need solutions to these 3 questions below: 1. Premier Bank and Trust is consider
ID: 2375912 • Letter: N
Question
need solutions to these 3 questions below:
1. Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that further discussions with Alou%u2019s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $297,000. Discussions with the accountant reveal the following.
Determine the correct inventory amount on December 31.
Alou sold goods costing $38,000 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2.
The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end. 3.
Alou received goods costing $19,000 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count. 4.
Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory. 5.
Alou received goods costing $44,000 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000.
Explanation / Answer
1. )
1. Alou sold goods costing $38,000 to Comerica Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerica until January 12. The goods were not included in the physical inventory because they were not in the warehouse. $0
2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end. $0
3. Alou received goods costing $17,000 on January 2. The goods were shipped FOB shipping point on December 26 by Galant Co. The goods were not included in the physical count. $ 17,000
4. Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory. $35,000
5. Alou received goods costing $44,000 on January 2 that were shipped FOB destination on December 29.The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000. $(44,000)
Accountants report a merchandiser%u2019s and a manufacturer%u2019s revenues when a sale is made. The term, FOB Shipping Point, indicates that the sale occurred at the shipping point%u2014at the seller%u2019s shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination%u2014at the buyer%u2019s receiving dock.
Accountants also assume that the cost of transporting the goods corresponds to these terms. If the sale occurred at the shipping point (seller%u2019s shipping dock), then the buyer should take responsibility for the cost of transporting the goods. (The buyer will record this cost as Freight-In or Transportation-In.) If the sale doesn%u2019t occur until the goods reach the destination (terms are FOB Destination), then the seller should be responsible for transporting the goods until they reach the buyer%u2019s unloading dock. (The seller will record the transportion cost as Freight-Out, Transportation-Out, or Delivery Expense.)
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3.)
Beg. Inv. 400 @ $8 = $3,200
Feb. 20 600 units @ $9 = $5,400
Aug. 12 300 units @ $11 = $3,300
May 5 500 units @ $10 = $5,000
Dec. 8 200 units @ $12 = $2,400
2,000 units at a cost of $19,300 available for sale
2,000 - 1,500 = 500 units ending inventory
FIFO
Ending Inventory
(200 x 12) + (300 x 10) = $5,400
COGS
19,300 - 5,400 = $13,900
LIFO
Ending Inventory
((400 x 8) + (100 x 9) = $4,100
COGS
19,300 - 4,100 = $15,200
Average Cost
19,300 / 2,000 = $9.65 avg. cost per unit
Ending Inventory
500 x 9.65 = $4,825
COGS
19,300 - 4,825 = $14,475
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