P6-1B. Computing FIFO and journalizing inventory transactions (Learning Objectives 1 & 2) 15-20 min. Star Equipment Inc. sells hand-held engine analyzers to automotive service shops. Star Equipment Inc. started April with an inventory of 75 units that cost a total of $10,500. During the month, Star Equipment Inc. purchased and sold merchandise on account as follows: Apr 6 Purchased 125 units @ $144 Sold 110 units @ $295 Purchased 160 units @ $154 13 19 25 Sold 120 units @ $295 29 Sold 105 units @ $295 Star Equipment Inc. uses the FIFO method. Cash payments on account totalled $31,600. Operating expenses for the month were $17,400, of which two-thirds were paid in cash and the rest accrued as Accounts Payable. Requirements 1. Which inventory method (excluding specific identification) most likely mimics the physical flow of Star Equipment Inc.'s inventory? 2. Prepare a perpetual inventory record, using FIFO, for this merchandise. 3. Journalize all transactions using FIFO. Record the payments on account and the operating expenses on April 30. P6-5B. Lower of cost and net realizable value rule (Learning Objective 4) 10-15 min. Because of a nationwide recession, Computer World Inc.'s merchandise inventory is gathering dust. It is now October 31, 2024, and the $66,800 that Computer World Inc. paid for its ending inventory is $2,300 higher than current replacement cost. Before any adjustments at the end of the period, Computer World Inc.'s Cost of Goods Sold account has a balance of $587,400. Computer World Inc. uses the lower of cost and net realizable value to value its ending inventory. Requirements 1. What amount should Computer World Inc. report for inventory on the statement of financial position? 2. What amount should Computer World Inc. report for cost of goods sold? 3. Journalize any required entries. P6-2B. Computing average cost and preparing a multistep statement of earnings (Learning Objectives 2 & 5) 15-20 min. Refer to the data for Star Line Equipment Inc. in P6-1B. However, assume Star Equipment Inc. uses the average cost method. Requirements 1. Prepare a perpetual inventory record using moving average cost. Round the average unit cost to the nearest cent and all other amounts to the nearest dollar. 2. Prepare a multistep statement of earnings for Star Equipment Inc. for the month of April.