1. Tic Toc Clock Shop reported the following merchandising-related transactions during June. Tic Tock Clock Shop records all purchases ""gross,"" and credit terms are precisely followed on both purchases and sales.
Prepare journal entries to record each transaction.
3-Jun Purchased $4,000 of clocks on account from Swiss Time, F.O.B. destination, terms 1/10, n/30.
5-Jun Sold a $1,500 clock to Janci Holgren on account, terms 2/10, n/eom. The customer picked up the clock from the shop.
9-Jun Paid the amount due for the purchase of June 3.
11-Jun Purchased $8,000 of clocks on account from Melbourne Clockworks, F.O.B. shipping point, terms 2/10, n/30. Freight charges of $460 were prepaid by Melbourne and added to the invoice. No discount is permitted on the freight charges.
19-Jun Sold a $3,500 clock on account, terms 2/10, n/eom. Tic Toc sold the clock F.O.B. destination, and paid the freight charges of $330.
23-Jun The customer of June 19 called to report that the clock was received damaged. An agreement was reached to reduce the invoice by 20%.
27-Jun Paid Melbourne Clockworks for the purchase of June 11.
27-Jun Janci Holgren paid for the purchase of June 5.
28-Jun The customer of June 19 paid the balance due.
2. Patti Devine owns Devine Decorating. One of her most popular items is the Remind-a-Chime digital clock. This programmable clock issues "voice-based" reminders of important events like birthdays, anniversaries, etc.
Following is the Remind-a-Clock inventory activity for January. The clocks on hand at January 1 had a unit cost of $140.
|
Purchases
|
Sales
|
Units on Hand
|
|
|
40
|
|
60 units @ $150 each
|
|
100
|
|
70 units @ $255 each
|
30
|
|
90 units @ $170 each
|
|
120
|
|
55 units @ $295 each
|
65
|
(a) If Devine uses the first-in, first-out (FIFO) inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit?
(b) If Devine uses the last-in, first-out (LIFO) inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit?
(c) If Devine uses the weighted-average inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit?
3. Park Place Luxury Autos uses the specific identification method to value its inventory. Below is a listing of automobiles that were either in beginning inventory or acquired during the year:
|
Automobile
|
Date Acquired
|
Cost
|
|
Bentley
|
Beginning inventory
|
$ 120,000
|
|
Rolls Royce
|
Beginning inventory
|
160,000
|
|
Cadillac
|
January
|
40,000
|
|
Lexus
|
March
|
50,000
|
|
Land Rover
|
June
|
60,000
|
|
Jaguar
|
July
|
42,000
|
|
Porsche
|
September
|
75,000
|
|
Mercedes
|
November
|
85,000
|
|
BMW
|
December
|
64,000
|
|
Infiniti
|
December
|
39,000
|
Park Place uses the specific identification method. Total sales during the year were $600,000. Automobiles in ending inventory were the Rolls Royce, Lexus, Jaguar, and BMW. Determine the ending inventory, cost of goods sold, and gross profit for Park Place.
4. Doyle's Art buys and sells paintings from emerging artists. The values of the works are prone to fluctuate considerably based on the ever changing stature of a particular artist. Following is a listing of 6 paintings, along with their costs, estimated selling prices, and expected selling costs (inclusive of commissions and shipping).
|
Painting
|
Cost
|
Estimated Selling Price
|
Estimated Selling Expense
|
|
Fire on Hill
|
$ 1,000
|
$ 1,400
|
$ 400
|
|
Horses in Aspen Grove
|
2,500
|
800
|
100
|
|
Baby's First Smile
|
3,000
|
6,000
|
500
|
|
Endless War
|
2,000
|
2,200
|
300
|
|
Rain Drop on Cactus
|
1,500
|
2,500
|
400
|
|
Election Day Upset
|
2,300
|
1,600
|
200
|
(a) What unit value should be attached to each painting, assuming item-by-item application of the lower-of-cost-or-net-realizable-value rule?
(b) Assuming an item-by-item application of the lower-of-cost-or-net-realizable-value rule, what journal entry is needed to reduce Election Day Upset?
(c) As a general rule, is the item-by-item approach required? Is the item-by-item approach the most "conservative?"
(d) If an item of inventory is written down, but subsequently recovers in value during a subsequent year, can it be written back up?
5. The Quilting Pad is a retail store that sells materials for custom quilts. The store has a quilting room where quilters gather to sew and visit.
The store's inventory consists of bolts of fabrics, spools of thread, and trays of various batting and backing material. Customers generally select what they need and pay for what they use. The retail price of goods is clearly marked on the bolts, spools, and trays. The Quilting Pad has virtually no problem with theft or shortages of inventory.
It is virtually impossible to track inventory in any detailed fashion. The store simply marks up all goods by a constant percentage. The mark up formula has been consistently applied to all items in inventory for many years.
The Quilting Pad uses the retail inventory technique. Following is information for 20X7:
|
Beginning inventory at cost
|
$ 46,800
|
|
Beginning inventory at retail
|
78,000
|
|
Cost of purchases of inventory during the year
|
230,000
|
At the end of the year, the Quilting Pad's inventory was physically counted, and it was determined that $100,000 was the retail value of goods on hand.
Calculate the cost to retail percentage by analyzing the beginning inventory data. Apply the retail method to estimate the sales and gross profit for 20X7.
6. Dine-Corp International publishes ratings and reviews of the world's finest restaurants. Following are facts you need to prepare Dine-Corp's March bank reconciliation:
|
Balance per company records at end of month
|
$ 72,644.12
|
|
Bank service charge for the month
|
44.00
|
|
NSF check returned with bank statement
|
1,440.66
|
|
Note collected by the bank during the month
|
45,000.00
|
|
Outstanding checks at month end
|
31,553.57
|
|
Interest on note collected during the month
|
4,500.00
|
|
Balance per bank at end of month
|
144,223.99
|
|
Deposit in transit at month end
|
7,989.04
|
Attachment:- Problems.xls