Question

You must answer all the questions in the proposed business case.

This task assesses the following learning outcomes:

• Critically understand the differences between the methods of valuation of the inventory
• Knowing how to properly elaborate an income statement and determine the ending inventory balance.

LAUNCH: WEEK 10 / DELIVERY: MAY 10^th, 2020, 23:59HRS ON MOODLE

Submission file format: Excel document with all the answers, clearly identifying all steps, results, journals and including comments besides each answer.

BUSINESS CASE (100 points)

Jim has recently opened a dry fruits wholesale company dedicated to the sale of peanuts, almonds and pistachios.

During its first month of activity, the company has made the following transactions:

February 2: Purchase of Pistachios:          2.500Kg@10$/Kg                                     $ 25.000

                  Purchase of Almonds:            4.000Kg @ 5$/Kg                                     $ 20.000

                  Purchas of Peanuts:               6.000Kg @ 3$/ Kg                                    $ 18.000

February 3: Purchase of Pistachios:          1.500Kg@12$/Kg                                     $18.000

                  Purchase of Almonds:            2.000Kg @ 6$/Kg                                     $ 12.000

                  Purchas of Peanuts:               2.000Kg @ 4$/ Kg                                     $ 18.000

February 6: Sold to several clients:

Pistachios:                             2.000Kg@ 20$/Kg                                    $40.000

Almonds:                              2.500Kg @ 11$/Kg                                   $ 27.500

Peanuts:                               3.000Kg @ 7$/ Kg                                    $ 21.000

February 6: Sold to Fruits Lovers Inc.:

Pistachios:                             500Kg @20$/Kg.                                      $ 10.000

Almonds:                              1.000Kg @ 11$/Kg                                   $ 11.000

Peanuts:                               1.500Kg @ 8$/ Kg                                    $ 12.000

February 12 Purchase of Pistachios:         1.500Kg@14$/Kg                   $ 21.000

                   Purchase of almonds:            2.000Kg @ 8$/Kg                   $ 16.000

                   

February 13: Sale of peanuts to Peanuts Lovers Inc.:  3.500Kg @8$/kg    $ 28.000

February 14: Purchase of Peanuts             6.000 Kg @4$/Kg                   $24.000

February 19: Sold to several clients:

Pistachios:                             1.00Kg@ 21$/Kg.                                     $ 21.000

Almonds:                              1.500Kg @ 13$/Kg                                   $ 19.500

Peanuts:                               3.000Kg @ 9$/ Kg                                    $ 27.000

February 25: Purchased from various suppliers:

Pistachios:                             1.00Kg@13$/Kg.                                      $ 13.000

Almonds:                              1.000Kg @ 9$/Kg                                     $ 9.000

Peanuts:                               1.000Kg @ 4$/ Kg                                    $ 4.000

Besides these transactions, the company has had the following expenses:

Salaries: $3500

Electricity bill: $300

Renting of equipment: &800

Rent of warehouse and office: $1.500

Miscellaneous: $1.200

Jim’s accountant recommended that he should use the average cost method in order to determine the cost of the inventory sold but he is not sure about the consequences it nay have on his financial situation

Relying on your accounting knowledge, Jim asks you the following questions:

5: Jim would like to know a forecast of the number of days to sell the inventory based on the results of the month of February. Explain your calculation and the steps followed. (10 points: 5 for calculation and 5 for explanation)

Answer 1