Sim-Jo-La Electronics sells a variety of electronic devices including a variety of WIFI SMART camera bulbs. The business began the second quarter (April to June) of 2020 with 15 (V380PRO) camera bulbs at a total cost of $108,750. The following transactions relating to the "V380PRO" camera bulbs were completed during the quarter. April 7 90 bulbs were purchased at a cost of $6,850 each. In addition, the business paid freight charges of $800 cash on each bulb to have the inventory shipped from the point of purchase to their warehouse. April 30 The sales for April were 75 bulbs which yielded total sales revenue of $803,250. (15 of these bulbs were sold on account to longstanding customers of the business) May 6 A new batch of 8o bulbs was purchased at a total cost of $654,800 May 9 Upon inspection of the bulbs purchased on May 6, five (5) of the units were found to be defective and were returned to the supplier. May 31 During the month 62 of the camera bulbs were sold at a price of $11,450 each. A customer, to whom 7 of the bulbs were sold during the first business day of May, returned 3 units of the merchandise, as they were of another make & model. June 5 June 14 owing to an increased demand, a further 110 bulbs were purchased at a cost of $9,000 each; the supplier gave a 3% quantity discount on the purchase. June 30 116 bulbs were sold during June at a unit selling price of $12,250. June 30 An actual count of inventory was carried out at the close of business which revealed that there were 36 units of the V380PRO brand of merchandise in the store room.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question
This problem is centred on the topic “Inventory Valuation & Control" which is covered in Unit 3
& speaks to the following objectives:
Course Objectives:
1) Given a set of transactions of a merchandiser for a specified period, prepare an inventory record
to determine the value of ending inventory & cost of goods sold
2) Demonstrate how sales returns & purchases returns are treated in the inventory record and how
they impact the income statement
3) Prepare an income statement for a merchandising entity
4) Use journal entries to demonstrate the difference between a perpetual & a periodic inventory
system using purchases, returns & sale of inventory
5) Given the usage and lead time of inventory items, determine the most economical quantity of that
inventory that a business should purchase at any one time.
6) Determine the various inventory levels necessary to prevent overstocking and understocking of
inventory
Transcribed Image Text:This problem is centred on the topic “Inventory Valuation & Control" which is covered in Unit 3 & speaks to the following objectives: Course Objectives: 1) Given a set of transactions of a merchandiser for a specified period, prepare an inventory record to determine the value of ending inventory & cost of goods sold 2) Demonstrate how sales returns & purchases returns are treated in the inventory record and how they impact the income statement 3) Prepare an income statement for a merchandising entity 4) Use journal entries to demonstrate the difference between a perpetual & a periodic inventory system using purchases, returns & sale of inventory 5) Given the usage and lead time of inventory items, determine the most economical quantity of that inventory that a business should purchase at any one time. 6) Determine the various inventory levels necessary to prevent overstocking and understocking of inventory
sim-Jo-La Electronics sells a variety of electronic devices including a variety of WIFI SMART camera
bulbs. The business began the second quarter (April to June) of 2020 with 15 (V380PRO) camera
bulbs at a total cost of $108,750. The following transactions relating to the "V380PRO" camera bulbs
were completed during the quarter.
go bulbs were purchased at a cost of $6,850 each. In addition, the business paid freight
charges of $800 cash on each bulb to have the inventory shipped from the point of
purchase to their warehouse.
April 7
April 30 The sales for April were 75 bulbs which yielded total sales revenue of $803,250. (15 of
these bulbs were sold on account to longstanding customers of the business)
May 6
A new batch of 80 bulbs was purchased at a total cost of $654,800
Upon inspection of the bulbs purchased on May 6, five (5) of the units were found to be
defective and were returned to the supplier.
May 9
May 31
During the month 62 of the camera bulbs were sold at a price of $11,450 each.
A customer, to whom 7 of the bulbs were sold during the first business day of May,
returned 3 units of the merchandise, as they were of another make & model.
June 5
June 14
Owing to an increased demand, a further 110 bulbs were purchased at a cost of $9,000
each; the supplier gave a 3% quantity discount on the purchase.
June 30
116 bulbs were sold during June at a unit selling price of $12,250.
June 30 An actual count of inventory was carried out at the close of business which revealed that
there were 36 units of the V380PROO brand of merchandise in the store room.
Unless otherwise stated, assume that all purchases were on account and received on the dates stated.
Required:
Prepare a perpetual inventory record for this merchandise, using the first in, first out (FIFO)
method of inventory valuation to determine the company's cost of goods sold for the quarter and
the value of ending.
(A)
(B)
Given that selling, distrībution and administrative costs associated with the V380PRO brand of
WIFI SMART camera bulbs for the quarter were $27,255, $42,400 and $145,600 respectively,
prepare an income statement for Sim-Jo-La (V380PRO) for the quarter ended June 30, 2020.
Journalize the transactions for the month of April, assuming the company uses a:
Periodic inventory system
Perpetual inventory system
(C)
One of the managers of the business has indicated that his main objective is to cut back on his tax
liability as much as possīble and is of the view that the FIFO method would be best. Do you agree
with him? Explain your answer clearly, with reference to the most popular methods of inventory
valuation.
(D)
Universal Enterprise sells a product that cost $450 per unit and has a monthly demand of 5,000
units. The annual holding cost per unit is calculated as 5% of the unit purchase price. It costs the
business $75 to place a single order. Currently the business places 12 orders each year.
(E)
i) What is the total stock administrative cost of Universal's current inventory policy?
ii) Is this the entity's cost minimizing solution for this product each year? Explain.
Transcribed Image Text:sim-Jo-La Electronics sells a variety of electronic devices including a variety of WIFI SMART camera bulbs. The business began the second quarter (April to June) of 2020 with 15 (V380PRO) camera bulbs at a total cost of $108,750. The following transactions relating to the "V380PRO" camera bulbs were completed during the quarter. go bulbs were purchased at a cost of $6,850 each. In addition, the business paid freight charges of $800 cash on each bulb to have the inventory shipped from the point of purchase to their warehouse. April 7 April 30 The sales for April were 75 bulbs which yielded total sales revenue of $803,250. (15 of these bulbs were sold on account to longstanding customers of the business) May 6 A new batch of 80 bulbs was purchased at a total cost of $654,800 Upon inspection of the bulbs purchased on May 6, five (5) of the units were found to be defective and were returned to the supplier. May 9 May 31 During the month 62 of the camera bulbs were sold at a price of $11,450 each. A customer, to whom 7 of the bulbs were sold during the first business day of May, returned 3 units of the merchandise, as they were of another make & model. June 5 June 14 Owing to an increased demand, a further 110 bulbs were purchased at a cost of $9,000 each; the supplier gave a 3% quantity discount on the purchase. June 30 116 bulbs were sold during June at a unit selling price of $12,250. June 30 An actual count of inventory was carried out at the close of business which revealed that there were 36 units of the V380PROO brand of merchandise in the store room. Unless otherwise stated, assume that all purchases were on account and received on the dates stated. Required: Prepare a perpetual inventory record for this merchandise, using the first in, first out (FIFO) method of inventory valuation to determine the company's cost of goods sold for the quarter and the value of ending. (A) (B) Given that selling, distrībution and administrative costs associated with the V380PRO brand of WIFI SMART camera bulbs for the quarter were $27,255, $42,400 and $145,600 respectively, prepare an income statement for Sim-Jo-La (V380PRO) for the quarter ended June 30, 2020. Journalize the transactions for the month of April, assuming the company uses a: Periodic inventory system Perpetual inventory system (C) One of the managers of the business has indicated that his main objective is to cut back on his tax liability as much as possīble and is of the view that the FIFO method would be best. Do you agree with him? Explain your answer clearly, with reference to the most popular methods of inventory valuation. (D) Universal Enterprise sells a product that cost $450 per unit and has a monthly demand of 5,000 units. The annual holding cost per unit is calculated as 5% of the unit purchase price. It costs the business $75 to place a single order. Currently the business places 12 orders each year. (E) i) What is the total stock administrative cost of Universal's current inventory policy? ii) Is this the entity's cost minimizing solution for this product each year? Explain.
Expert Solution
steps

Step by step

Solved in 6 steps with 7 images

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education