Need help with Accounting for Inventories questions:

1.

Western Company normally makes the journal entry for a purchase of inventory and recognition of the payable on receipt of a vendor invoice. On December 31 (year end) it receives an invoice for $1,000 from Far East Ltd. and records the purchase. However, the incoming shipment is actually still in transit (in mid Pacific) at year end and the sales terms were FOB destination. Western takes a physical count of inventory at the end of year as standard procedure. Western:

Choices a, b and c all represent correct statements

should reverse the purchase entry to correct the error

does not legally own the goods on December 31

should catch the error when it compares the count to the records (the book to physical adjustment

Choices a, b and c all represent incorrect statements

2.

Hammer Co. is in the business of buying hammers at wholesale prices and reselling them at retail prices. The following information for the month of February was collected by Hammer Co.'s Purchase and Sales departments:

Date	Transactions	Units	Unit cost/sales price
Feb 4	Beginning inventory	300	$15
9	Purchase	100	18
12	Sale	320	27
17	Purchase	150	20
26	Sale	100	30

If the company uses a FIFO cost flow assumption, what was the cost of the inventory on hand after the February 26th sale if a periodic inventory system and a perpetual inventory system was used?

Periodic System $2,200 Perpetual System $2,600

Periodic System $2,600 Perpetual System $2,200

None of the other alternatives are correct

Periodic System $2,600 Perpetual System $2,600

Periodic System $2,200 Perpetual System $1,950

3.

If a company uses the FIFO Method of valuing its inventory, this requires that:

It actually sells its oldest inventory first

It charges the costs associated with its oldest inventory to Cost of Sales first

It charges the costs associated with its most recently acquired inventory to Cost of Sales first

None of the above are correct statements

It actually sells its most recently acquired inventory first

4.

Freddy's Frogs sells inventory that had cost the company $1,800 for $2,500 whereby $2,000 is received in cash and the remainder is to be paid by the customer in 10 days (specific identification method is used). Which of the following is the correct journal entry to record the transaction if a perpetual inventory method is used by the company?

Dr. Cash $2000, Dr. A/R $500, Cr. Sales $2,500. Dr. Cost of goods sold $1,800, Cr. Inventory $1,800

None of the other alternatives are correct

Dr. cash $2,000. Dr. A/R $500, Cr. Sales $2,500

Dr. Cash $2000, Dr. A/R $500, Cr. Sales $2,500. Dr. Cost of goods sold $1,800, Cr. Purchases $1,800

Dr. Cash $2000, Dr. Loss on sale $500, Cr. Sales $2,500. Dr. Cost of goods sold $1,800, Cr. Purchases $1,800