Question 1 (20 marks) Beginning inventory, purchases and sales data of ABC Co. are as follows: May 3 24 units @ $90 Inventory Purchase 11 26 units @ $94 14 Sale 36 units 21 Purchase 18 units @ $120 25 Sale 20 units Required: Assuming ABC Co. adopts perpetual inventory system and follow FIFO cost method, prepare a schedule and calculate the cost of goods sold and ending inventory as at May 31. (20 marks) Question 2: (20 marks) BB Co. has the following transactions during May, 2011, its first month of operation. May 1 Purchased 1000 units @ $25.00 each May 9 Sold 800 units @ $38.00 each May 15 Purchased 500 units @ $26 each May 27 Sold 600 units @ $37.00 each Required: (i) Calculate total sales, ending inventory, cost of goods sold and gross profit using each of the following inventory methods: (18 marks) a. FIFO Perpetual b. FIFO Periodic c. Weighted Average Cost Periodic (round to 2 decimal places) (ii) Assuming the purchase cost of inventory would increase substantially next month due to shortage in material supply, what would be the impact on net profit if BB Co. continues to use FIFO method, instead of weighted average cost method? Explain (2 marks) Question 1: (40 marks) The following information is extracted from SS Co.'s Statement of Financial Position at the end of year 3 since its business operation on 1 Jan 2017. $000 6,000 3,000 Stockholders' equity: Share capital - 9% Cumulative preference shares, $100 par (80,000 authorized) Share capital - ordinary shares, no par (4,000,000 authorized, 3,000,000 issued) Share premium Retained earnings Total equity 120,000 9,000 138,000 REQUIRED: a. SS Co. issued the preference shares on 1 Jan 2017. Calculate the number of preference shares issued. (2 marks) b. SS Co. issued 1,500,000 ordinary shares on 1 Jan 2017. There were 2,000,000 ordinary shares issued by year end. With net profit of $875,000, calculate the earnings per share for ordinary shares for 2017. (5 marks) C.SS Co. did not declare any dividend in the first two years. At year ended 31 December of year 3, SS Co. paid total cash dividends of $2,850,000. Compute the dividend paid per share during the third year for each of the two classes of stock. (9 marks) d. Prepare journal entries for following transactions occurred during the fourth year: (15 marks) i.) On 1 January, SS Co. repurchased 50,000 ordinary shares at $80 per share. ii) On 1 July, SS Co. reissued 30,000 shares at $50 per share. iii) On 1 October, Issued 50,000 ordinary shares at $90 each e. What is the number of ordinary shares issued and outstanding after item(d)? (5 marks) f. Assuming you are potential investor of SS Co., name two reasons why you would invest in the company in the form of preference share instead of ordinary share? (4 marks)
