Business Accounting Accounting Homework Merchandise Inventory
Picker Paradise carries a large inventory of guitars and other musical instruments. Picker uses the FIFO method and a perpetual inventory system. Company records indicate the following for a particular line of Honeydew guitars:
Date Item Quantity Unit Cost
May 1 Balance..................... 5 $70
6 Sale........................... 3
8 Purchase................... 10 80
17 Sale........................... 4
30 Sale........................... 5
Prepare a perpetual inventory record for the guitars. Then determine the amounts Picker should report for ending inventory and cost of goods sold by the FIFO method.
After preparing the FIFO perpetual inventory record in the previous example, complete the journal entries for the May 8 purchase of inventory on account and cash sale on May 17 (sale price of each guitar was $140).
Refer to the inventory data used in the first example. Assume that Picker Paradise uses the LIFO cost method. Prepare a perpetual inventory record for the guitars on the LIFO basis. Then identify the cost of ending inventory and cost of goods sold for the month.
Moss Motors estimates its inventory by the gross profit method when preparing monthly financial statements. For the past two years, gross profit has averaged 30% of net sales. Assume further that the company's inventory records reveal the following data (amount in thousands):
Inventory, March 1.........................................$ 292
Transactions during March:
Purchases...............................................6,585
Purchase discounts................................ 149
Purchase returns.................................... 8
Sales.......................................................8,657
Sales returns.......................................... 17
1. Estimate the March 31 inventory using the gross profit method.
2. Prepare the March income statement through gross profit.
