Part 1: Prepare ABC Co.'s joumal entries for each of the following transactions. Assume that a perpetual inventory method is used. Recording Purchases of Merchandise a. ABC Co. purchases $16,000 of inventory on account, terms 3/10 net 30 from Sampson Company. b. ABC Co. retums $1,800 of inventory to Sampson from the initial purchase C. ABC Co. pays the balance owed to Sampson Company, taking the discount. Recording Sales of Merchandise (new scenario) d. ABC Co. sells merchandise on account for $7,600 (terms 2/10 net 30) to Blue Co. The merchandise had cost ABC Co. $3,750 e. Blue Co. retums $500 of the merchandise to ABC Co. Assume this retumed merchandise had cost ABC Co. $300. f. Blue Co. pays ABC Co, the balance owed within 10 days of the sale. Part 2: During 2014, Smith & Co. sold 42,000 units of its product. The following units were on hand or purchased during the year. Units Cost per Total Cost Beginning inventory (1/1/2016) 12,000 $15.10 $181,200 Purchase #1: (2/2/16) 16,000 $15.25 $244,000 Purchase #2: (6/15/16) 17,000 $15.50 $263,500 Purchase #3: (10/31/16) 15,000 $15.75 $236,250 Total Available for Sale 60,000 $924,950 Less Sold Ending Inventory Required: In the table above, fill in the number of units sold and the number of units in Ending Inventory. Calculate ending inventory and cost of goods sold for the next 3 questions. 1) If the company used the FIFO method, what is the value of ending inventory and cost of goods sold? Ending Inventory: Cost of Goods Sold: 2) If the company used the LIFO method, what is the value of ending inventory and cost of goods sold? Ending Inventory: Cost of Goods Sold: 3) If the company used the average cost method, what is the value of ending inventory and cost of goods sold? Please round your calculated average cost per unit to 4 decimals (example - $18.7915) Average Cost per unit = Ending Inventory: Cost of Goods Sold: ..... .. ... .. . Part 3: Calculate the five critical subtotals in the multistep income statement based on the information provided in this table: Sales 1,150,000 Sales returns 10,000 Sales discounts 5,000 Cost of Goods Sold 410,000 Total Operating 300,000 Expenses Interest Income 6,000 Interest Expense 12.000 Income Tax Expense 12,000 Amount: a. Net Sales b. Gross Profit c. Income From Operations d. Income Before Taxes e. Net Income Fill in the blanks. If costs are rising, then...... 1) FIFO COGS is_ (greater or less than) LIFO COGS 2) FIFO ending inventory is _ (greater or less than) LIFO ending inventory 3) Net Income for a company using FIFO will be _(greater or less than) a company that uses LIFO If ending inventory is understated: (Fill in with overstated or understated): 4) COGS is 5) Net Income is 6) Ending Retained Earnings are 7) Stockholder's Equity is 8) Assets are
