The controller of Utah Corp. has provided you with the following information relating to its inventory:

DateCostLower of cost and NRV

Dec 31/17$274,200$246,000

Dec 31/18$369,000$333,000

Utah uses the periodic inventory system, and records its inventory at cost. An allowance account is adjusted at the end of each year to adjust the value of the inventory to the lower of cost and NRV.

Instructions

Prepare the journal entries that Utah would have prepared for its 2017 and 2018 year ends, assuming that 2017 was its first year of operations.

The controller of Utah Corp. has provided you with the following information relating to its inventory:

DateCostLower of cost and NRV

Dec 31/17$274,200$246,000

Dec 31/18$369,000$333,000

Utah uses the periodic inventory system, and records its inventory at cost. An allowance account is adjusted at the end of each year to adjust the value of the inventory to the lower of cost and NRV.

Question Three (8 marks)

An inventory taken the morning after a large theft (March 12) discloses $19,250 of goods on hand. The following additional data is available from the books:

Inventory on hand, March 1........................................... $ 29,400

Purchases received, March 1 - 11............................... 25,200

Sales (goods delivered to customers).......................... 47,250

Past records indicate that sales are made at 50% above cost.

Instructions

Estimate the inventory of goods on hand at the close of business on March 11 by the gross profit method and determine the amount of the theft loss. Show appropriate titles for all amounts in your presentation.

Question Four (9 marks)

An audit of the inventory records of Missouri Inc. identified a number of errors. These errors are summarized in Exhibit A below:

EXHIBIT A

Year

Net Income

Description

Reported

of Error

2014

$96,000

Understatement of ending inventory

$8,800

2015

$76,000

Overstatement of ending inventory

$1,200

2016

$79,200

Overstatement of ending inventory

$14,400

2017

$84,000

Understatement of ending inventory

$16,000

2018

$96,000

Overstatement of ending inventory

$4,160

Instructions

a)As financial accountant for Missouri, you have been asked to calculate the corrected net income amounts for each of the five years based on the audit findings.

Question Five(44 marks)

Idaho Inc. is a wholesale company selling special parts for the automotive industry. The company uses FIFO and a perpetual inventory system. Its inventory records for part SA-123 show the following transactions for the month of May 2018:

Date

Transaction

Units

Unit

Units

Unit

Purchased

Cost

Sold

Selling

Price

May 1

Balance

180

$10.50

May 10

Purchase

750

$10.80

May 15

Sale

(150)

$18.60

May 20

Purchase

150

$11.03

May 21

Sale

(225)

$18.75

May 23

Purchase

375

$11.10

Instructions

a)Assuming Idaho makes all sales and purchases of inventory on account, prepare the journal entries for each of the above listed transactions.

b)Now assume Idaho uses the average cost method, prepare the journal entries.