Acc205 Principles of Accounting: Module 6 Practice Problems (E8-16 and E9-20)

Acc205 Principles of Accounting
Module 5 Practice Problems (E5-17, E6-21 and E6-22)

E5-17 Journalizing purchase and sales transactions—perpetual system
The following transactions occurred during February 2012, for Soul Art Gift Shop:
3-Feb Purchased $2,700 of inventory on account under terms of 4/10, n/eom (end of month) and FOB shipping point.
7 Returned $400 of defective merchandise purchased on February 3.
9 Paid freight bill of $110 on February 3 purchase.
10 Sold inventory on account for $4,350. Payment terms were 2/15, n/30. These goods cost the company $2,300
12 Paid amount owed on credit purchase of February 3, less the return and the discount.
16 Granted a sales allowance of $500 on the February 10 sale.
23 Received cash from February 10 customer in full settlement of her debt, less the allowance and the discount.

Requirement
1. Journalize the February transactions for Soul Art Gift Shop. No explanations are required.

E6-21 Comparing amounts for ending inventory—perpetual inventory—FIFO and LIFO [5–10 min]
Assume that a Models and More store bought and sold a line of dolls during December as follows:
Beginning inventory 13 units @ 11.00
Sale 9 units
Purchase 17 units @ 13.00
Sale 13 units
Models and More uses the perpetual inventory system.

Requirements
1. Compute the cost of ending inventory using FIFO.
2. Compute the cost of ending inventory using LIFO.
3. Which method results in a higher cost of ending inventory?

E6-22 Comparing cost of goods sold in a perpetual system—FIFO and LIFO
Review the data in Exercise 6-21.

Requirements
1. Compute the cost of goods sold under FIFO.
2. Compute the cost of goods sold under LIFO.
3. Which method results in the higher cost of goods sold?
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