Learning Outcomes:
1: Prepare general journal entries for merchandize operations using periodic inventory systems.
2: Compute the cost of inventory and cost of goods sold by using periodic systems using: First-In First-Out, Last-In First-Out, and Weighted Average and estimate the value of an inventory using the retail method and the gross profit method.
3: Differentiate operations related to petty cash funds and create bank reconciliation statement.
4: Determine the cost of plant assets and Compute depreciation by using straight line, declining balance and units of production depreciation methods.
Problem 1: A merchandiser frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.
Problem 2: Alhekma Co. uses a periodic inventory system. Its records show the following for the month of September, in which 200 units were sold.
|
|
|
Units
|
Unit Cost
|
Total Cost
|
| |
|
Sep-01
|
Inventory
|
300
|
$6
|
$1,800
|
|
Sep-12
|
Purchase
|
500
|
7
|
3,500
|
|
Sep-23
|
Purchase
|
400
|
8
|
3,200
|
Instructions:
a. Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods.
b. Which costing technique results in the higher ending inventory? Justify your answer.
c. Which costing technique gives the higher cost of goods sold? Justify your answer.
Problem 3:
On September 30, 2020, Almaha Company had a cash balance per books of $3,664. The statement from Abu Dhabi Islamic Bank on that date showed a balance of $10,900. A comparison of the bank statement with the Cash account revealed the following facts.
(1) Checks written in September but still outstanding $7,000.
(2) Checks written in October but still outstanding $3,100.
(3) Deposits of September 29 and 30 not yet recorded by bank $5,200.
(4) NSF check of customer returned by bank $1,200.
(5) Check No. 210 was correctly written and paid by the bank for $593. The cash payment journal reflects an entry for Check No. 210 as a debit to Accounts Payable and a credit to Cash in Bank for $539.
(6) Bank service charge for September was $50.
(7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable subsidiary ledger for $824 when Check No. 318 was correctly prepared for $284. The check cleared the bank in September.
(8) The bank collected a note receivable for the company for $3,000 plus $100 interest revenue.
Required:
a. Prepare bank reconciliation at September 30.
b. Briefly clarify one cause for the difference between to the cash balance per books and the balance per bank.
Problem 4:
Eagle Company purchased a delivery truck at a cost of $400,000 on October 1, 2020. It is estimated that the delivery truck will have a $50,000 salvage value at the end of its 5-year useful service life. During its useful life, the delivery truck is expected to be driven 150,000 miles. Actual miles driven were 10000 in 2020; 60,000; 2021, 50000; 2022, 20000; 2023; 10000 2024.
Instructions:
a. Prepare depreciation schedules for the following methods: (1) straight-line, (2) units-of-activity methods.
b. Prepare the journal entry to record 2020 depreciation under (1) straight-line, (2) units-of-activity methods.
c. Show how the truck would be reported in the December 31, 2020, balance sheet under (1) straight-line, (2) units-of-activity methods.
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