Reference no: EM132323126
PROBLEMS
Problem 6-1A
Markham Leathers, a distributor of leather products, uses the FIFO method for valuing inventories. It began August with 50 units of an inventory item that cost $80 each. During August, the store completed these inventory transactions:
|
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Units
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Unit Cost
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Unit Sale Price
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|
Aug. 3
|
Sale
|
40
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|
$140
|
|
8
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Purchase
|
80
|
$88
|
|
|
21
|
Sale
|
70
|
|
150
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|
30
|
Purchase
|
10
|
96
|
|
Required
1. Prepare a perpetual inventory record for this item.
2. Determine the store's cost of goods sold for August.
3. Compute gross margin for August.
Problem 6-2A
Vista Distributors purchases inventory in crates of merchandise. Assume the company began July with an inventory of 30 units that cost $300 each. During the month, the company purchased and sold merchandise on account as shown:
Jul. 10 Purchased 30 units at $320.
15 Sold 40 units at $700.
22 Purchased 70 units at $350.
29 Sold 75 units at $800.
Assume Vista Distributors uses the FIFO cost method for valuing inventories. The company uses a perpetual inventory system. Cash payments on account totalled $15,000. Company operating expenses for the month were $30,000. The company paid one-half in cash, with the rest accrued as Accounts Payable.
Required
1. Prepare a perpetual inventory record, at FIFO cost, for this merchandise.
2. Make journal entries to record the company's transactions.
Problem 6-3A
Refer to the Vista Distributors situation in Problem 6-2A. Keep all the data unchanged, except assume that Vista uses the moving-weighted-average-cost method.
Required
1. Prepared a perpetual inventory record at moving-weighted-average cost. Round the average unit cost to the nearest cent and all other amounts to the nearest dollar.
2. Prepare a multi-step income statement for Vista Distributors for the month of January.
Problem 6-4A
Refer to Problems 6-2A and 6-3A to prepare a table comparing ending inventory, cost of goods sold, and gross margin under both the FIFO and the moving-weighted-average-cost methods. You will need to calculate gross margin for Problem 6-2A. Explain why the gross margin is lower under the moving-weighted-average-cost method.
Problem 6-5A
Sandy's Office Supplies distributes office furniture. The company's fiscal year ends on March 31, 2017. On January 31, 2017, one department in the company had in inventory 20 office suites that cost $1,800 each. During the quarter, the department purchased merchan¬dise on account as follows.