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Chapter 13: Q4BE (page 658)

Question: Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.

Units Unit Cost Total Cost

April 1 inventory 250 \(10 \) 2,500

April 15 purchase 400 12 4,800

April 23 purchase 350 13 4,550

1,000 $11,850

Compute the April 30 inventory and the April cost of goods sold using the average-cost method.

Short Answer

Expert verified

The ending inventory on April 30 was $5,175 and the cost of goods sold amounts to$6,675.

Step by step solution

01

Step-by-step-solutionStep1: Periodic inventory system

The periodic inventory system is a method of inspecting inventory at the end of the period. Thus under this method, instead of keeping track of inventory for each transaction, the inventories are inspected only at the end of the period. This is why it is called a periodic inventory system

02

Cost of goods available for sale and the average cost

Costofgoodsavailableforsale=OpeningInventory+TotalPurchases=2500+(4800+4550)=$11,850Averagecostperunit=CostofgoodsavailableforsaleTotalunits=118501000=$11.85

03

Closing inventory

Closinginventory(inunits)=Openinginventory+TotalPurchases-Sales=250+(450+350)-600=450Closinginventory(value)=Closinginventory(units)×Averagecostperunit=450X11.50=$5,175

04

Cost of goods sold

Costofgoodssold=Costofgoodsavailableforsale-Valueofclosinginventory=11850-5175=$6,675

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Most popular questions from this chapter

Indicate how unrealised holding gains and losses should be reported for investments classified as trading and held-for-collection.

Question: In determining the amount of a provision, a company using IFRS should generally measure:

(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.

(b) Using the minimum amount of the loss in the range.

(c) Using the best estimate of the amount of the loss expected to occur.

(d) Using the maximum amount of the loss in the range.

Question: The following information relates to Moran Co. for the year ended December 31, 2017: net income \(1,245.7 million; unrealized holding loss of \)10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.

Journal Entries for Fair Value and Equity Methods) The following are two independent situations.

Situation 1: Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of \(13 per

share on March 18, 2017. On June 30, Martinez declared and paid \)75,000 cash dividends to all stockholders. On December 31,

Martinez reported net income of \(122,000 for the year. At December 31, the market price of Martinez Fashion was \)15 per share.

Situation 2: Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding shares

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Prepare all necessary journal entries in 2017 for both situations.

(Fair Value Measurement Issues) Assume the same information as in E17-19 for Lilly Company. In addition,

assume that the investment in the Woods Inc. stock was sold during 2018 for \(195,000. On December 31, 2018, the following

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Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock \)100,000 \(140,000

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Instructions

(a) Compute the amount of net income or net loss that Lilly should report for 2018, taking into consideration Lilly’s securitytransactions for 2018.

(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock atDecember 31, 2018.
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