ACCT 301 Connect Homework Chapter 8 solutions complete answers

ACCT 301 Connect Homework Chapter 8 solutions complete answers 

 

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Question 1

 

A company began its fiscal year with inventory of $197,000. Purchases and cost of goods sold for the year were $956,000 and $990,000, respectively.

 

What was the amount of ending inventory?

 

Question 2

 

On December 28, 2021, Videotech Corporation (VTC) purchased 12 units of a new satellite uplink system from Tristar Communications for $25,000 each. The terms of each sale were 2/10, n/30. VTC uses the gross method to account for purchase discounts and a perpetual inventory system. VTC paid the net-of-discount amount on January 6, 2022.

 

Prepare the journal entries on December 28 and January 6 to record the purchase and payment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

Question 3

 

Esquire Inc. uses the LIFO method to report its inventory. Inventory at January 1, 2021, was $600,000 (24,000 units at $25 each). During 2021, 88,000 units were purchased, all at the same price of $30 per unit. 89,000 units were sold during 2021.

 

Assuming an income tax rate of 25%, what is LIFO liquidation profit or loss that the company would report in a disclosure note accompanying its financial statements?

 

Question 4

 

John’s Specialty Store uses a perpetual inventory system. The following are some inventory transactions for the month of May:

 

John’s purchased merchandise on account for $5,900. Freight charges of $750 were paid in cash.

 

John’s returned some of the merchandise purchased in (1). The cost of the merchandise was $1,050 and John’s account was credited by the supplier.

 

Merchandise costing $3,250 was sold for $6,100 in cash.

 

Prepare the necessary journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

Question 5

 

On July 15, 2021, the Nixon Car Company purchased 1,500 tires from the Harwell Company for $46 each. The terms of the sale were 3/10, n/30. Nixon uses a perpetual inventory system and the gross method of accounting for purchase discounts.

 

1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2021.

 

2. Prepare the journal entry for the payment, assuming instead that it was made on August 15, 2021.

 

Question 6

 

Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021:

 

Inventory on hand—2,400 units; cost $5.70 each.

 

Purchased 12,000 units for $5.90 each.

 

Sold 9,600 units for $12.40 each.

 

Purchased 7,200 units for $6.00 each.

 

Sold 8,600 units for $11.40 each.

 

Purchased 4,400 units for $5.80 each.

 

Inventory on hand—7,800 units.

 

Using calculations based on a periodic inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using each of the following cost flow methods.

 

Question 7

 

The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning inventory of 23,000 units consisted of the following, listed in chronological order of acquisition:

 

13,500 units at a cost of $7.00 per unit = $94,500

 

9,500 units at a cost of $8.00 per unit = 76,000

 

During 2021, inventory quantity declined by 13,000 units. All units purchased during 2021 cost $11.00 per unit.

 

Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note, assuming the amount determined is material.

 

Question 8

 

The following inventory transactions took place near December 31, 2021, the end of the Rasul Company's fiscal year-end:

 

On December 27, 2021, merchandise costing $2,000 was shipped to the Myers Company on consignment. The shipment arrived at Myers's location on December 29, but none of the merchandise was sold by the end of the year. The merchandise was not included in the 2021 ending inventory.

 

On January 5, 2022, merchandise costing $8,000 was received from a supplier and recorded as a purchase on that date and not included in the 2021 ending inventory. The invoice revealed that the shipment was made f.o.b. shipping point on December 28, 2021.

 

On December 29, 2021, the company shipped merchandise costing $12,000 to a customer f.o.b. destination. The goods, which arrived at the customer’s location on January 4, 2022, were not included in Rasul's 2021 ending inventory. The sale was recorded in 2021.

 

Merchandise costing $4,000 was received on December 28, 2021, on consignment from the Aborn Company. A purchase was not recorded and the merchandise was not included in 2021 ending inventory.

 

Merchandise costing $6,000 was received and recorded as a purchase on January 8, 2022. The invoice revealed that the merchandise was shipped from the supplier on December 28, 2021, f.o.b. destination. The merchandise was not included in 2021 ending inventory.

 

Select whether Rasul correctly accounted for each of the above transactions.

 

Question 9

 

Ferris Company began January with 6,000 units of its principal product. The cost of each unit is $9. Merchandise transactions for the month of January are as follows:

 

1. Calculate January's ending inventory and cost of goods sold for the month using FIFO, periodic system.

 

Question 10

 

Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron’s December 31, 2021, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):

 

The replacement cost of the grills throughout 2022 was $1,200. Cast Iron sold 45,000 grills during 2022. The company's selling price is set at 200% of the current replacement cost.

 

1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 under two different assumptions. First, that Cast Iron purchased 46,000 units and, second, that Cast Iron purchased 24,000 units during the year.

 

4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 assuming that Cast Iron purchased 46,000 units (as per the first assumption) and 24,000 units (as per the second assumption) during the year and uses the FIFO inventory cost method rather than the LIFO method.