EXERCISE 7 Spencer Company had beginning inventory of $22,000 at cost and $20,00

Question

EXERCISE 7 Spencer Company had beginning inventory of $22,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Sales were $157,000. Required compute the estimated ending inventory at cost using the conventional retail method EXERCISE 8 Piven Mining Corporation holds significant limestone deposits. One of its key customers, Kuai Oil, produces crude oil from shale deposits. This production process requires limestone, and Piven is seeing a large increase in order flow from Kuai and other shale companies. Piven's management belleves Kual's stock is undervalued, and has decided to invest excess cash in the stock of Kuai Oil, The intent of this investment is for "trading purposes only. Following are detailed facts about the Kuai investment. May 7 Purchased 500,000 shares of Kuai Oil at $7 per share. May 31 The fair value of Kuai's stock was $9 per share.. July 15 Received a dividend from Kuai of $0.10 per share. July 31 The fair value of Kuai's stock was $8 per share. Prepare journal entries to record the investment, and necessary end-of-month adjusting entries to reflect changes for each month. GENERAL JOURNAL DATE PR. DEBIT DESCRIPTION CREDIT

Explanation / Answer

COST RETAIL Beginning Inventory 22000 20000 Purchases 120000 170000 Total Goods available 140000 190000 Less: sales at retail 157000 Ending inventory at retail price 33000 Cost Ratio of Total Goods 73.68% ($140,000/190,000*100) Therefore, ending inventory at cost $24,314 (33000*73.68%) Ending inventory at cost $24,314

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