Question
st as you finished your studies of inventory in BUS 285, you received a phone call from Bob. It turns out that he is considering
st as you finished your studies of inventory in BUS 285, you received a phone call from Bob. It turns out that he is considering purchasing a property to house his business. He is at the bank and they have indicated it will require the December 31, 2016 financial statements which were recently finalized and also financial statements as at and for the two months ended February 28, 2017 before making a decision about whether to finance the purchase of the property. To help him prepare the required financial statements, Bob has asked you to help him with some inventory issues. As you are aware, Economy Small Engine Repair uses a periodic inventory system but Bob knows that there are differences in value for inventory if you use a perpetual inventory system with different costing structures. Bob needs to maximize his inventory value for this loan so without "breaking the rules", he wants to know what happens if inventory records for routine parts that are easily identified like spark plugs and filters are maintained using FIFO and inventory records for things like fasteners and other bulk products are done using weighted average. Shortly after your telephone conversation, Bob emailed you the following information: ?An inventory count was performed on December 31, 2016. Included in inventory were 50 spark plugs and filters at a cost of $1.25 each and 80 liters of oil at a cost of $2.50 per liter. ?Due to the bank's requirements, another inventory count was performed on February 29, 2017. On that date, ESER had 85 spark plugs and filters and 95 liters of oil in inventory. The following are the summaries of inventory purchases and uses/sales for January 1 to February 29, 2017:
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