Question

In: Accounting

Mr Alfred gets a note from a client called Tony’s Technologies. On behalf of Tony’s Technologies,...

Mr Alfred gets a note from a client called Tony’s Technologies. On behalf of Tony’s Technologies, Mr Alfred maintains their perpetual inventory recording system using the FIFO (First In First Out) cost assignment method.  The note advises that during August 2020 the following transactions occurred relating to the ‘Benk Computer Monitor’.

Feb. 1

Balance of inventory - 52 Benk Computer Monitors, cost price is $105 each

4

Credit sale of 25 units to Greenvale Secondary School (Invoice H72). Selling price $215.

9

Cash sale of 1 unit to Jarrod Sanders (Receipt V51). Selling price $215.

13

Purchase of 45 units at $110 each (plus GST) from Keji Ltd (Invoice S21).

19

Credit sale of 23 units to Mt Alexander Village (Invoice H91). Selling price $245.

20

Tony used 2 units as gifts to his two cousins (Memo 13). Selling price $215.

24

40 units purchased from Keji Ltd for $4 620 including GST (Invoice S87).

28

Tony decided to use 2 units as part of a trade display at a computer fair (Memo 14). Selling price $215.

Required:

Rule up a perpetual stock record card for the Benk Compute Monitor and record the above transactions on the stock record card using the perpetual inventory recording system and FIFO (First in First Out) cost assignment method.

After you have finished preparing the stock record card, Mr Albert arrives, and tells you he has shocking news. The news is that the net realisable value of each item is $107.

Required:

Calculate the stock write down and prepare the general journal entry to adjust inventory records, if required. You are not required to update this on the stock card. Show all workings.

You and Mr Albert’s assistant start to discuss the job Mr Albert has just given you. Mr Albert’s assistant remarks that she sees no difference between LIFO and FIFO.

Required:

Explain the different impacts on the Income Statement and the Balance Sheet of maintaining a perpetual recording system and the FIFO cost flow assignment as against the LIFO cost flow assignment during a period of cost prices decreasing.                                                              

Solutions

Expert Solution

Stock Cards

Particulars Units   Price Total

Balance of Inventory of Benk Computers 52 105 5460

Sold to to Greenvale Secondary School (Invoice H72) (25) 105 -2625

Cash sale of 1 unit to Jarrod Sanders (Receipt V51) (1) 105 -105

Purchase 45 units at $110 each from Keji Ltd(Invoice S21) 45 110 4950

Credit sale of 23 units to Mt Alexander Village (Invoice H91) (23) 105 -2415

Tony used 2 units as gifts to his two cousins (Memo 13) (2) 105 -210

40 units purchased from Keji Ltd 40 115.50 4620

Used at a computer fair (1) 105 -105

Used at a computer fair (1) 110 -110

Total 84 9460

Note : For the computers used at fair 1 is taken from the opening lot whose cost were @105 and the secend was taken from the lot whose cost was @110. (As per the FIFO rule)

The Net Realisable value of the stocks are @107

Hence total NRV is 84*107 = 9309

Cost 9460

Value of Stock Loss 151

Journal - Profit and Loss 151

Provision for Loss of Inventory    151

When the price of the products are faling then LIFO method would give a heigher profit as compared to the FIFO Method. As the cost of the Inventory would be taken as of the latest i.e the lower value would be taken.

Similarly the Value of the Inventory would be high in LIFO as compared to FIFO as the Inventory with high time duration would be there in the stock which would have a heigher value than the latest stock.

  


Related Solutions

Write a complete Java program called CharCounter that gets two Strings called inputWord and inputCharacter from...
Write a complete Java program called CharCounter that gets two Strings called inputWord and inputCharacter from the user at the command line. Check that the character has a length of 1. If it doesn't, provide the user with suitable feedback and conclude the program. If the character length is valid (i.e., it has a length of 1), use a while loop to check each position in the inputWord variable and return the number of times the character occurs. For example,...
java [rogram for single client and multiple servers and a broker who gets the request from...
java [rogram for single client and multiple servers and a broker who gets the request from client and if the broker has that service with any server then broker will tell the client about the server and then client can connect to the server
Write a function called main which gets a single number, furlongs, from the user and converts...
Write a function called main which gets a single number, furlongs, from the user and converts that to meters and prints out the converted result. The math you need to know is that there are 201.16800 meters in a furlong. your results should yield something like these test cases. >>> main() How many furlongs? 10 your 10 furlongs are 2011.68 Meters >>> main() How many furlongs? 24 your 24 furlongs are 4828.032 Meters
Question 6 (7 marks) [Note this question is from the Week 11 Tutorial] Mr Peter is...
Question 6 [Note this question is from the Week 11 Tutorial] Mr Peter is working as a Purchases Journal clerk in a small firm located on the Gold Coast. David is his friend, who works as an Accounts Payable Ledger clerk in the same firm. Peter periodically enters fictitious acquisitions. After creating a fictitious purchase, Peter notifies his Accounts Payable Ledger clerk. David enters these transactions in his ledger. When the payables are processed, the payment is mailed to the...
On November 1, 20X1, ABC Co. received a $30,000 note receivable from a client for services...
On November 1, 20X1, ABC Co. received a $30,000 note receivable from a client for services rendered. The note receivable will be due on February 1, 20X2 with interest at 4% per year. ABC Co. adjusts its books monthly. What adjusting entry is needed on ABC Co.’s books on December 31, 20X1? a. Debit: Interest receivable…………………..100                          Credit: Interest income..…….…….…....100 b. Debit: Interest expense……………………..100                          Credit: Interest payable………………….100 c. Debit: Interest receivable…………………..200                          Credit: Interest income.....……….……..200 d. Debit: Cash………….. ……………….……100...
You got information from the admitting office that Mr John 45 years old client with complaints...
You got information from the admitting office that Mr John 45 years old client with complaints of fever and headache wants to get admitted to your unit for observation and treatment. Answer the following questions. 1.Describe your role as an enrolled nurse in admitting Mr John to your unit (in 30-40 words). 2.Enlist twelve(12) pieces of information that you would document in his admission database. 3. What is the role of doctors in care of above client? 4. What is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT