1.
OnJune1, 2015, FrackCorp.soldmerchandisewithalist
priceof$5,000to
Floopyon account.Frack allowedtradediscountsof30%.Credittermswere2/15,n/40andthe
salewasmade FOBshippingpoint.Frackprepaid$200ofdeliverycostsforFloopyasanaccommodation.On June
12,2015,FrackreceivedfromFloopyaremittanceinfullpayment. Prepare the general journal entries for Frack to
record the events. Frack uses the periodic method for sales and gross method
for sales discounts.
2.
A client,FloppyCo.,sellslawnmowersandgardentillers.Thegardentillersarepurchased fromBadly Built LLCandsoldto customerswithoutmodification.The lawnmowers,however,are
purchasedfromseveralcontractors.Floppythenmakesongoingdesignrefinementstothe mowersbeforesellingthemtocustomers
The lawnmowerscost$200.Floppythenmakesthedesignrefinementsatacostof$85per
lawnmower.Floppystoresthe lawnmowersinitsownwarehouseandsellsthemdirectlyto retailersatalist priceof$500.FloppyusestheFIFOinventorymethod.Approximatelytwo-thirdsof newlawnmowersalesinvolvetrade-ins.Foreachusedlawnmowertradedinand
returnedtoFloppy,retailersreceivea$40allowanceregardlessofwhetherthetrade-inwas
associatedwithasaleofayear2oryear3model.Floppy’snetrealizablevalueonausedlawn moweraverages$25.
AtDecember31,year2,Floppy’sinventoryof
newlawnmowersincludesbothyear2and year
3models.Whentheyear3modelwasintroducedinSeptemberyear2,the list
priceofthe remainingyear2modellawnmowerswasreducedbelowcost.Floppyis
experiencingrising
costs.
Floppyhascontactedyourfirmforadviceonhowto reportthe carryingvalueofinventory,the impactofthedeclineinvalueontheyear2models,andtheeffectsofusingtheFIFOmethodon
theirDecember31,year2financialstatements.
All
freight bills are paid directly to the freight companies.
Floppyhadthefollowinginformationregardingthegardentillerinventory for the fiscal year ended December 31, Y2:
Purchases
$210,000
Purchasediscounts
38,000
Purchasereturns
17,500
Freight-in
12,100
Freight-out
18,000
Beginninginventory
42,900
Endinginventory
34,250
Prepare a
Schedule of Cost of Goods Sold for the fiscal year ended December 31, Y2:
3
.FlimCo.sellsoneproduct,whichitpurchasesfromvarioussuppliers.Flim’strialbalanceat
December31, year2,includedthefollowingaccounts:
Sales(33,000units@
$16)
$528,000
Salesdiscounts
7,500
Purchases
368,900
Purchasediscounts
18,000
Freight-in
5,000
Freight-out
11,000
FlimCo.’sinventorypurchasesduringyear2wereasfollows:
Date
Units
Cost per Unit
Total Cost
Beginninginventory,January1
8,000
$8.20
$65,600
Purchases,quarterendedMarch31
12,000
8.25
99,000
Purchases,quarterendedJune30
15,000
7.90
118,500
Purchases,quarterendedSeptember 30
13,000
7.50
97,500
Purchases,quarterendedDecember
31
7,000
7.70
53,900
Total
55,000
$434,500
Additionalinformation:
Flim’saccountingpolicyis
toreportinventoryinitsfinancialstatementsatthe lowerof
costor market,appliedto
totalinventory.Costis determinedunderthelast-in,first-out(LIFO)method.
Flimhasdeterminedthat,atDecember31year2,thereplacementcostofits inventorywas$8 perunitandthenetrealizablevaluewas$8.80perunit.Flim’snormalprofitmarginis$1.05per
unit.
From this information, complete the following
schedules.
Part a:
SUPPORTINGSCHEDULEOFENDINGINVENTORY
December31,
Year2
Inventory at cost
(LIFO)
Units
Cost per Unit
Total Cost
Flim Company
Schedule of Cost of Goods Sold
For the Year Ended December 31, Y2
Beginning
Inventory
Purchases
Less:
Purchase Discounts
Purchase Returns
Net
Purchases
Plus:
Freight-in
Goods
Available for Sale
Ending
Inventory
Cost of
Goods Sold
Part b:
4 .Thefollowing
information pertainsto
FrackCorp.’s
2015cost ofgoodssold:
Inventory,12/31/14
$90,000
2015purchases
134,000
2015write-offofobsoleteinventory
24,000
Inventory,12/31/15
30,000
The inventorywrittenoffbecameobsoletedueto
anunexpectedandunusualtechnological advancebya competitor.In its2015incomestatement,whatamountshouldFrackreportas cost of goodssold?
5 .On December 15, 2015, Frack purchased goods costing
$100,000. The terms were FOB shipping point. Costs incurred by Frack in
connection with the purchase and delivery of the goods were as follows:
Normalfreightcharges
$3,000
Handlingcosts
2,000
Insuranceon
shipment
200
Abnormalfreightchargesforexpressshipping
1,500
Thegoodswere receivedonDecember17,2015. Whatis
theamountthatFrack should
chargeto:
a. inventory
b. currentperiodexpense
6 .FlipCo.adoptedthedollar-valueLIFOinventorymethodasofJanuary1,2015.A single inventorypoolandan internallycomputedpriceindexareusedtocomputeFlip’sLIFOinventory layers.InformationaboutFlip’sdollarvalueinventoryfollows:
Inventory
Date
Atbaseyearcost
AtdollarvalueLIFO
1/1/14
$90,000
$90,000
2014layer
20,000
30,000
2015layer
40,000
80,000
WhatwasthepriceindexusedtocomputeFlip’s: (Round all values to one decimal
place.)
a. 2014dollarvalueLIFOinventorylayer
b. 2015dollarvalueLIFOinventorylayer
7 .FlipCo.’sinventoryatDecember31,
2015, was$1,500,000basedon
aphysicalcountpricedatcost,
andbeforeanynecessaryadjustmentforthefollowing:
>> Merchandisecosting$90,000,shippedFOBshippingpointfromavendoronDecember
30,2015,wasreceivedandrecordedonJanuary5,2016.
>>Goodsin the shippingareawereexcludedfrominventoryalthoughshipmentwasnotmade
untilJanuary4,2016.Thegoods,billedtothecustomerFOB
destinationonDecember 30,2015,hadacostof$120,000.
WhatamountshouldFlipreportasinventoryinitsDecember31,2015balancesheet?
8. FlipCo.’saccountspayablebalanceatDecember31,2015,was$2,200,000beforeconsidering
the followingdata:
>>GoodsshippedtoFlipFOBshippingpointon
December22,2015,werelost in
transit.
The
invoicecostof$40,000wasnotrecordedbyFlip.OnJanuary7,2016,Flipfileda
$40,000claimagainstthe commoncarrier.
>>GoodsshippedtoFlipFOBdestinationon
December20,2015,were receivedon January6,2016.The invoicecostwas$50,000.
WhatamountshouldFlipreportasaccountspayablein itsDecember31, 2015balancesheet?
9.FlipCompany’susualsalestermsarenetsixtydays,FOBshippingpoint.Sales,netofreturns andallowances,totaled$2,300,000fortheyearendedDecember31, 2015,beforeyear-end adjustments.Additionaldataareasfollows:
>>OnDecember27, 2015, Flipauthorizedacustomerto return,forfullcredit,goods shippedandbilledat$80,000onDecember15,
2015. Thereturnedgoodswere received byFliponJanuary4,2016,anda$80,000creditmemowasissuedandrecordedon the
samedate.
>>Goodswithan invoiceamountof$50,000werebilledandrecordedonJanuary3,2016.
ThegoodswereshippedonDecember30,
2015.
>>Goodswithan invoiceamountof$100,000werebilledandrecordedon
December30, 2015.ThegoodswereshippedonJanuary3,2016.
Flip’adjustednetsalesfor2015shouldbe?
10 .OnJanuary1, 2016,Flip,Inc.contractedwiththecityof
Biggertoprovidecustombuiltdesksfor the
cityschools.The contractmadeFlipthecity’ssolesupplierandrequiredFlipto supplyno
lessthan4,000desksandnomorethan5,500desksperyearfortwo years.Inturn,Biggeragreed
to payafixedpriceof$105perdesk.During2016, Flipproduced5,000desksforBigger.At December31,2016, 2,500ofthesedesksweresegregatedfromtheregularinventoryandwere
acceptedandawaitingpickupbyBigger.BiggerpaidFlip$450,000during2016.Whatamount
shouldFliprecognizeascontractrevenuein 2016?
11 .ThefollowingitemswereincludedinFloozyCo.’sinventoryaccountat December31,2015:
>> Merchandiseouton consignment,atsalesprice,including45%markupon
sellingprice$40,000
>>Goodspurchased,in
transit,shippedFOBshippingpoint
$36,000
>>Goodsheldon
consignmentbyFloozy
$27,000
BywhatamountshouldFloozy’sinventoryaccountat
December31,2015,be reduced?
12.On December 1, 2016, Floozy Department Store received 505 sweaters on
consignment from Flip.Flip’scostforthesweaterswas$80each,andtheywerepricedtosellat
$110.Floozy’scommission
on consignedgoodsis 10%.AtDecember31,
2016fivesweatersremained.In itsDecember 31,2016balancesheet,whatamountshouldFloozyreportaspayableforconsignedgoods?
13 .During
2015, Floozy Co. purchased $960,000 of inventory. The cost of goods sold for
2015 was $900,000,andthe
endinginventoryatDecember31,2014,was$180,000.Whatwasthe
inventoryturnoverfor2015? Round answer to one decimal place.
14 .Selected datapertainingto
Floozy Co. forthe calendar 2015isasfollows:
Net cashsales
$3,000
Costofgoodssold
18,000
Inventoryat12/31/14
6,000
Purchases
24,000
Accountsreceivable12/31/14
20,000
Accountsreceivable12/31/15
22,000
Calculate Floozy’s averagedays’salesininventory.Round answer to one decimal place.
