Question
Problem 1 Sandvik Mining uses a periodic inventory system. One of the companys products is a special equipment for the oil drilling rig. The inventory
Problem 1
Sandvik Mining uses a periodic inventory system. One of the companys products is a special equipment for the oil drilling rig. The inventory quantities, purchases and sales of this equipment for the most recent year are as follows:
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Instructions
- Using the periodic costing procedures, compute the cost of December 31 inventory and the cost of goods sold for the year under each of the following cost assumptions:
- First-in, first-out
- Last-in, first-out
- Average cost (round to the nearest dollar, except unit cost)
- Prepare the journal entries to record cost of goods sold under each of the above assumptions.
- Assuming that current market price of the one unit is $225 and materiality level is set at $600, make necessary journal entry to adjust the balance of ending inventory under each cost assumption FIFO, LIFO, Average cost.
- How will your answers to requirement a. change if the company switch to perpetual inventory system? Calculate cost of goods sold as of June 1 and the amount of ending inventory as of December 1 using the same cost assumptions - FIFO, LIFO, Average cost (round to the nearest dollar, except unit cost).
Problem 2
The following is a series of related transactions between Company A, a wholesaler, and Company B, a chain of retail shoe stores:
April 9. Company A sold to Company B 450 units of product X on account, terms 3/15, n/60. The cost of product to company A was $210 per unit and the sales price was $250 per unit.
April 12. Kazpost Express charged $2,000 for delivering this merchandise to Company B. This charge was fully paid by Company B.
April 20. Company B returned 100 units of product to Company A because they were defective. Company A allowed to Company B full credit for this return.
April 22. Company B paid the remaining balance due to Company A within the discount period.
Instructions
- Record this series of transactions in the general journal of Company A (The company records sales at sales gross price.)
- Record this series of transactions in the general journal of Company B (The company records purchases of merchandise at net cost and uses a Transportation expense account to record charges from Kazpost.)
- Assume Company B failed to make a payment on April 22 and did it on April 30 instead. Make a journal entries for April 30 for both Company A and Company B.
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