I.
Periodic inventories
TH Company uses the periodic inventory method and has the following inventory
information available for the month of November
Date
Transaction
Units
Unit cost
11/1
Beginning inventory
250
$8
11/5
Purchase No.1
300
$12
11/12
Sale No.1
(150)
11/18
Purchase No. 2
250
$16
11/25
Sale No. 2
(300)
Answer the following independent
questions and show computation supporting your
answers
1. Assume that the company uses the average cost method. What is the dollar value of the
ending inventory on Nov 30? What is the dollar value of the COGS during November?
2. Assume that the company uses the FIFO inventory method. What is the dollar value of
the ending inventory on Nov 30? What is the dollar value of the COGS during
November?
Date
11/1
11/5
11/18
Explanation
Beginning Inventory
Purchase
Purchase
Total
COGS available for sale
Units
250
300
250
800
Units Cost
$8
$12
$16
Total Cost
$2,000
$3,600
$4,000
$9,600
Ans:
1. Average cost method
- Beginning Inventory = 250 x $8 = $2,000
Purchase = (300 x $12) + (250 x $16) = $7,600
- COGS available for sale = Beginning Inventory + Purchase ( total 800 units)
= $2,000 + $7,600 = $9,600
$9,600
-
Cost per Unit =
-
Units sold = 150 + 300 = 450
Units in ending inventory = 350
Ending Inventory = 350 x $12 = $4,200
COGS = $9,600 - $4,200 = 5,400
-
800
= $12
2. FIFO method
- Units in ending inventory = 350
Date
11/18
11/5
Total
Units
250
100
350
Ending Inventory
Units Cost
$16
$12
Total Cost
$4,000
$1,200
$5,200
 Ending Inventory = $5,200
 COGS = $9,600 - $5,200 = $4,400
II.
Notes receivable
Instructions: Prepare the Journal entries to record the following events:
Jul. 1: TL Company accepted a 8%, 3-month, $10,000 note dated July 1 from TH Company
for the balance due on TL’s account
Jul. 31: TL accrued interest on the above note for the month of July
Oct. 1: Collected TH Company note in full. Assume interest was correctly accrued on August
31 and September 30
Oct. 1: Assume instead that the note is dishonored and that no interest has been accrued. TH
Company is expected to eventually pay the amount owed.
Date
Account Title
Debit
Credit
Jul.1
Note Receivable
$10,000
Account Receivable
$10,000
Jul.31
Interest Receivable
67
Interest Revenue
67
10,000 x 8% x 1/12
Oct.1
Cash
10,133
Interest Revenue
133
Note Receivable
10,000
Oct.1
Account Receivable
10,200
Note Receivable
10,000
Interest Revenue
200
III.
Plant asset disposal entries
Prepare the necessary journal entries to record the following transactions in 2018 for BCTH
Co.
March 1
Discarded old store equipment that originally cost $20,000 and had a book
value of $4,000 on the date of disposal. Assume depreciation on the
equipment has already been recorded for the current year
July 31
Sold a delivery truck for $8,000. The delivery truck originally cost $30,000
and had accumulated depreciation of $24,000 on the date of sale. Assume
the depreciation on the truck has already been recorded for the current year
Sept 30
Equipment with a 4-year useful life was purchased on January 1, 2012, for
$16,000 and was sold for $5,000. The equipment had been depreciated
using the straight-line method with an estimated salvage value of $4,000.
Depreciation expenses was last recorded on December 31, 2017.
Date
Mar.1
Jul.31
Sep.30
IV.
Account Title
Acc Depreciation – E
Loss on Disposal of Asset
Equipment
Cash
Acc Depreciation – Truck
Gain on Disposal of Asset
Equipment
Cash
Depreciation Expense
Loss on Disposal of Asset
Acc Depreciation - E
Equipment
Debit
Credit
$16,000
$4,000
20,000
8,000
24,000
2,000
30,000
5,000
3,000
11,000
3,000
16,000
Journal Entries
Date
Oct.5
Oct.8
Oct.10
Account Title
Account Payable
Cash
Inventory
Account Payable
Inventory
Cash
Debit
Credit
$15,000
$15,000
12,000
12,000
200
200
Oct.15
Oct.20
Oct.25
V.
Account Payable
Inventory - Discount
Cash
Account Receivable
Sale Revenue
COGS
Inventory
Sale Returns and Allowances
Account Receivable
Inventory
COGS
12,000
240
11,760
16,000
16,000
9,500
9,500
1,000
1,000
600
600
Multiple-step Income statement
TL Department Store
Income Statement
For the Year Ended December 31, 2018
Sales
Sales Revenue
Less: Sale discounts
Net Sales
$400,000
$20,000
380,000
Cost of Goods Sold
260,000
Gross Profit
120,000
Operating Expenses
Selling expense
Admin expense
Total operating expense
Income from operations
36,000
17,000
53,000
67,000
Other Revenues and Gains
Interest Revenue
900
Other Expense and Losses
Interest Expense
2,500
Net income
$ 63,600