Q. Perpetual inventory system: journal entries. At thebeginning of 20X3, Beehler Company implemented a computerizedperpetual inventory system. The first transactions that occurredduring 20X3 following.
• Purchases on account: 500 units @ $4 =$2,000
• Sales on account: 300 of the above units =$2,550
• Returns on account: 75 of the above unsold units
The company president examined the computer-generated journalentries for these transactions and was confused by the absence of aPurchases account.
a. Duplicate the journal entries that would have prepared onthe computer printout.
b. Calculate the balance in the firm’s Inventoryaccount.
c. Briefly explain the absence of the Purchases account tothe company president.
Q. Inventory valuation methods: computations and concepts.Wave Riders Surfboard Company began business on January 1 of thecurrent year. Purchases of surfboards were as follows:
1/3: Purchase 100 boards @ $125
3/17: Sold 50 boards @ $130
5/9: 5/9: 246 boards @140
7/3: 400 boards @ $150
10/23: 74 boards @ $160
Wave Riders sold 710 boards at an average price of $250 perboard. The company uses a periodic inventorysystem.
Instructions
a. Calculate cost of goods sold, ending inventory, and grossprofit under each of the following inventory valuationmethods:
• First-in, first-out
• Last-in, first-out
• Weighted average
b. Which of the three methods would be chosen if management’sgoal is to
(1) produce an up-to-date inventory valuation on the balancesheet?
(2) approximate the physical flow of a sand and graveldealer?
(3) report low earnings (for tax purposes) for a separateelectronics company that has been experiencing declining purchaseprices?
Q. Depreciation methods. Betsy Ross Enterprises purchased adelivery van for $30,000 in January 20X7. The van was estimated tohave a service life of 5 years and a resid¬ual value of $6,000. Thecompany is planning to drive the van 20,000 miles annually. Computedepreciation expense for 20X8 by using each of the followingmethods:
a. Units-of-output, assuming 17,000 miles were driven during20X8
b. Straight-line
c. Double-declining-balance
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