D E G 1 Heavy Equipment and Machinery Inc. 2 Trial Balance 3 At December 30, 2019 Adjustments Debit Credit Unadjusted Trial Balance Debit balances Credit balances S 3,000,000 31,000,000 2,000,000 164,000,000 280,000,000 Adjusted Trial Balance Debit balances Credit balances $ 3,000,000 31,000,000 2,000,000 164,000,000 280,000,000 6 Cash and short-term investments 7 Accounts receivable 8 Allowance for doubtful accounts 9 Inventory 10 Land 11 Building 12 Accumulated depreciation building 13 Equipment 14 Accumulated depreciation equipment 15 Goodwill 16 Accounts payable 17 Wages payable 18 Interest payable 19 Unearned revenue 20 Dividends payable 21 Current portion of mortgage payable 22 Lawsuit liability 10,000,000 10,000,000 3.000.000 3,000,000 56,000,000 40,000,900 56,000,000 40,000,904 8,200,000 9,000,000 8,200,000 9,000,000 50,000,000 EL Trial Balance Statement of income 50,000,000 1.000 A D . 50,000,000 150,000,000 20,000,000 150,000,000 50,000,000 150,000,000 20,000,000 150,000,000 1,000,000 9,000,000 1,000,000 9,000,000 743,931,000 560,000,000 743,931,000 22 Lawsuit liability 23 Mortgage payable 24 Preferred shares 25 Common shares 26 Retained earnings 27 Cash Dividends dedared. Preferred Shares 28 Cash Dividends declared Common Shares 29 Stock Dividends declared - Common Shares 30 Sales revenue 31 Cost of goods sold 32 Wages expense 3) Advertising and promotion expense 34 Insurance expense 35 Repairs and maintenance expenses 36 Depreciation expense 37 Utilities expense 38 Bad debts expense 39 Bank charges expense 40 Damages from lawsuits expense 41 Interest expense 42 Income tax expense 41 65,000,000 2,000,000 3,000,000 5,000,000 560,000,000 65,000,000 2,000,000 3,000,000 5,000,000 6,000,000 5,000,000 6,000,000 5,000,000 1,000,000 30,000,000 6,131,904 25,000,000 $1,229,131,904 51,229, 131,904 1,000,000 50,000,000 6,131,904 25,000,000 $1,229,131,904 $1,229, 131,901 S Trial Balance Statement of income B D G 1 Heavy Equipment and Machinery Inc. 2 Statement of income 3 For Year-ended December 30, 2019 4 HEMI Common Wajax Common 5 HEMI Wajax size 6 Revenues 7 Cost of sales 8 Gross profit 9 Selling and administrative expenses no Earnings before finance costs and income taxes 11 Finance costs 12 Earnings before income taxes 3 Income tax expense 4 Net income size 100% 75% 25% 18% $743,931,000 560,000,000 183,931,000 137,000,000 46,931,000 6,131,904 40,799,096 25,000,000 $ 15,799,096 6% 1% 5% 3% 2% 5 ACCT1115 Case Study (Section OE05) Instructor: Nadim Merali Heavy Equipment and Machinery Inc. (HEMI) Inventory 1. HEMI uses a perpetual inventory system with the weighted average method of costing inventory. For transmission inventory the Accountant wants you to: a. Compute the cost of goods sold using the first-in-first out (FIFO) method of costing inventory for the following purchase and sale information (show your calculations): 4 marks Activity Units Total Cost Unit Cost Total Sales Date Revenues 15 $6,000,000 $400,000 7,200,000 $450,000 16 December 1 Purchase December 10 Purchase December 11 Sale December 15 Purchase December 20 Sale $8,500,000 (20) 16 (20) 8,800,000 $550,000 12,000,000 b. Explain why the cost of goods sold under the FIFO method that you have computed in 1(a) above is lower than the cost of goods sold under the weighted average cost method from HEMI's accounting system of $18,504,180, 2 marks b. Explain why the cost of goods sold under the AFO method that you have computed in 1(a) above is lower than the cost of goods sold under the weighted average cost method from HEMI's accounting system of $18,504,180, 2 marks C Explain the benefit of a physical inventory count when HEMI has a perpetual inventory system and the inventory is physically protected 2 marks Heavy Equipment and Machinery Inc. (HEMI) 2. Explain the accounting treatment of the following major transactions and provide adjusting journal entries, if necessary a. On December 21, HEMI ordered 25 transmissions for a total cost of $15,000,000 which were shipped on December 27 with the terms FOB Destination. This inventory was not received at year-end and has not been recorded in HEMI's accounting records. 4 marks b. There is a product in inventory that cost HEMI $11,000,000 which management is estimating will sell for $12,000,000 and HEMI will have to pay the transportation costs of approximately $2,000,000 (1.e., the net realizable value NRV) will be $10,000,000. 4 marks D E G 1 Heavy Equipment and Machinery Inc. 2 Trial Balance 3 At December 30, 2019 Adjustments Debit Credit Unadjusted Trial Balance Debit balances Credit balances S 3,000,000 31,000,000 2,000,000 164,000,000 280,000,000 Adjusted Trial Balance Debit balances Credit balances $ 3,000,000 31,000,000 2,000,000 164,000,000 280,000,000 6 Cash and short-term investments 7 Accounts receivable 8 Allowance for doubtful accounts 9 Inventory 10 Land 11 Building 12 Accumulated depreciation building 13 Equipment 14 Accumulated depreciation equipment 15 Goodwill 16 Accounts payable 17 Wages payable 18 Interest payable 19 Unearned revenue 20 Dividends payable 21 Current portion of mortgage payable 22 Lawsuit liability 10,000,000 10,000,000 3.000.000 3,000,000 56,000,000 40,000,900 56,000,000 40,000,904 8,200,000 9,000,000 8,200,000 9,000,000 50,000,000 EL Trial Balance Statement of income 50,000,000 1.000 A D . 50,000,000 150,000,000 20,000,000 150,000,000 50,000,000 150,000,000 20,000,000 150,000,000 1,000,000 9,000,000 1,000,000 9,000,000 743,931,000 560,000,000 743,931,000 22 Lawsuit liability 23 Mortgage payable 24 Preferred shares 25 Common shares 26 Retained earnings 27 Cash Dividends dedared. Preferred Shares 28 Cash Dividends declared Common Shares 29 Stock Dividends declared - Common Shares 30 Sales revenue 31 Cost of goods sold 32 Wages expense 3) Advertising and promotion expense 34 Insurance expense 35 Repairs and maintenance expenses 36 Depreciation expense 37 Utilities expense 38 Bad debts expense 39 Bank charges expense 40 Damages from lawsuits expense 41 Interest expense 42 Income tax expense 41 65,000,000 2,000,000 3,000,000 5,000,000 560,000,000 65,000,000 2,000,000 3,000,000 5,000,000 6,000,000 5,000,000 6,000,000 5,000,000 1,000,000 30,000,000 6,131,904 25,000,000 $1,229,131,904 51,229, 131,904 1,000,000 50,000,000 6,131,904 25,000,000 $1,229,131,904 $1,229, 131,901 S Trial Balance Statement of income B D G 1 Heavy Equipment and Machinery Inc. 2 Statement of income 3 For Year-ended December 30, 2019 4 HEMI Common Wajax Common 5 HEMI Wajax size 6 Revenues 7 Cost of sales 8 Gross profit 9 Selling and administrative expenses no Earnings before finance costs and income taxes 11 Finance costs 12 Earnings before income taxes 3 Income tax expense 4 Net income size 100% 75% 25% 18% $743,931,000 560,000,000 183,931,000 137,000,000 46,931,000 6,131,904 40,799,096 25,000,000 $ 15,799,096 6% 1% 5% 3% 2% 5 ACCT1115 Case Study (Section OE05) Instructor: Nadim Merali Heavy Equipment and Machinery Inc. (HEMI) Inventory 1. HEMI uses a perpetual inventory system with the weighted average method of costing inventory. For transmission inventory the Accountant wants you to: a. Compute the cost of goods sold using the first-in-first out (FIFO) method of costing inventory for the following purchase and sale information (show your calculations): 4 marks Activity Units Total Cost Unit Cost Total Sales Date Revenues 15 $6,000,000 $400,000 7,200,000 $450,000 16 December 1 Purchase December 10 Purchase December 11 Sale December 15 Purchase December 20 Sale $8,500,000 (20) 16 (20) 8,800,000 $550,000 12,000,000 b. Explain why the cost of goods sold under the FIFO method that you have computed in 1(a) above is lower than the cost of goods sold under the weighted average cost method from HEMI's accounting system of $18,504,180, 2 marks b. Explain why the cost of goods sold under the AFO method that you have computed in 1(a) above is lower than the cost of goods sold under the weighted average cost method from HEMI's accounting system of $18,504,180, 2 marks C Explain the benefit of a physical inventory count when HEMI has a perpetual inventory system and the inventory is physically protected 2 marks Heavy Equipment and Machinery Inc. (HEMI) 2. Explain the accounting treatment of the following major transactions and provide adjusting journal entries, if necessary a. On December 21, HEMI ordered 25 transmissions for a total cost of $15,000,000 which were shipped on December 27 with the terms FOB Destination. This inventory was not received at year-end and has not been recorded in HEMI's accounting records. 4 marks b. There is a product in inventory that cost HEMI $11,000,000 which management is estimating will sell for $12,000,000 and HEMI will have to pay the transportation costs of approximately $2,000,000 (1.e., the net realizable value NRV) will be $10,000,000. 4 marks