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I-08.03 Ali Naeem was recently placed in charge of inventory accounting for Sialkot Surgical Supply. This company is located in Pakistan and deals in surgical supplies for global export. The company has been using the last-in, first-out inventory method applied on a perpetual basis. The company's export trade is denominated and settled in dollars, and that currency is used within the company's ledger. Ali's responsibility is to bring Sialkot Surgical's inventory accounting into conformity with international accounting standards that have been embraced by the Institute of Chartered Accountants of Pakistan. As a result of his research, Ali was surprised to learn that LIFO does not have global acceptance and it is not a GAAP method in his country. Below is January's preliminary inventory schedule for surgical clamps. This schedule was prepared on a LIFO basis. Date 1-Jan 5-Jan Purchases Sales Cost of Goods Sold 9,000 @ $35 = $315,000 7,000 X $21 = $147,000 2,000 X $20 = $ 40,000 $187,000 7,000 X $21 = $147,000 ### ### 4,000 X $22 = $ 88,000 ### ### 3,000 @ $37 = $111,000 3,000 X $22 = $66,000 Balance 5,000 X $20 = $100,000 5,000 X $20 = $100,000 7,000 X $21 = $147,000 $247,000 3,000 X $20 = $ 60,000 3,000 X $20 = $ 60,000 4,000 X $22 = $ 88,000 $148,000 3,000 X $20 = $ 60,000 1,000 X $22 = $ 22,000 $ 82,000 3,000 X $20 = $ 60,000 1,000 X $22 = $ 22,000 $ 82,000 I-08.03 (a Examine Sialkot's LIFO inventory schedule, and redo the presentation assuming perpetual FIFO. For this problem, ) you may assume that the beginning inventory would be the same as under LIFO. (b Examine Sialkot's LIFO inventory schedule, and redo the presentation assuming a moving average method. For ) this problem, you may assume that the beginning inventory would be the same as under LIFO. (c Prepare journal entries necessary to reflect the FIFO perpetual application. ) (d Show that the Inventory account balance resulting from part (c) agrees with the schedule from part (a). If Ali ) applied FIFO on a periodic basis, rather than a perpetual basis, would the same results occur? (e By applying FIFO, rather than LIFO, will Sialkot Surgical's income be increased or decreased? ) (f) Do you suspect that global divergence in accounting practices can contribute to difficulties in cross-border financing and global trade? Name: Date: (a) I-08.03(a,b) Section: FIFO perpetual: Date Purchases Sales 1-Jan 7,000 X $21 = $147,000 ### 9,000 @ $35 = $315,000 ### 4,000 X $22 = $ 88,000 ### Balance 5,000 X $20 = $100,000 5-Jan ### Cost of Goods Sold 3,000 @ $37 = $111,000 Name: Date: (b) I-08.03(a,b) Section: Moving average: Date Purchases Sales 1-Jan 7,000 X $21 = $147,000 ### 9,000 @ $35 = $315,000 ### 4,000 X $22 = $ 88,000 ### Balance 5,000 X $20 = $100,000 5-Jan ### Cost of Goods Sold 3,000 @ $37 = $111,000 Name: Date: I-08.03(c-f) Section: (c) GENERAL JOURNAL Date Accounts 7-Jan Purchased $147,000 of inventory on account (7,000 X $21) 12-Jan Sold merchandise on account (9,000 X $35) 12-Jan To record the cost of merchandise sold 17-Jan Purchased $88,000 of inventory on account (4,000 X $22) 26-Jan Sold merchandise on account (3,000 X $37) 26-Jan To record the cost of merchandise sold Debit Credit Name: Date: (d) (e) (f) Section: I-08.03(c-f)