BYP 5-5 The following situation is in chronological order.
1. Flutie decides to buy a surfboard.
2. He calls Surfing USA Co. to inquire about their surfboards.
3. Two days later he requests Surfing USA Co. to make him a surfboard.
4. Three days later, Surfing USA Co. sends him a purchase order to fill out.
5. He sends back the purchase order.
6. Surfing USA Co. receives the completed purchase order.
7. Surfing USA Co. completes the surfboard.
8. Flutie picks up the surfboard.
9. Surfing USA Co. bills Flutie.
10. Surfing USA Co. receives payment from Flutie.
In a memo to the president of Surfing USA Co., answer the following.
(a)When should Surfing USA Co. record the sale?
(b)Suppose that with his purchase order, Flutie is required to make a down payment.Would that change your answer?
Heath Limited is trying to determine the value of its ending inventory at February 29, 2008, the company’s year end. The accountant counted everything that was in the warehouse as of February 29, which resulted in an ending inventory valuation of $48,000. However, she didn’t know how to treat the following transactions so she didn’t record them.
1. On February 26, Heath shipped to a customer goods costing $800. The goods were shipped FOB shipping point, and the receiving report indicates that the customer received the goods on March 2.
2. On February 26, Seller Inc. shipped goods to Heath FOB destination. The invoice price was $350. The receiving report indicates that the goods were received by Heath on March 2.
3. Heath had $500 of inventory at a customer’s warehouse “on approval.” The customer was going to let Heath know whether it wanted the merchandise by the end of the week, March 4.
4. Heath also had $400 of inventory on consignment at a Jasper craft shop.
5. On February 26, Heath ordered goods costing $750. The goods were shipped FOB shipping point on February 27. Heath received the goods on March 1.
6. On February 29, Heath packaged goods and had them ready for shipping to a customer FOB destination. The invoice price was $350; the cost of the items was $250. The receiving report indicates that the goods were received by the customer on March 2.
7. Heath had damaged goods set aside in the warehouse because they are no longer saleable. These goods originally cost $400 and, originally, Heath expected to sell these items for $600.
Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit. During the year, purchases were:
Feb. 20 600 units @ $9 Aug. 12 300 units @ $11
May 5 500 units @ $10 Dec. 8 200 units @ $12
Eddings Company uses a periodic inventory system. Sales totaled 1,500 units.
Problem 6-3A (P6-3A) Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit. During the year, purchases were: Feb. 20 600 units @ $9 Aug. 12 300 units @ $11 May 5 500 units @ $10 Dec. 8 200 units @ $12 Eddings Company uses a periodic inventory system. Sales totaled 1,500 units.
Determine the cost of goods available for sale. $ _____
Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement?
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