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Question 1: Bank Reconciliation
The following information is available for Brown Basket Company regarding its April 30, 2011, bank statement:
- Balance per books is $7,766.25.
- Balance per bank is $6,489.31.
- Cheque #321 for $734.25 and cheque #368 for $57.48were not returned with the April 30 bank statement.
- A deposit in transit of $2,963.67 had not been received by the bank when the bank statement was generated.
- A bank debit memo indicated an NSF cheque written by Bruce Garrett to Brown Basket Company on April 13 for $325.
- A bank credit memo indicated a bank collection of $1,200 and interest revenue of $45 on April 20.
- The bank statement indicated service charges of $25.
Required:
Prepare a bank reconciliation for Brown Basket Company dated April 30, 2011 and any required journal entries.
Question 2: Petty Cash
On October 1, 2011, Thomas Trams established a $100 petty cash fund. At the end of October the petty cash fund contained:
Cash on hand $3.75
– Petty cash tickets for
Entertainment $55.40
Postage 25.80
Miscellaneous items 18.30
Required:
- Prepare the journal entry to establish the petty cash fund on October 1, 2011.
- Prepare the journal entry on October, 2011, to replenish the petty cash fund.
- Assume on October 31, 2011, after replenishing the petty cash fund, Thomas Trams desires to increase the petty cash fund to $150. Prepare the necessary journal entry.
Question 3: Gross Margin Method of Estimating Inventory
Late on the night of November 30, 2011, an arsonist destroyed the Christmas House Company warehouse, which was full of inventory. Luckily the accounting records were stored in another facility and not destroyed in the fire. Christmas House Company is in the process of filing a claim with its insurance company for the inventory loss due to the fire.
Beginning inventory $545,500
Purchases through November 30, 2011 250,000
Net sales revenue through November 30, 2011 900,000
The gross margin percent has historically been 25% of net sales revenue.
Required:
Estimate the value of the inventory destroyed in the fire using the gross margin method.
Question 4: Inventory Costing
Assume the following data for Smooth Sailing Co. for November 2010:
Beginning inventory Nov. 1 8 units at $40 each
Sale Nov. 3 5 units at $130 each
Nov. 6 purchase 12 units at $44 each
Sale Nov. 8 7 units at $135 each
Sale Nov. 9 3 units at $135 each
Required:
- Calculate ending inventory and Cost of Goods Sold for Smooth Sailing Co. assuming the moving weighted-average cost method is being used.
- Calculate ending inventory and Cost of Goods Sold for Smooth Sailing Co. assuming the FIFO cost method is being used
Question 5: Lower of Cost and Net Realizable Value
Kristy’s KrustyKrutons had the following ending inventory costs:
| Product | Units on Hand | Unit Cost | Unit NRV |
| A | 15 | 6 | 6 |
| B | 40 | 7.5 | 7.25 |
| C | 35 | 15 | 17 |
Required:
Calculate the lower of cost and net realizable value (LCNRV) on an item by item basis.
Question 6: Retail Method of Estimating Inventory
Apply the retail method to the following information and calculate the cost of the ending inventory:
| Cost | Retail | |
| Beginning inventory | $28,825 | $67,500 |
| Net purchases | $75,300 | $230,000 |
| Sales | $63,900 |
Question 7: Gross Profit Method of Estimating Inventory
Goodwood Inc. wants to estimate inventory destroyed by flood. Its average gross profit percentage is 65%. The following information is available:
| (1) Beginning inventory: | $258,120 |
| (2) Purchases: | $69,450 |
| (3) Purchases returns and allowances: | $3,500 |
| (4) Transportation-in: | $1,930 |
| (5) Sales: | $455,600 |
| (6) Sales returns and allowances: | $5,600 |
Required:
Calculate the value of the destroyed ending inventory using the gross profit method.
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