Question 1

Presented below are selected transactions for Scotian Corporation during July.

Jul1Sold merchandise to Brunswick Inc. for $800, terms 3/10, n/30. The merchandise sold cost $400.

2Purchased merchandise from FoundersCorporation for $4,500, terms 4/10, n/30.

3Paid freight charges of $100 on items purchased on July 2.

4Purchased merchandise from Edward Company Ltd. for $5,000, n/30.

10Received payment from Brunswick Inc. for purchase of July 1.

11Paid Founders Corporation for July 2 purchase.

Instructions

(a)Record the above transactions for ScotianCorporation, assuming a perpetual inventory system is used. The cost of goods sold on July 1 was determined to be $400.

(b)Record the above transactions for ScotianCorporation, assuming a periodic inventory system is used.

Question 2

Given the following information, prepare in good form the cost of goods sold section of an income statement, using the periodic inventory system.

Beginning inventory$15,000

Ending inventory16,000

Freight in 4,000

Purchases38,000

Purchase discounts500

Purchase returns and allowances1,800

Question 3

Owl Ltd. sells many products. Hoot is one of its popular items. Below is an analysis of the inventory purchases and sales of Hoot for the month of March. Owl uses the perpetual inventory system.

PurchasesSales

UnitsUnit CostUnitsSelling Price/Unit

Mar1Beginning inventory600$40

3Purchase10060

4Sales190$80

10Purchase10066

16Sales275120

19Sales220120

25Sales75120

30Purchase46075

Instructions

(a)Using the FIFO cost method, calculate the cost of goods sold for March. Show calculations.

(b)Using the average cost method, calculate the ending inventory at March 31. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.

Question 4

Garmin Ltd. uses the periodic inventory system and had the following inventory information available:

UnitsUnit CostTotal Cost

Jan 1Beginning inventory100$4$ 400

20Purchase500$52,500

Jul25Purchase100$6600

Nov20Purchase 300$7 2,100

1,000$5,600

A physical count of inventory on December 31 showed that there were 350 units on hand.

Instructions

Answer the following independent questions and show calculations supporting your answers.

(a)Assume that the company uses FIFO. The value of the ending inventory at December 31 is $__________.

(b)Assume that the company uses average cost. The value of the ending inventory on December 31 is $__________.

(c)Determine the difference in the amount of profit that the company would have reported if it had used FIFO instead of average cost. Would profit have been greater or less?

Question 5

Broadway Limited had an $800 credit balance in Allowance for Doubtful Accounts at December 31, 2015, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following:

Estimated Percentage

Uncollectible

Current Accounts$150,0001%

1-30 days past due15,0003%

31-60 days past due8,0006%

61-90 days past due5,00012%

Over 90 days past due 6,00030%

Total Accounts Receivable$184,000

Instructions

(a)Prepare the adjusting entry at December 31, 2015, to recognize bad debts expense.

(b)Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $800 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's bad debts.

Question 6

L&S Sales Limited had the following transactions in June 2015. L&S uses a perpetual inventory system and its cost of goods sold is 40% of the selling price.

1.Sales on account for June 2015 were $120,000.

2.$168,000 was received as payments on account during the month. This included $7,500 from Mini- Store Inc., which had previously been written off.

3.L&S received returned merchandise of $4,000 from a customer. The merchandise was unopened and was returned to the store shelves. The customer's account was credited for the full amount.

4.Colville Co. Limited contacted the credit department because it was having difficulty making payments on its account. On June 15, they signed a 5%, 2-month note for the balance in their account ($24,000).

5.On June 30, the company advanced $6,000 to an employee. There is no interest on the amount and it is due in 6 months.

6.Based on a review of the aged accounts receivable, the accountant estimates that $16,000 will be uncollectible. The balance in the Allowance for Doubtful Accounts at May 31, 2015 was a credit of $5,000.

7.The balance in accounts receivable at June 1, 2015 was $210,000. There were no other receivables at June 1, 2015.

Instructions

(a)Prepare entries for the above transactions and any month end adjustments and accruals required.

(b)Calculate the balances and show how the receivables will be shown on the statement of financial position at June 30, 2015.