Part A. (7 marks). Gerard Limited reported inventory of $689,600 and accounts payable to suppliers of $456,300 for the year ended December 31, 2020. The company has a periodic inventory system, and the inventory value given is the result of the physical count.

1. The inventory count took place on December 31. Late in the day on December 31, goods with a cost of $54,300 and a retail price of $98,500 were delivered to a customer. These goods had been counted earlier in the day and were included in the inventory count. The company did not record the sale until January 3 due to the New Years break.
2. Goods from a supplier, in transit on December 31, were neither counted nor recorded as a purchase and account payable as of December 31. The goods, with a cost of $37,500, legally belonged to Gerard while they were in transit over the year-end.
3. Goods received from a supplier on December 30 were counted and included in inventory, but the invoice had not been recorded as a purchase or accounts payable by the end of December. The invoice was for $51,100.
4. The inventory count was subsequently determined to include $21,900 of goods on consignment from a supplier.

Required:

Indicate the amount and sign (+ or -) of the effect of items (b) to (d) on the balance in Inventory and Account Payable. If there is no effect, write N/E. Item (a) is done as an example. Calculate the correct balances for inventory (net) and accounts payable, as of December 31, 2020.

	Inventory	Accounts Payable
Preliminary value	$689,600	$456,300
Sale not recorded (done as example)	-54,300	N/E
Goods in transit
Invoice unrecorded
Goods on consignment
Revised (correct) total

Question 3 (continued). Part B (8 marks). The records of Colchester Corporation showed the following transactions, in the order given, relating to an inventory item:

	Units		Unit Cost
Inventory (beginning)	300		$6.90
Purchase	600		7.20
Sale (at $15)	400
Purchase	500		7.50
Sale (at $15)	900
Purchase	1100		7.60

Required:

1. Determine the amounts for the following cost flow assumptions (round unit costs to the nearest cent; show computations), assuming a periodic inventory system (6 marks) :

Cost Flow assumption	Cost of Ending Inventory	Cost of Goods sold
FIFO
Weighted Average

2. Which cost flow method results in the highest gross margin. Briefly explain. No calculation needed. (2 marks)____________________________________________________

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Part C (4 marks). In the early morning of January 1, 2021, Detroit Corp.'s inventory was destroyed by fire. The following information was available for calendar 2020:

Sales................................................ $1,900,000

Net purchases................................... 1, 600,000

Freight-in 20,000

Beginning inventory........................... 410,000

Detroits gross profit on sales has averaged 30% for several years.

Instructions: Calculate the estimated cost of the inventory destroyed. Show computations.

Cost of inventory destroyed:__________________________________