BUS 321 - Intermediate Financial Accounting 1

Burnett – Winter Quarter 2014

Exam 2

This exam is scheduled to be 110 minutes long. All questions are worth the same amount of points.

Please make sure you have 10 pages including this page. Do not start working on this exam until

instructed to do so. This is a closed book, closed notes exam. The use of any electronic device other than

a permitted calculator constitutes unauthorized assistance. Students found to be in possession of such a

device during the exam will be given a score of zero. You must show work to get credit (unless no

work is required)!

INVENTORY

PURCHASES – GROSS METHOD – PERIODIC INVENTORY SYSTEM On June 30

th, OUR

COMPANY purchased merchandise with an invoice price of $40,000 having terms

3/15, n/30 fob shipping point, which the supplier shipped on July 2nd

. We received the

merchandise on July 4th

. Prepare the entries for the next two problems:

1. Prepare the entry to record the purchase AND indicate the date on which we should record

the purchase.

2. On July 9th

when we pay our account in full.

Debit Credit

Change in

Total Assets

Change in

Total

Liabilities

Change in

Total Equity

Net Income for

the period

Cash Flow for

the period

PURCHASES – NET METHOD – PERPETUAL INVENTORY SYSTEM On July 13th

, OUR COMPANY

ordered merchandise with an invoice price of $70,000 having terms 3/15 n/30 fob shipping

point, which the supplier shipped on July 15th

and we received the merchandise on July 18th

.

Prepare the entries for the following two problems.

3. Prepare the entry to record the purchase AND indicate the date on which we should we

record the purchase.

4. On July 22nd

when we write a $30,000 check to pay on our account

5. GOODS IN TRANSIT The December 31, 2013, year-end inventory balance of Raymond

Corporation is $210,000. You have been asked to review the following transactions to

determine if they have been correctly recorded. Please write CORRECT if the transaction is

recorded correctly or NOT CORRECT if the transaction was not recorded

correctly.

a. Goods shipped to Raymond f.o.b. destination on December 26, 2013, were

received on January 2, 2014. The invoice cost of $30,000 is included in the

inventory balance.

b. At year-end, Raymond held $14,000 of merchandise on consignment from

Harrison Company. This merchandise is included in the inventory balance.

c. On December 29, merchandise costing $6,000 was shipped to a customer f.o.b.

shipping point and arrived at the customer’s location on January 3, 2014. The

merchandise is not included in the preliminary inventory balance.

d. At year-end, Raymond had merchandise costing $15,000 on consignment with

Joclyn Corporation. The merchandise is not included in the preliminary inventory

balance.

COST FLOW ASSUMPTIONS - PERIODIC During July, OUR COMPANY sold 40 units for $20

each. Use the following information for the next two problems

qty cost Total Cost

7/1 Beginning 10 15.00 150

7/14 Purchase 35 13.00 455

7/24 Purchase 20 12.00 240

Available 65 845

6. Use LIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.

7. Prepare the journal entry to record Cost of Goods Sold and Ending Inventory in the problem

above, if an entry is required. If no entry is required, please state no entry required.

8. COST FLOW ASSUMPTIONS - PERPETUAL Use AVERAGE COST - PERPETUAL to prepare the

journal entry for the July 15th

credit sale of 25 units at $20/unit. Purchases Sales average cost

Qty Cost qty price

1-Jul 10 15 150

4-Jul 5 20

14-Jul 35 13 455

15-Jul 25 20

24-Jul 20 12 240

25-Jul 10 20

9. LOWER OF COST OR MARKET Calculate Market for each of the products in the following

table and answer the question below.

A1 A2 B11 B12

Replacement cost 23.00 65.00 54.00 35.00

Selling price 40.00 100.00 80.00 60.00

Direct selling costs 12.00 30.00 28.00 18.00

Normal profit 4.00 10.00 8.00 6.00

MARKET (fill in)

Explain why the replacement cost is or is not appropriate to use as the Market for product B11.

(Two sentence maximum.)

.

Use this information for the next 2 Problems

part no qty cost mkt

101 3 20.00 19.00

201 5 9.00 10.00

301 2 17.50 20.00

401 1 35.00 33.00

Per Unit

10. LOWER OF COST OR MARKET Use the information in the above table to calculate Lower of

Cost or Market on an item by item basis.

Inventory at Lower of Cost or Market =