Question

Record transactions. Prepare the journal entry for each of the following transactions that occurred during the first year of operations at ShermanCo.   
   
a. Issued common stock for cash   

shares 400,000
par $6.00
total cash $2,400,000
   
b.At the beginning of the year, borrowed cash from the Lindquist National Bank and signed a note

amount borrowed $350,000
interest rate 6%
note due in 4 years
   
c. Incurred and paid salaries for the year.

amount $250,000
   
d. Purchased merchandise inventory, paying part in cash and the rest on account.   

amount paid in cash $300,000
amount on credit $275,000
   
e. Sold inventory on credit.   

inventory cost $280,000
total sales $410,000
   
f. Paid rent of $121,000 on the sales facilities during the first 11 months of the year
   
g. Sold inventory for cash   

inventory cost $200,000
total sales $290,000
   
h. Purchased store equipment, paying part in cash and   
the rest on credit   
equipment price $150,000
cash paid $65,000
remaining due in 90 days
   
i. Paid the following outstanding debts   

for store equipment $75,000
due to suppliers $100,000
   
j. Incurred and paid utilities expense for the year.   

amount $28,000
   
k. Collected cash from customers during the year for credit sales
previously recorded.

amount $375,000
   
l. At year-end, accrued interest on the note due to Lindquist National Bank.   

amount $21,000
   
m. At year-end, accrued past-due December rent on the sales facilities.   

amount $11,000
   
   2. Prepare an income statement and balance sheet from transaction data.





Chris Moody, CPA, MSM-Accounting
University of Phoenix Online Faculty
email: XXXXX@XXXXXX.XXX.
altemail: XXXXX@XXXXXX.XXX.

Posted: Mon 06/15/2009 05:57 AM, by: Chris Moody (XXXXX@XXXXXX.XXX) Cost-flow assumptions—FIFO and LIFO using periodic and perpetual systems.

The inventory records of Twilight, Inc., reflected the following information for the year ended December 31, 2005:      

                                    Number of               Unit            Total
      &nb sp;                                    Units               Cost            Cost
Inventory, January 1            200                    25              5,000

Purchases:      
30-May            &n bsp;                  250                    26              6,500
28-Sep       ;                         400                    28             11,200

Goods available for sale    850                &n bsp;                     22,700

Sales:     
February-05                      100   
June-05                             250
November-05                    275   
Total sales                        625   
Inventory, December 31    225   
      
Required:      

a. Assume that Twilight, Inc., uses a periodic inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.      
      
b. Assume that Twilight Inc., uses a perpetual inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.      
      
c. Explain why the FIFO results for cost of goods sold and ending inventory are the same in your answers to parts a and b, but the LIFO results are      
different.      
      
d. Explain why the results from the LIFO periodic calculations in part a cannot possibly represent the actual physical flow of inventory items.      
      


Cost-flow assumptions—FIFO and LIFO using periodic and perpetual systems.

The inventory records of Twilight, Inc., reflected the following information for the year ended December 31, 2005:      

                                    Number of               Unit            Total
      &nb sp;                                    Units               Cost            Cost
Inventory, January 1            200                    25              5,000

Purchases:      
30-May            &n bsp;                  250                    26              6,500
28-Sep       ;                         400                    28             11,200

Goods available for sale    850                &n bsp;                     22,700

Sales:     
February-05                      100   
June-05                             250
November-05                    275   
Total sales                        625   
Inventory, December 31    225   
      
Required:      

a. Assume that Twilight, Inc., uses a periodic inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.      
      
b. Assume that Twilight Inc., uses a perpetual inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.      
      
c. Explain why the FIFO results for cost of goods sold and ending inventory are the same in your answers to parts a and b, but the LIFO results are      
different.      
      
d. Explain why the results from the LIFO periodic calculations in part a cannot possibly represent the actual physical flow of inventory items.      
      
Cost-flow assumptions—FIFO and LIFO using periodic and perpetual systems.

The inventory records of Twilight, Inc., reflected the following information for the year ended December 31, 2005:      

                                    Number of               Unit            Total
      &nb sp;                                    Units               Cost            Cost
Inventory, January 1            200                    25              5,000

Purchases:      
30-May            &n bsp;                  250                    26              6,500
28-Sep       ;                         400                    28             11,200

Goods available for sale    850                &n bsp;                     22,700

Sales:     
February-05                      100   
June-05                             250
November-05                    275   
Total sales                        625   
Inventory, December 31    225   
      
Required:      

a. Assume that Twilight, Inc., uses a periodic inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.      
      
b. Assume that Twilight Inc., uses a perpetual inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIFO.      
      
c. Explain why the FIFO results for cost of goods sold and ending inventory are the same in your answers to parts a and b, but the LIFO results are      
different.      
      
d. Explain why the results from the LIFO periodic calculations in part a cannot possibly represent the actual physical flow of inventory items.