P6 - 5B Information for BigFishTackle Co. Ltd. is presented in P6.4B. Use the sa
ID: 2604848 • Letter: P
Question
P6-5B
Information for BigFishTackle Co. Ltd. is presented in P6.4B. Use the same inventory data and assume that the company uses the perpetual inventory system.
Date
Explanation
Units
Unit Cost
Total Cost
Apr.1
Beginning inventory
50
$230
$11,500
6
Purchases
35
240
8,400
9
Sales
(55)
14
Purchases
40
245
9,800
20
Sales
(50)
28
Purchases
30
250
7,500
Instructions
(a) Determine the cost of goods sold and cost of ending inventory using average cost. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
(b) When the company counted its inventory at the end of April, it counted only 49 rods on hand. What journal entry, if any, should the company make to record this shortage?
(c) If the company had not discovered this shortage, identify what accounts would be overstated or understated and by what amount.
Record transactions using perpetual FIFO; apply LCNRV.
Date
Explanation
Units
Unit Cost
Total Cost
Apr.1
Beginning inventory
50
$230
$11,500
6
Purchases
35
240
8,400
9
Sales
(55)
14
Purchases
40
245
9,800
20
Sales
(50)
28
Purchases
30
250
7,500
Explanation / Answer
Answer- 1. Average Costs Date Purchases Cost of Goods Sold Balance Unit Cost Total Unit Cost Total Unit Cost Total Apr-1 50 230.00 11,500.00 Apr-6 35 240.00 8,400.00 50 230.00 11,500.00 35 240.00 8,400.00 85 234.12 19,900.00 Apr-9 55 234.12 12,876.47 30 234.12 7,023.53 Apr-14 40 245.00 9,800.00 30 234.12 7,023.53 40 245.00 9,800.00 70 240.34 16,823.53 Apr-20 50 240.34 12,016.81 20 240.34 4,806.72 Apr-28 30 250.00 7,500.00 20 240.34 4,806.72 30 250.00 7,500.00 50 246.13 12,306.72 Total 105 25,700.00 105 24,893.28 Cost of Goods Sold = 105 Units = $24,893.28 Ending Inventory = 50 Units = $12,306.72 Answer b. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 30-Apr Cost of Goods Sold 492.27 Inventory 492.27 (record the shortage of inventory) Loss on Inventory = 2 Units X $246.13 = $492.27 (Approx.) Answer c. Cost of Goods Sold Understated 492.27 Inventory Overstated 492.27 Retained Earnings Overstated 492.27
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