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Chapter 6: 3SE_1 (page 358)

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for\(100 each.

Requirements

1. Prepare Boston Cycle’s perpetual inventory record assuming the company usesthe specific identification inventory costing method. Assume that Boston sold 10bicycles that cost \)42 each and 24 bicycles that cost $68 each.

Short Answer

Expert verified

The total cost of goods sold based on specific identification amounts to$2,052.

Step by step solution

01

Specific identification method

The specific identification method is an inventory costing method that estimates the inventory cost based on the particular units of inventory. This inventory method is used for unique inventory items such as jewelry, real estate, etc.

02

Perpetual inventory record based on the specific identification method

Date

Purchase / Opening inventory

Sale

Balance

Unit

Cost

Amount

Unit

Cost

Amount

Unit

Cost

Amount

Oct 1

12

$42

$1,806

12

$42

$1,806

Oct 16

40

$68

$2,720

12

40

$42

$68

$4,526

Oct 31

10

24

$42

$68

$2,052

2

16

$42

$68

$1,172

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Most popular questions from this chapter

Question:This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued through Chapter 5.

Consider the December transactions for Crystal Clear Cleaning that were presentedin Chapter 5. (Cost data have been removed from the sale transactions.) Crystal Clearuses the perpetual inventory system.

Dec. 2 Purchased 1,000 units of inventory for \(4,000 on account from Sparkle

Company on terms, 5/10, n/20.

5 Purchased 1,200 units of inventory from Borax on account with terms

4/10, n/30. The total invoice was for \)6,000, which included a \(300

freight charge.

7 Returned 300 units of inventory to Sparkle from the December 2

purchase.

9 Paid Borax.

11 Sold 500 units of goods to Happy Maids for \)5,500 on account with

termsn/30.

12 Paid Sparkle.

15 Received 100 units with a sales price of \(1,100 of goods back from

customer Happy Maids.

21 Received payment from Happy Maids, settling the amount due in full.

28 Sold 500 units of goods to Bridget, Inc. on account for \)6,500. Terms

1/15,n/30.

29 Paid cash for utilities of \(550.

30 Paid cash for Sales Commission Expense of \)214.

31 Received payment from Bridget, Inc., less discount.

31 Recorded the following adjusting entries:

a. Physical count of inventory on December 31 showed 800 units of

goods on hand.

b. Depreciation, \(150.

c. Accrued salaries expense of \)2,100.

d. Estimated sales returns of \(1,500, with cost of \)540.

e. Prepared all other adjustments necessary for December (Hint: You willneed to review the adjustment information in Chapter 3 to determinethe remaining adjustments). Assume the cleaning supplies left atDecember 31 are $50.

Requirements

1. Prepare perpetual inventory records for December for Crystal Clear Cleaning usingthe FIFO inventory costing method. (Note: You must calculate the cost of goodssold on the 11th, 28th, and 31st (adjusting entry a).) Round per unit costs to twodecimal places.

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

6. If the business wanted to maximize gross profit, which method would it select?

Question:Antique Carpets’s books show the following data. In early 2020, auditors found that the ending merchandise inventory for 2017 was understated by \(8,000 and that theending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandiseinventory at December 31, 2018, was correct.

2019

2018

2017

Net Sales Revenue

\( 212,000

\) 161,000

\( 170,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\)22,000

\(28,000

\)41,000

Net cost of purchase

131,000

100,000

86,000

Cost of goods available for sale

153,000

128,000

127,000

Less: Ending Merchandise Inventory

34,000

22,000

28,000

Cost of goods sold

119,000

106,000

99,000

Gross Profit

93,000

55,000

71,000

Operating Expenses

63,000

28,000

39,000

Net Income

\( 30,000

\) 27,000

$ 32,000

Requirements

1. Prepare corrected income statements for the three years.

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using theweighted-average inventory costing method.

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

3. Which method will result in the lowest income taxes for Right Now? Why? Whichmethod will result in the highest net income for Right Now? Why?
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