A140/ACG1022 Section 01 Financial Accounting – Module 05 Inventory

Module 05 Content

Scenario:

You are an employee at a full-service bookkeeping and auditing firm called Accounting Solutions. Your long-term client Jane Jewels owns a retail hobby store, Hobbies Galore. Jane is switching from a periodic inventory to a perpetual inventory system. She has asked you to complete some inventory costing schedules using different methods.

Assessment Instructions:

Download the following Excel template.

Module 05 Assignment Inventory.xlsx

Use the information given to complete the following:

Complete a FIFO cost schedule and the corresponding journal entries.

Complete a LIFO cost schedule and the corresponding journal entries.

Complete a weighted average cost schedule and the corresponding journal entries.

Complete the table and answer the question about the cost schedules.

Estimate the ending inventory using the gross profit method and answer the last question.

Module 05 Assignment Inventory
Use the information below to complete the tasks. (HINT: under view use “freeze panes” so it is easier to scroll through
Model Airplane kits sell for $50 each
Hobbies Galore
Item: Model Airplane kits
Date
Item
1-Aug Balance
5-Aug Purchase
12-Aug Sale
15-Aug Purchase
28-Aug Sale
Quantity
5
7
8
13
9
Unit Cost
$20
$21
$22
1
Prepare a perpetual inventory costing record using FIFO and journalize the purchase and sales transactio
Purchases
Cost of Goods Sold
Date
Quantity
Unit Cost Total Cost
Quantity
Unit Cost Total Cost
1-Aug
5-Aug
7
$21
$147
$0
12-Aug
$0
5
$20
$100
$0
3
$21
$63
15-Aug
13
$22
$286
$0
$0
$0
28-Aug
$0
$0
$0
$0
Total
20
$433
$163
2
Prepare a perpetual inventory costing record using LIFO and prepare the purchase and sales transaction
Purchases
Cost of Goods Sold
Date
Quantity
Unit Cost Total Cost
Quantity
Unit Cost Total Cost
1-Sep
4-Sep
7
$21
$147
$0
12-Sep
$0
$0
22-Sep
$0
$0
30-Sep
$0
$0
Total
3
Prepare a perpetual inventory costing record using weighted average cost and prepare the purchase and
Purchases
Cost of Goods Sold
Date
Quantity
Unit Cost Total Cost
Quantity
Unit Cost Total Cost
Total
4
Using the information above, complete the table for FIFO, LIFO and Weighed Average Cost and answer t
FIFO
LIFO
Weighted Average Cost
Revenue
Cost of Goods Sold
Gross Profit
During inflation, which costing method gives the highest profit before operating expenses? Which meth
inventory on hand?
5
Estimate the August 1 inventory for Hobbies Galore using the gross profit method.
Hobbies Galore lost inventory in one of its storage units last month, July. Over the last five years, gross profit
following records were recovered.
Beginning Inventory
Net Purchases
Sales
Sales returns and allowances
Sales discounts
$
Estimate the August 1 inventory using the gross profit method.
42,500
341,900
530,400
12,300
6,500
Give an example of a time when a business would estimate its ending inventory using the gross profit
easier to scroll through the information)
ase and sales transactions. (Aassume all purchases and sales are on account)
Remaining Inventory on Hand
Quantity
Unit Cost Total Cost
Date
5
$20
$100
Aug
5
Inventory
5
$20
$100
Accounts Payable
7
$21
$147
12
Accounts Receivable
$0
Sales
4
$21
$84
Cost of Goods Sold
$0
Inventory
$0
15
Inventory
$0
Accounts Payable
$0
28
Accounts Receivable
Sales
Cost of Goods Sold
Inventory
e and sales transactions.
Remaining Inventory on Hand
Quantity
Unit Cost Total Cost
5
$20
$100
5
$20
$100
$0
$0
$0
$0
$0
$0
$0
Journal
Accounts
Journal
Date
Aug
Accounts
5
12
15
28
Inventory
Accounts Payable
Accounts Receivable
Sales
Cost of Goods Sold
Inventory
Inventory
Accounts Payable
Accounts Receivable
Sales
Cost of Goods Sold
Inventory
epare the purchase and sales transactions.
Remaining Inventory on Hand
Quantity
Unit Cost Total Cost
rage Cost and answer the question.
Weighted Average Cost
expenses? Which method gives the highest cost of
od.
ve years, gross profit has averaged 35%. The
Journal
Date
Accounts
y using the gross profit method.
Journal
Accounts
Post.
Debit
Credit
Post.
Debit
Credit
Journal
Accounts
Journal
Accounts
Post.
Debit
Credit