Question 1 - Peter Kalle Company had the following account balances at year-end: cost of goods sold $60,000; merchandise inventory $15,000; operating expenses $29,000; sales $108,000; sales discounts $1,200; and sales returns and allowances $1,700. A physical count of inventory determines that merchandise inventory on hand is $14,100.
Instructions
(a) Prepare the adjusting entry necessary as a result of the physical count.
(b) Prepare closing entries.
Question 2 - The trial balance of G. Durler Company at the end of its fiscal year, August 31, 2011, includes these accounts: Merchandise Inventory $17,200; Purchases $149,000; Sales $190,000; Freight-in $4,000; Sales Returns and Allowances $3,000; Freight-out $1,000; and Purchase Returns and Allowances $2,000.The ending merchandise inventory is $25,000.
Instructions - Prepare a cost of goods sold section for the year ending August 31 (periodic inventory).
Question 3 - Jones Company had 100 units in beginning inventory at a total cost of $10,000.The company purchased 200 units at a total cost of $26,000. At the end of the year, Jones had 80 units in ending inventory.
Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost.
(b) Which cost flow method would result in the highest net income?
(c) Which cost flow method would result in inventories approximating current cost in the balance sheet?
(d) Which cost flow method would result in Jones paying the least taxes in the first year?