Chapter 3 EOC assignment

Complex  Moderate  Simple How many questions that List the question that you are not List the brief List the exercises that you are not Problems & Critical Thinking Complex  Moderate

Complex  Moderate  Simple How many

questions that

List the question

that you are not

List the brief

List the exercises

that you are not

Problems & Critical Thinking

Complex  Moderate  Simple 

problems that

you did answer?

List the problems

that you are not

Q6:

Specific identification is‌used‌to‌track‌and‌cost‌specific‌and‌identifiable‌inventory‌items‌that‌are‌

either‌in‌or‌out‌of‌stock‌on‌an‌individual‌basis.‌This‌is‌done‌with‌items‌a‌company‌has‌identified‌via‌RFID‌tag,‌stamped‌receipt‌date,‌or‌serial‌number.‌

FIFO is‌an‌acronym‌for‌first-in,‌first-out‌and‌means‌that‌the‌oldest‌inventory‌items‌are‌recorded‌

Q9:

1.‌Restaurants,‌grocers‌and‌other‌businesses‌working‌with‌perishables‌will‌obviously‌want‌to‌use‌FIFO.‌The‌first‌products‌in‌really‌are‌the‌first‌products‌out‌in‌that‌situation,‌and‌taking‌inventory‌like‌that‌will‌help‌company‌keep‌a‌realistic‌view‌of‌inventory‌costs

2.‌LIFO‌will‌report‌the‌lowest‌income,‌while‌specific‌identification‌and‌the‌weighted‌average‌method‌both‌fall‌in‌between

3.‌FIFO‌or‌the‌specific‌identification‌methods‌keep‌precise‌track‌of‌‌historical‌costs‌compared‌with‌revenue

The‌periodic‌system‌relies‌upon‌an‌occasional‌physical‌count‌of‌the‌inventory‌to‌determine‌the‌ending‌inventory‌balance‌and‌the‌cost‌of‌good‌sold,‌while‌the‌perpetual‌system‌keeps‌continual‌track‌of‌inventory‌balances.‌The‌perpetual‌uses‌book‌records‌while‌periodic‌uses‌physical‌verification.‌About‌the‌updation,‌periodic‌updates‌at‌the‌end‌of‌accounting‌period‌and‌the‌perpetual‌updates‌continuously

Chapter 5 "Reporting and Analysing Receivables"

Purchase‌Discounts:‌Purchase‌discounts‌are‌the‌reductions‌that‌retailers‌and‌stores‌get‌from‌their‌wholesalers.‌It‌offered‌to‌stores‌can‌depend‌on‌variety‌of‌factors‌such‌as‌size‌of‌order,‌a‌cut‌in‌prices‌of‌raw‌material,‌etc

Q10:

Because‌purchase‌returns‌can‌be‌increased‌the‌Inventory‌and‌Accounts‌Payable‌accounts‌when‌the‌goods‌were‌originally‌purchased,‌it‌will‌decrease‌these‌accounts‌when‌goods‌are‌returned,‌or‌when‌it‌is‌granted‌an‌allowance

Q11:

A‌purchase‌discount‌is‌a‌reduction‌in‌price‌that‌a‌supplier‌or‌wholesaler‌offers‌to‌a‌retailer‌or‌store

A‌sales‌discount‌is‌a‌reduction‌in‌price‌the‌customer‌receives‌when‌he‌buys‌a‌product‌from‌a‌retailer‌or‌store

A‌quantity‌discount‌is‌an‌incentive‌offered‌to‌a‌buyer‌that‌results‌in‌a‌decreased‌cost‌per‌unit‌of‌

Q13:

Because‌purchase‌returns‌can‌be‌increased‌the‌Inventory‌and‌Accounts‌Payable‌accounts‌when‌the‌goods‌were‌originally‌purchased,‌it‌will‌decrease‌these‌accounts‌when‌goods‌are‌returned,‌or‌when‌it‌is‌granted‌an‌allowance

(d)‌Goods‌in‌transit‌to‌Helgeson‌from‌a‌supplier‌shipped‌FOB‌shipping‌point‌‌be‌included‌in‌the‌inventory

(e)‌Goods‌in‌transit‌to‌a‌customer,‌shipped‌FOB‌shipping‌point‌‌not‌be‌included‌in‌the‌inventory(f)‌Goods‌in‌transit‌to‌Helgeson‌from‌a‌supplier,‌shipped‌FOB‌destination‌‌not‌be‌included‌in‌the‌inventory

BE6-2:

The‌correct‌cost‌of‌the‌inventory‌on‌august‌31‌=‌Inventory‌Count‌on‌august‌31‌-‌‌inventory‌held‌on‌consignment‌for‌a‌local‌designer‌-‌inventory‌that‌had‌been‌sold‌to‌customers‌but‌was‌being‌held‌for‌alterations‌+‌The‌second‌shipment‌cost‌plus‌freight‌charges‌terms‌FOB‌shipping‌point‌shipped‌on‌august‌28

Ending‌inventory‌=‌2‌x‌$600‌+‌$475‌=‌$1,675

BE6-4:

date units cost total units cost total units cost total

date units cost total units cost total units cost totalApr.‌1 15 $180 $2,700

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalPurchase

s 250 $70 $17,500 250 $70 $17,500Purchase 500 $100 $50,000 250 $70

500 $100 $67,500Sales‌ 250 $70

0

125 $100

900 $120 $120,50

0Cost‌of‌goods‌sold‌=‌$22,500‌+‌$32,500‌=$55,000

Ending‌inventory‌=‌$120,500

(b)‌)‌average‌cost

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalPurchase

s

250 $70 $17,500 250 $70 $17,500

Purchase

s 500 $100 $50,000 750 $90 $67,500Sales‌ 300 $90 $27,00

0 450 $90 $40,500Purchase

0

1025 $110 $112,750

Cost‌of‌goods‌sold‌=‌$27,000‌+‌$35,750‌=$62,750

BE6-7:

(a)‌Average.‌The‌ending‌inventory‌is‌valued‌at‌the‌average‌of‌the‌cost‌of‌the‌product,‌including‌earlier‌costs.‌Since‌this‌formula‌yields‌a‌high‌ending‌inventory,‌the‌result‌will‌not‌be‌closer‌to‌replacement‌cost.‌This‌result‌is‌achieved‌with‌the‌FIFO‌cost‌formula

(b)‌FIFO.‌The‌cost‌of‌goods‌is‌valued‌using‌the‌earlier,‌higher‌costs.‌Since‌the‌revenue‌reflects‌current‌lower‌prices,‌the‌FIFO‌cost‌formula‌does‌not‌match‌current‌costs‌against‌revenue.‌This‌result‌is‌better‌achieved‌by‌the‌average‌cost‌formula

BE6-8:

Total‌assets‌in‌the‌statement‌of‌financial‌position‌will‌be‌overstated‌by‌the‌amount‌that‌ending‌inventory‌is‌overstated,‌$25,000.‌Total‌liabilities‌will‌also‌be‌overstated‌by‌$25,000‌(assuming‌the‌"supplier"‌was‌not‌paid).‌Shareholders'‌equity‌will‌not‌be‌affected

BE6-9:

Impact‌during‌current‌year:

- Asset:‌as‌closing‌stock‌is‌understated‌(which‌is‌part‌of‌asset)‌therefore‌assets‌will‌also‌be‌understated‌by‌$7000

- Shareholder‌Equity:‌As‌net‌profit‌is‌also‌understated‌by‌$7000‌(which‌is‌added‌in‌

shareholder's‌equity)‌therefore‌shareholder's‌equity‌will‌also‌be‌understated

- Liability:‌Shareholder‌equity‌is‌part‌of‌liability‌side‌and‌if‌it‌is‌understated‌therefore‌net‌liabilities‌will‌also‌be‌understated

Impact‌in‌next‌year:

- Assets:‌Opening‌stock‌does‌not‌reflect‌in‌assets‌at‌the‌end‌of‌year‌therefore‌therefore‌there‌will‌be‌no‌impact‌on‌assets

- Shareholder‌equity:‌The‌shareholder's‌equity‌was‌understated‌by‌$7000‌last‌year‌howeverin‌this‌year‌there‌is‌overstatement‌of‌net‌profit‌of‌$7000‌which‌means‌both‌are‌off‌setted‌and‌there‌is‌no‌impact‌on‌total‌shareholder's‌equity

- Liability:‌As‌in‌two‌years‌all‌the‌error‌are‌washed‌out/off‌setted‌and‌shareholders's‌equity‌is‌also‌properly‌stated‌therefore‌there‌is‌no‌impact‌on‌liabilities

BE6-10:

(a)

Debit‌inventory‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌4‌500

Debit‌purchases‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌6‌000

5.‌Goods‌that‌are‌still‌in‌transit‌and‌were‌purchased‌FOB‌destination‌from‌a‌supplier‌on‌January‌25‌‌Do not include

6.‌Goods‌that‌are‌still‌in‌transit‌and‌were‌purchased‌FOB‌shipping‌point‌from‌a‌supplier‌on‌January‌25‌‌Include in inventory‌

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

100 $225 $33,000Sales‌ 50 $210

25 $225 $16,12

5

75 $225 $16,875Purchases 200 $275 $55,000 75 $225

200 $275 $71,875Sales 75 $225

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

g‌

50 $210

100 $225 $33,000Sales‌ 75 $220 $16,50

0

75 $220 $16,500

Purchases 200 $275 $55,000 75 $220

200 $275 $71,500Sales 250 $260 $65,00

0 25 $260 $6,500Purchases 300 $290 $87,000 25 $260

300 $290 $93,500Sales 200 $289 $57,80

E6-5:

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

g‌

500 $125 $62,500

Purchases 1,200 $127 $152,40

0 1,700 $126 $214,200Sales 1,000 $126 $126,00

0 700 $126 $88,200Purchases 1,800 $128 $87,000 2,500 $127 $317,50

0Sales 1,600 $127 $203,20

cost‌of‌the‌ending‌inventory‌‌=‌$243,200

(b)‌Gross‌profit =‌Revenue‌-‌Cost‌of‌Goods‌Sold‌=‌(1,000‌x‌200‌+‌1,600‌x‌205)‌-‌329,200‌=‌198,800

gross‌profit‌margin‌=‌‌=‌0,38

(c)

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

900 $128 $204,10

0 900 $128 $115,200Purchases 1,000 $129 $129,00

gross‌profit =‌197,900

gross‌profit‌determined‌in‌part‌(b)‌higher‌than‌using‌FIFO

E6-6:

(a)FIFO

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost total

4,400 $6$7 $38,600 1,500100 $7$8 $12,700Cost‌of‌goods‌sold‌=‌$52,100

Ending‌inventory‌=‌$12,700

Average

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost total

Beginnin

Purchases 2,300 $6 $13,800 3,800 $5.6 $21,280Sales 2,500 $5.6 $14,000 1,300 $5.6 $7,280

Purchases 4,500 $7 $31,500 5,800 $6.7 $38,860

Purchases 1,500 $8 $12,000 7,300 $6.9 $50,370Sales 5,700 $6.9 $39,330 1,600 $6.9 $11,040Cost‌of‌goods‌sold‌=‌$53,330

(b)‌the‌average‌cost‌method‌results‌in‌a‌higher‌cost‌of‌goods‌sold‌because‌the‌cost‌of‌inventory‌isrising

(c)‌the‌FIFO‌cost‌method‌results‌in‌a‌higher‌profit‌becauses‌it‌produces‌the‌lower‌cosr‌of‌goods‌sold‌when‌prices‌are‌rising

(d)‌the‌FIFO‌cost‌method‌results‌in‌a‌higher‌ending‌inventory‌because‌the‌cost‌of‌invetory‌is‌rising

(e)‌both‌cost‌methods‌result‌in‌the‌same‌pre-tax‌cash‌flow.‌The‌cost‌methods‌don’t‌change‌the‌pre-tax‌cash‌flows‌of‌a‌company

E6-7:

(a)

units cost total units cost total units cost total

9,000 $12 $108,00

0

9,000 $12 $108,00

015,00

0

$14 $210,00

0

9,000 $1215,00

0

$14 $318,00

0

9000 $1213,00

0

$14 $290,00

02,000 $14 $28,000

(b)

units cost total units cost total units cost total

9,000 $12 $108,00

0 9,000 $12 $108,00015,00

0

$14 $210,00

0

24,000

$13.25

$318,00022,00

0

$13.25

$291,500

Income‌before‌income‌tax 35,000 33,500Income‌tax‌expense‌(30%) 10,500 10,050

E6-8:

(a)

2018 2017Cost‌of‌goods‌sold 174,000 150,000

units cost total units cost total units cost totalBeginnin

5,000 $214,000 $20.5 $227,00

0Sales‌ 2,000 $20 2,000 $21

3,000 $21 $103,00

0 4,000 $20.5 $124,000Purchases 4,000 $20.8 $83,200 2,000 $21

4,000 $20.54,000 $20.8 $207,20

0Sales‌ 2,000 $21

4,000 $20.5 $124,00

04,000 $20.8 $83,200

Cost‌of‌goods‌sold‌=‌$103,000‌+‌$124,000‌=‌$227,000

Ending‌inventory‌=‌$83,200

Average

units cost total units cost total units cost totalBeginnin

0Sales‌ 5,000 $20.6 $103,00

0 6,000 $20.6 $123,600Purchases 4,000 $20.8 $83,200 10,00

0 $20.68 $206,800Sales‌ 6,000 $20.6

8

$124,080

E6-14:

(a)FIFO

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

g‌

1,500 $5 $7,500

Purchases 2,300 $6 $13,800 1,500 $5

2,300 $6 $21,300Purchases 4,500 $7 $31,500 1,500 $5

2,300 $64,500 $7 $52,800Purchases 1,500 $8 $12,000 1,500 $5

2,300 $64,500 $71,500 $8 $64,800Sales‌ 1,500 $5

2,300 $6 100 $74,400 $7 $52,100 1,500 $8 $12,700ending‌inventory‌=‌$12,700

cost‌of‌goods‌sold‌=‌$52,100

Average

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

g‌

1,500 $5 $7,500Purchases 2,300 $6 $13,800 3,800 $5.6 $21,280Purchases 4,500 $7 $31,500 8,300 $6.4 $53,120Purchases 1,500 $8 $12,000 9,800 $6.6 $64,680Sales‌ 8,200 $6.6 $54,120 1,600 $6.6 $10,560ending‌inventory‌=‌$10,560

Intermediate Financial Accounting - Volume 1 (Version 2019 - Revision A) by (Glenn

Arnold & Suzanne Kyle)‌

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

g‌

8 550 4,400

Purchases 50 560 28,000 8 550

50 560 32,400Purchases 10 575 5,750 8 550

50 560

10 575 38,150Sales‌ 8 550 43 560

7 560 8,320 10 575 29,830Purchases 12 572 6,864 43 560

10 575

12 572 36,694Sales‌ 23 560 12,880 20 560

10 575

12 572 23,814Cost‌of‌goods‌sold‌=‌21,200

Balance‌‌inventory‌=‌23,814

7-5

Purchases Cost of goods sold Ending inventory

units cost total units cost total units cost totalBeginnin

g‌

8 550 4,400

Purchases 50 560 28,000 58 558.6

2 32,399.96Purchases 10 575 5,750 68 561.0

3 38,150.04Sales‌ 15 561.0

636,598.9

=‌275,000‌+‌(650,000‌–‌16,000)‌–‌(955,000‌-‌35%‌x‌955,000‌)‌–‌(90,000‌x‌(100%-35%))‌

units cost total units cost total units cost totalBeginnin

g‌

2000 0.50 1000Sales‌‌ 1200 0.50 600 800 0.50 400Purchases 1000 2.00 2000 1800 1.33 2394Purchases 500 1.00 500 2300 1.26 2898Sales‌ 2000 1.26 2520 300 1.26 378Purchases 1000 2.50 2500 1300 2.21 2873

Because‌of‌this‌mistake,‌the‌2022‌opening‌inventory‌was‌also‌understated‌by‌$2,000,‌causing‌cost‌of‌goods‌sold‌to‌be‌understated‌and‌gross‌profit‌overstated‌by‌$2,000

ii.‌The‌2023‌ending‌inventory‌was‌overstated‌by‌$5,000‌so‌that‌cost‌of‌goods‌sold‌is‌overstated‌and‌gross‌profit‌is‌understated‌

units cost total units cost total units cost totalBeginnin

g‌

50 80 4000Purchases 110 90 9900 160 86.88 13900.8Sales‌ 130 86.88 11294.4 30 86.88 2606.4Purchases 120 70 8400 150 73.38 11007Sales‌ 120 73.38 8805.6 30 73.38 2201.4Purchases 20 60 1200 50 68.03 3401.5(a)

Debit‌cost‌of‌goods‌sold‌‌‌901.5

Credit‌inventory‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌901.5

P6-6B:

units cost total units cost total units cost totalBeginnin

g‌

60 140 8400

Purchases 100 130 13000 60 140

100 130 21400Sales‌ 60 140

60 130 16200 40 130 5200Purchases 35 120 4200 40 130

35 120 9400Sales‌ 40 130

20 120 7600 15 120 1800Purchases 15 110 1650 15 120

15 110 3450(a)

units cost total units cost total units cost totalBeginnin

g‌

100 30 3,000Purchases 500 42 21,000 600 40 24,000Sales‌ 450 40 18,000 150 40 6,000Purchases 750 44 33,000 900 43.33 38,997Sales‌ 800 43.33 34,664 100 43.33 4,333Purchases 600 46 27,600 700 45.62 31,934(a)‌

2.2016‌total‌and‌net‌assets‌were‌overstated‌by‌$2,000.‌2017‌total‌assets‌and‌net‌assets‌werecorrect.

Chapter 5 "Reporting and Analysing Receivables"

CT5-5

Rita‌Pelzer‌is‌a‌new‌employee‌and‌is‌placed‌in‌a‌responsible‌position‌and‌she‌is‌pressured‌by‌supervisors‌to‌continue‌unethical‌work‌(not‌according‌to‌rules)‌previously‌done‌by‌the‌previous‌supervisor‌(Jamie‌Caterino).‌Rita's‌work‌should‌not‌be‌eligible‌for‌cash‌discounts.‌So‌Rita‌experiences‌a‌dilemma‌between‌following‌Jamie‌'s‌words‌or‌opposing‌her‌with‌the‌risk‌that‌she‌might‌lose‌her‌job

Cash‌discounts‌are‌deductions‌given‌for‌buying‌goods‌in‌bulk,‌usually‌expressed‌as‌a‌percent.‌The‌price‌calculated‌at‌the‌buyer‌is‌the‌price‌according‌to‌the‌list‌(list‌price)‌minus‌the‌rebate‌