Key steps in the inventory management processes

Reference no: EM131498796

Assessment Task 1- Assignment

Question 1

Organisations use procedures and practices to meet their requirements in relation to maintaining inventory records. What areas might be subject to control in this fashion?

Question 2

What are the key steps in the inventory management processes and relevant documentation and recording systems?

Question 3

Explain the five methods of inventory valuation.

Question 4

How would you measure ending inventory in the following businesses?

(a) A second-hand car yard with 30 cars in stock

(b) A hardware store specialising in selling nails of different sizes. A single nail has an insignificant cost.

Question 5

Pin store provides you with the following information in regard to the financial year ending 30 June 20X5:

	Cost price	retail price
Beginning inventory	43,000	72,000
Net purchases	307,000	428,000

Additional information Net sales were $416,000

Additional mark-ups were $2,500

Staff discounts on goods sold were $4,500

Required

Calculate ending inventory at cost price using the retail inventory method.

Question 6

Anderson commenced business on 1 June 20X5 by introducing $40,000 cash as capital. For the month of June 20X5 the following transactions then took place:

20X5

June 1	Purchased inventory for cash $5,500 including GST
4	Sold goods for cash $690 plus GST (cost of goods sold $345)
6	Purchased inventory on credit from Lang $3,200 plus GST
9	Sold goods on credit to Jang $6,900 plus GST (cost of goods sold $3,450)
12	Received credit note from Lang for overcharge on June 6 purchase $200 plus GST
15	Sold goods for cash $2,700 plus GST (cost price of goods sold $1,350)
19	Sent credit note to Jang $900 plus GST for goods returned (cost price of goods returned $450)
22	Anderson withdrew inventory for personal use $231 including GST.
30	A physical stocktake revealed closing inventory valued at $3,500

Required

(a) Record the transactions in the general journal

(b) Post the general journal to the general ledger

Question 7

A firm uses a periodic inventory system. Details of an item of inventory disclosed:

1/1/20X5	Opening Balance	100 units @ $88 per unit (including GST)
20/1/20X5	Purchased	300 units @ $99 per unit (including GST)
2/2/20X5	Sold	200 units @ $121 per unit (including GST)
18/4/20X5	Purchased	400 units @ $104.50 per unit (including GST)
28/4/20X5	Sold	150 units @ $121 per unit (including GST)
9/5/20X5	Purchased	50 units @ $104.50 per unit (including GST)
15/7/20X5	Purchased	100 units @ $110 per unit (including GST)
31/10/20X5	Sold	300 units @ $132 per unit (including GST)
28/11/20X5	Sold	50 units @ $132 per unit (including GST)
31/12/20X5	Closing inventory on hand	250 units

Required

(a) What is the value of ending inventory if the FIFO method of inventory costing is used?

(b) Prepare the general journal entry to record closing stock into the ledger using FIFO.

(d) What is the value of ending inventory if the weighted average cost method of inventory costing is used?

(e) Prepare the general journal entry to record closing stock into the ledger using average cost.

(f) Prepare the trading statement where the weighted average cost method is used.

Question 8

A firm uses a perpetual inventory system. Details of an item of inventory disclosed:

1/9/20X5	Opening Balance	100 units @ $80 each
7/9/20X5	Purchased	300 units @ $90 each
12/9/20X5	Sales	200 units @ $110 each
14/9/20X5	Purchased	400 units @ $95 each
18/9/20X5	Sales returns (original sales 12/9/20X5)	50 units
21/9/20X5	Sales	150 units @ $110 each
22/9/20X5	Purchased	50 units @ $95 each
24/9/20X5	Purchased	100 units @ $100 each
26/9/20X5	Sales	300 units @ $110 each
30/9/20X5	Sales	50 units @ $110 each

Required

(a) Open the spreadsheet provided by your assessor titled Store Ledger Card. Record the information in a store ledger card using FIFO. Save the file using the following format: [Your ID] Store Ledger Card ddmmyy

(b) What is the value of ending inventory if FIFO method of inventory costing is used?

(d) At month end the stocktake recorded 290 units. Update the stock card and save the file using the following format: [Your ID] Updated Store Ledger Card ddmmyy.

(e) Prepare the general journal entry to record the variance.

Note: You must submit a soft copy and a print out of the following:

a. [Your ID] Store Ledger Card ddmmyy.

b. [Your ID] Store Updated Ledger Card ddmmyy.

Question 9

Assume the following data for a retail business in 20X5:

Net sales:	$640,000
Gross profit:	224,000
Expenses:	64,000
Net profit after tax:	160,000
Ending inventory:	94,000
Beginning inventory:	86,000

(a) Calculate the inventory turnover.

(b) When the ending inventory is understated, how the gross profit for the period will be affected. Explain.

Question 10

A firm has these inventory records for January 20X5.

Date	Item	Qty	Unit cost	Sale price
1	Opening inventory	100 units	$8
6	Purchased	60 units	$9
13	Sales	70 units		$20
21	Purchased	150 units	$9
24	Sales	210 units		$22
27	Purchased	90 units	$10
30	Sales	30 units		$25

The accounting records reveal that operating expense for January was $1,900.

(a) Prepare the January profit and loss statement, showing for FIFO, LIFO and weighted-average cost. Show your calculation and use the periodic inventory system to calculate cost of goods sold.

Profit and Loss Statement

for the month ended 31 January 20X5

	FIFO	Weighted-average
Sales revenue
Cost of goods sold:
Beginning inventory
Net purchases
Cost of goods available for sale
Ending inventory
Cost of goods sold
Gross profit
Operating expenses
Net profit

(b) Which inventory method you use if your motive is to:

a. Report the lowest net profit?

b. Report the highest net profit?

c. Report inventory on the balance sheet at the most current cost? (State the reason for each answer)

Task 2

This is an individual assessment. Using MYOB AccountRight v19, you are required to complete the following tasks:

1. Open the Aurora Coffee.myo file.

You must change the company information using your name, student number and an address. This will identify your work when you submit your assessment. You should regularly back up the files you create.

2. Create Inventory Cards for the following items:

Item Number E-100 Item Name Espresso Machine Cost of Sales Account 5-1100 Income Account 4-1100

Asset Account 1-1300

Tax Code GST

Minimum Stock Level 20

Default Reorder Quantity 50

Base Selling Price $22 Selling Unit of Measure Each Price Includes GST Yes

Item Number E-200 Item Name Coffee Plunger Cost of Sales Account 5-1100 Income Account 4-1100

Asset Account 1-1300

Tax Code GST

Minimum Stock Level 10

Default Reorder Quantity 30

Base Selling Price $66 Selling Unit of Measure Each Price Includes GST Yes

Item Number E-300 Item Name Cappuccino Machine Cost of Sales Account 5-1100 Income Account 4-1100

Asset Account 1-1300

Tax Code GST

Minimum Stock Level 5

Default Reorder Quantity 20

Base Selling Price $440 Selling Unit of Measure Each Price Includes GST Yes

3. Enter the quantity of each item on hand 1 June. Adjust Inventory, using 1-1300 Inventory as the default adjustment account, then enter the unit cost of each item as indicated.

Item	Name	Units on Hand	Cost Price (Excluding GST)
E-100	Espresso Machine	20	$15
E-200	Coffee Plunger	14	50
E-300	Cappuccino Machine	5	300

4. Create cards in the Card File for a Supplier and a Customer.

Card Type: Supplier Name: Saeco P/L Card ID: SUP 001

Address: 35 Pitt St, Sydney, NSW 2000 Phone: 9229 2871

Contact: David Mason Discount, Days: 10%, 10 Credit Limit: $10,000 ABN: 65 145 209 404

Card Type: Customer Name: Grace Bros P/L Card ID: CUS 001

Address:16 George St, Sydney, NSW 2000 Phone: 9510 6771

Contact: Michael Fletcher Discount, Days: 10%, 10 Credit Limit: $10,000

5. Set Saeco P/L as the Primary Supplier of all your inventory items.

6. Sell the following Inventory Items to Grace Bros P/L on 2 June.
10 Espresso Machine
5 Coffee Plunger
2 Cappuccino Machine

7. Check the To Do List (Stock Alert) and order the default quantities of the items that are in short supply from the usual supplier on 3 June.

8. Change the purchase order to a bill according to the following information:

Saeco P/L Date:

Tax Invoice No.: Supplied to: Details:

50 Espresso Machine

30 Coffee Plunger

20 Cappuccino Machine Freight:

GST:

Invoice Total:

5 June

31185

Aurora Coffee P/L

PO 0001

$750

$1,500

$6,000

$50

$830

$9,130

E&OE Terms: 10% Discount for prompt payment

9. Aurora Coffee has decided to offer a cleaning and maintenance service to purchases of their cappuccino machines. This will carried out in the customers' homes. To simplify the accounting, the service ($35 plus GST) and the associated call-out fees are to be set up as Items. Record a Service as an item.

10. Create three new Sales items.

Item number	Name	Price (including GST)
S-200	Local Call-Out	$22
S-300	Metropolitan Call-Out	$66
S-400	Rural Call-Out	$132

11. Create a new card in the Card File: Card Type: Customer
Name: Cash Sales Card ID: CUS 002

12. Record the sale of some items on 10 June.

Customer	Item Number	Quantity Sold
Grace Bros P/L	E-100	35
	E-200	26
	E-300	18
Cash Sales	S-100	30
	S-200	20
	S-300	7
	S-400	3

13. In carrying out its maintenance service for customers, Aurora Coffee often requires replacement parts for the machines. However, it does not have the facility to keep all possible parts in stock, rather, items are ordered from Saeco P/L as and when required and are delivered by courier accompanied by a delivery note (the invoice following in a few days). As all service work is carried out on a cash basis, customers must often be billed for parts before Saeco's invoice is received, based on the price quoted over the phone.
Record the following item received without a supplier invoice.

Item number	Name	Income account	Expense account	Price (including GST)
Z-000	Replacement Parts	4-1300	5-1300	$33

14. Produce an invoice to record the following cash sale on 22 June:

Customer	Item Number	Quantity Sold
Cash Sales	S-100	1
	S-300	1
	Z-000	1

15. Invoice for Replacement Parts (Inv. No. 1111) is received from Saeco P/L on 28 June.

16. The end of month stocktake on 30 June reveal the following items in stock:

Item	Name	On Hand
E-100	Espresso Machine	24
E-200	Coffee Plunger	12
E-300	Cappuccino Machine	5

17. Print the following reports for June and submit to your assessor:
• Cards List Summary
• Item List (Summary)
• Item Transactions report
• Profit and Loss (Accrual)
• Inventory Journal
• Inventory Value Reconciliation report.

To be deemed competent you will need to successfully demonstrate the following:
• You must provide the followings:
- Cards List Summary
- Item List (Summary)
- Item Transactions report
- Profit and Loss (Accrual)
- Inventory Journal
- Inventory Value Reconciliation report.

Attachment:- Store Ledger Card and Aurora coffee.rar

Reference no: EM131498796

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