Accounting -OnJune1, 2015, FrackCorp.soldmerchandisewithalist priceof$5,000to Floopyon account

| January 30, 2017

Question
1. OnJune1, 2015, FrackCorp.soldmerchandisewithalist priceof$5,000to Floopyon account.Frack allowedtradediscountsof30%.Credittermswere2/15,n/40andthe salewasmade FOBshippingpoint.Frackprepaid$200ofdeliverycostsforFloopyasanaccommodation.On June 12,2015,FrackreceivedfromFloopyaremittanceinfullpayment. Prepare the general journal entries for Frack to record the events. Frack uses the periodic method for sales and gross method for sales discounts.

2. A client,FloppyCo.,sellslawnmowersandgardentillers.Thegardentillersarepurchased fromBadly Built LLCandsoldto customerswithoutmodification.The lawnmowers,however,are purchasedfromseveralcontractors.Floppythenmakesongoingdesignrefinementstothe mowersbeforesellingthemtocustomers

The lawnmowerscost$200.Floppythenmakesthedesignrefinementsatacostof$85per lawnmower.Floppystoresthe lawnmowersinitsownwarehouseandsellsthemdirectlyto retailersatalist priceof$500.FloppyusestheFIFOinventorymethod.Approximatelytwo-thirdsof newlawnmowersalesinvolvetrade-ins.Foreachusedlawnmowertradedinand returnedtoFloppy,retailersreceivea$40allowanceregardlessofwhetherthetrade-inwas associatedwithasaleofayear2oryear3model.Floppy’snetrealizablevalueonausedlawn moweraverages$25.

AtDecember31,year2,Floppy’sinventoryof newlawnmowersincludesbothyear2and year 3models.Whentheyear3modelwasintroducedinSeptemberyear2,the list priceofthe remainingyear2modellawnmowerswasreducedbelowcost.Floppyis experiencingrising costs.

Floppyhascontactedyourfirmforadviceonhowto reportthe carryingvalueofinventory,the impactofthedeclineinvalueontheyear2models,andtheeffectsofusingtheFIFOmethodon theirDecember31,year2financialstatements.

All freight bills are paid directly to the freight companies.

Floppyhadthefollowinginformationregardingthegardentillerinventory for the fiscal year ended December 31, Y2:

Purchases

$210,000

Purchasediscounts

38,000

Purchasereturns

17,500

Freight-in

12,100

Freight-out

18,000

Beginninginventory

42,900

Endinginventory

34,250

Prepare a Schedule of Cost of Goods Sold for the fiscal year ended December 31, Y2:

3 .FlimCo.sellsoneproduct,whichitpurchasesfromvarioussuppliers.Flim’strialbalanceat December31, year2,includedthefollowingaccounts:

Sales(33,000units@ $16)

$528,000

Salesdiscounts

7,500

Purchases

368,900

Purchasediscounts

18,000

Freight-in

5,000

Freight-out

11,000

FlimCo.’sinventorypurchasesduringyear2wereasfollows:

Date

Units

Cost per Unit

Total Cost

Beginninginventory,January1

8,000

$8.20

$65,600

Purchases,quarterendedMarch31

12,000

8.25

99,000

Purchases,quarterendedJune30

15,000

7.90

118,500

Purchases,quarterendedSeptember 30

13,000

7.50

97,500

Purchases,quarterendedDecember 31

7,000

7.70

53,900

Total

55,000

$434,500

Additionalinformation:

Flim’saccountingpolicyis toreportinventoryinitsfinancialstatementsatthe lowerof costor market,appliedto totalinventory.Costis determinedunderthelast-in,first-out(LIFO)method.

Flimhasdeterminedthat,atDecember31year2,thereplacementcostofits inventorywas$8 perunitandthenetrealizablevaluewas$8.80perunit.Flim’snormalprofitmarginis$1.05per unit.

From this information, complete the following schedules.

Part a:

SUPPORTINGSCHEDULEOFENDINGINVENTORY

December31, Year2

Inventory at cost (LIFO)

Units

Cost per Unit

Total Cost

Flim Company

Schedule of Cost of Goods Sold

For the Year Ended December 31, Y2

Beginning Inventory

Purchases

Less: Purchase Discounts

Purchase Returns

Net Purchases

Plus: Freight-in

Goods Available for Sale

Ending Inventory

Cost of Goods Sold

Part b:

4 .Thefollowing information pertainsto FrackCorp.’s 2015cost ofgoodssold:

Inventory,12/31/14

$90,000

2015purchases

134,000

2015write-offofobsoleteinventory

24,000

Inventory,12/31/15

30,000

The inventorywrittenoffbecameobsoletedueto anunexpectedandunusualtechnological advancebya competitor.In its2015incomestatement,whatamountshouldFrackreportas cost of goodssold?

5 .On December 15, 2015, Frack purchased goods costing $100,000. The terms were FOB shipping point. Costs incurred by Frack in connection with the purchase and delivery of the goods were as follows:

Normalfreightcharges

$3,000

Handlingcosts

2,000

Insuranceon shipment

200

Abnormalfreightchargesforexpressshipping

1,500

Thegoodswere receivedonDecember17,2015. Whatis theamountthatFrack should chargeto:

a. inventory

b. currentperiodexpense

6 .FlipCo.adoptedthedollar-valueLIFOinventorymethodasofJanuary1,2015.A single inventorypoolandan internallycomputedpriceindexareusedtocomputeFlip’sLIFOinventory layers.InformationaboutFlip’sdollarvalueinventoryfollows:

Inventory

Date

Atbaseyearcost

AtdollarvalueLIFO

1/1/14

$90,000

$90,000

2014layer

20,000

30,000

2015layer

40,000

80,000

WhatwasthepriceindexusedtocomputeFlip’s: (Round all values to one decimal place.)

a. 2014dollarvalueLIFOinventorylayer

b. 2015dollarvalueLIFOinventorylayer

7 .FlipCo.’sinventoryatDecember31, 2015, was$1,500,000basedon aphysicalcountpricedatcost, andbeforeanynecessaryadjustmentforthefollowing:

>> Merchandisecosting$90,000,shippedFOBshippingpointfromavendoronDecember 30,2015,wasreceivedandrecordedonJanuary5,2016.

>>Goodsin the shippingareawereexcludedfrominventoryalthoughshipmentwasnotmade untilJanuary4,2016.Thegoods,billedtothecustomerFOB destinationonDecember 30,2015,hadacostof$120,000.

WhatamountshouldFlipreportasinventoryinitsDecember31,2015balancesheet?

8. FlipCo.’saccountspayablebalanceatDecember31,2015,was$2,200,000beforeconsidering the followingdata:

>>GoodsshippedtoFlipFOBshippingpointon December22,2015,werelost in transit. The invoicecostof$40,000wasnotrecordedbyFlip.OnJanuary7,2016,Flipfileda $40,000claimagainstthe commoncarrier.

>>GoodsshippedtoFlipFOBdestinationon December20,2015,were receivedon January6,2016.The invoicecostwas$50,000.

WhatamountshouldFlipreportasaccountspayablein itsDecember31, 2015balancesheet?

9.FlipCompany’susualsalestermsarenetsixtydays,FOBshippingpoint.Sales,netofreturns andallowances,totaled$2,300,000fortheyearendedDecember31, 2015,beforeyear-end adjustments.Additionaldataareasfollows:

>>OnDecember27, 2015, Flipauthorizedacustomerto return,forfullcredit,goods shippedandbilledat$80,000onDecember15, 2015. Thereturnedgoodswere received byFliponJanuary4,2016,anda$80,000creditmemowasissuedandrecordedon the samedate.

>>Goodswithan invoiceamountof$50,000werebilledandrecordedonJanuary3,2016. ThegoodswereshippedonDecember30, 2015.

>>Goodswithan invoiceamountof$100,000werebilledandrecordedon December30, 2015.ThegoodswereshippedonJanuary3,2016.

Flip’adjustednetsalesfor2015shouldbe?

10 .OnJanuary1, 2016,Flip,Inc.contractedwiththecityof Biggertoprovidecustombuiltdesksfor the cityschools.The contractmadeFlipthecity’ssolesupplierandrequiredFlipto supplyno lessthan4,000desksandnomorethan5,500desksperyearfortwo years.Inturn,Biggeragreed to payafixedpriceof$105perdesk.During2016, Flipproduced5,000desksforBigger.At December31,2016, 2,500ofthesedesksweresegregatedfromtheregularinventoryandwere acceptedandawaitingpickupbyBigger.BiggerpaidFlip$450,000during2016.Whatamount shouldFliprecognizeascontractrevenuein 2016?

11 .ThefollowingitemswereincludedinFloozyCo.’sinventoryaccountat December31,2015:

>> Merchandiseouton consignment,atsalesprice,including45%markupon sellingprice$40,000

>>Goodspurchased,in transit,shippedFOBshippingpoint $36,000

>>Goodsheldon consignmentbyFloozy $27,000

BywhatamountshouldFloozy’sinventoryaccountat December31,2015,be reduced?

12.On December 1, 2016, Floozy Department Store received 505 sweaters on consignment from Flip.Flip’scostforthesweaterswas$80each,andtheywerepricedtosellat $110.Floozy’scommission on consignedgoodsis 10%.AtDecember31, 2016fivesweatersremained.In itsDecember 31,2016balancesheet,whatamountshouldFloozyreportaspayableforconsignedgoods?

13 .During 2015, Floozy Co. purchased $960,000 of inventory. The cost of goods sold for 2015 was $900,000,andthe endinginventoryatDecember31,2014,was$180,000.Whatwasthe inventoryturnoverfor2015? Round answer to one decimal place.

14 .Selected datapertainingto Floozy Co. forthe calendar 2015isasfollows:

Net cashsales

$3,000

Costofgoodssold

18,000

Inventoryat12/31/14

6,000

Purchases

24,000

Accountsreceivable12/31/14

20,000

Accountsreceivable12/31/15

22,000

Calculate Floozy’s averagedays’salesininventory.Round answer to one decimal place.

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