Maze Inc. has held some unique models of watches in stock for almost a year since they purchased those watches on 1 January 2017 at a cost of 300,000. At the end of the year 2017, Maze Inc. was evaluated whether they need to write down the value of those inventories. On 31 December 2017, it was estimated that the selling price of those watches was 280,000 and it was estimated that it would cost the Maze Inc. 30,000 to provide free cleaning service to the customers to sell them. Maze Inc. did not sell those watches in 2018. At the end of the year 2018, Maze Inc. estimated that the selling price of those watches would go up to 320,000 due to the increased market demand and no extra cost would be needed to sell them. (10 marks)

 

Required:

 

1. Show the journal entry on 31 December 2017 for the valuation of the watches and state how the valuation of these watches affected Maze Inc.'s net income for the year 2017. 

 

2. Show the journal entry on 31 December 2018 for the valuation of the watches and state how the valuation of these watches affected Maze Inc.'s net income for the year 2018.

Vogts Company sells TVs and it operates a periodic inventory system. On 1 January 2018, the inventory account in firms' ledger had a balance of 600,000. Based on the following information, answer the required questions. (15 marks)

 

1. Vogts' accountants conducted a physical counting of inventory on 31 December 2018 and concluded that the value of all the inventories in Vogts' warehouse was 500,000.

 

2. On 1 May 2018, Vogts purchased more TVs from Kota Inc. at the cost of 300,000. Kota Inc. shipped out the TVs on 5 May 2018 on the terms of FOB shipping point. Vogts received those TVs on 20 May 2018. Vogts will not pay Kota Inc. until 1 January 2019.

 

3. On 1 June, Vogts found out that some TVs purchased from Kota Inc. were in defect and returned those TVs. The total cost of those returned TVs was 80,000.

 

4. On 28 December Vogts purchased more TVs from Dato Inc. at the cost of 100,000. Dato Inc. shipped out the TVs on 29 December 2018 on terms of FOB destination. Vogts received the TVs from Dato Inc. on 4 January 2019.

 

5. One of Vogts' major customers purchased 120,000 worth of TVs, with cost 100,000, on 25 December 2018. Vogts shipped out the TVs on 27 December 2018, on terms of FOB destination. Those TVs arrived at the buyer's place on 2 January 2019.

 

6.  Among the inventory in Vogts' warehouse on 31 December 2018 was some TVs on consignment from Maza Inc., with a cost of 50,000.

 

Required:

 

Vogts has not made any journal entries for all the above transactions yet. Assume that the above are all the transactions related to Vogts' inventory for the 2018 accounting period.

 

·  For each of the 6 transaction information, provide all relevant journal entries, if any, required on 31 December 2018.

 

·  Provide the journal entry for recognition of Vogts' cost of goods sold.