Section 1-INTRODUCTION TO ACCOUNTING FOR INVENTORY

1.Your calendar year company places the following orders on December 27. Indicate which of the orders will be reflected on this year's financial statements. (Answer Yes or No at the end of each sentence.)

a.Goods shipped December 28, FOB shipping point and received January 2.

b.Goods shipped December 27, FOB destination and received January 4.

c.Goods shipped January 2, FOB shipping point and received January 3.

d.Goods shipped FOB destination December 28 and received December 30.

2.Your company places the following orders on September 25. Indicate which orders will be reflected on the balance sheet for the year ended September 30. (Answer Yes or No at the end of each sentence.)

a.Goods are shipped FOB destination September 28 and received September 30.

b.Goods are shipped FOB destination September 27 and received October 2.

c.Goods are shipped FOB destination September 28 and received October 2.

d.Goods are shipped FOB shipping point October 1 and received October 3.

3.Skipped on purpose.

4.Fill in the missing data in the following table: (A is filled in as an example.)

A

B

C

D

E

Beginning inventory

$10,000

$12,000

$8,000

Purchases

$20,000

$16,000

$15,000

Goods available for sale

30,000

$30,000

$31,000

Ending inventory

$5,000

$7,000

$13,000

$9,000

Cost of goods sold

25,000

$25,000

$17,000

$12,000

American Institute of Professional Bookkeepers, 2010

Section 2-INVENTORY RECORDKEEPING USING THE PERPETUAL METHOD

Insert journal entries below each exercise.

1.On July 13, Ainsley Co. orders inventory with an invoice price of $20,000, FOB shipping point. On July 17, the goods and invoice are received. On July 21, Ainsley pays the invoice in full. On July 30, the inventory is sold on account for $30,000. Prepare the journal entries to record each transaction under the perpetual method.

2.Cooke Enterprises orders inventory from Advantage Systems, FOB shipping point. The units list for $10,000, but Cooke gets a 5% trade discount. Freight is $150, which Cooke pays the trucker upon delivery. Before paying the invoice, Cooke notices that goods were damaged and returns the entire shipment. Prepare the journal entries to record each transaction under the perpetual method.

3.Wasatch Tech purchases goods with an invoice price of $4,200 and terms of 2/10, n/30 and pays the net amount after 8 days. Prepare the journal entries to record the purchase and payment if Wasatch books cash discounts:

a.at gross.

b.at net.

4.Good Thymes Produce purchases goods with an invoice price of $6,300 and terms of 3/10 n/30. It pays the full amount after 15 days. Prepare the journal entries to record the purchase and payment if Good Thymes records cash discounts:

a.at gross.

b.at net.

5.GemStone sells 500 units of inventory for $12,000 on account. The units cost $11 each. The customer returns 50 units before paying the invoice. Prepare the journal entries to record each transaction under the perpetual method.

Section 3-INVENTORY RECORDKEEPING USING THE PERIODIC METHOD

Insert journal entries below each exercise.

1.On April 10, MDC orders inventory with an invoice price of $18,000, FOB destination. MDC receives the goods and invoice on April 13 and pays the invoice in full on April 20. On April 30, the inventory is sold for $25,000 cash. Prepare the journal entries to record each transaction under the periodic method.

2.McClain Enterprises orders inventory that lists for $4,000, including $100 for shipping, and is offered a 5% trade discount. Terms are FOB shipping point. McClain receives the shipment, but before paying the invoice, McClain sees that half the units are damaged and returns them. Prepare the journal entries to record each transaction under the periodic method.

3.skipped

4. skipped

5.Timpany Products sells 400 units of inventory for $16,000 on account. The goods cost Timpany $17 per unit. Before Timpany receives payment, the customer returns 100 units. Prepare the journal entries to record each transaction under the periodic method.

Section 4-INVENTORY COSTING THE WEIGHTED-AVG. AND MOVING-AVG. METHODS

You can show your work or just enter the answers. Where there are tables, (and even when there aren't) you can copy and paste data into Excel to make the calculations easier.

1.FlipCo, which uses the periodic method and weighted average costing, begins operations in 20X8. On January 15, FlipCo purchases 20 units at $6 each; on March 21, 30 units at $7.00 each, on June 1, 450 units at $5.25 each, and on November 12, 50 units at $6.25 each.

a.What is FlipCo's cost per unit?

b.If ending inventory is 125 units, what is FlipCo's 20X8 ending inventory and COGS?

2.CommerceCo. provides you with the following information:

December 31, 20X8

Ending inventory of 600 units

$8,800

January 28, 20X9

Purchase of 700 units @ $23

16,100

January 28, 20X9

Freight for purchase

500

October 5, 20X9

Purchase of 900 units @ $25

22,500

October 9, 20X9

Return of 200 units @ $25

5,000

On December 31, 20X9, there are 1,200 units on hand. Using the weighted average method, what is cost of goods sold on CommerceCo's 20X9 income statement?

3.RichCo starts up in 20X9. The company makes the following purchases:

Purchase date

Units purchased

Unit cost

Total cost

January 15

700

$16

$ 11,200

April 12

2,600

$17

44,200

June 7

3,300

$19

62,700

August 25

1,300

$22

28,600

September 5

5,100

$24

122,400

December 11

900

$27

24,300

RichCo's 20X9 year-end physical count finds 2,600 units on hand. If RichCo uses weighted-average costing, what is 20X9 goods available for sale, ending inventory, and COGS?

4.PrimeCo started operations in July and uses moving-average costing under the perpetual method. Transactions from July through October are:

PurchasesSales

July 212,000 @ $8

August 2 800 @ $10

August 21800 @ $11

September 111,000 @ $ 9

October 11400 @ $14

October 15100 @ $15

Prepare the journal entries that should be recorded for the three sales.