarter were $47,200, 72,190

and 98,040 respectively, prepare an income statement for Scottie Computers &

Electronics to determine the net earnings for the quarter. (6 marks)

iii) State the journal entries necessary to record the transactions on August 12 and August 31,

assuming the company uses a: - Perpetual inventory system

- Periodic inventory system (8 marks)

iv) Assuming that Scottie used the perpetual system and weighted average method of inventory

valuation, determine the value of ending inventory and cost of goods sold after the July 31

transaction. (4 marks)