Mini-Project #5 Inventony STUDENT ROLE: You are employed with Johnson Accounting
ID: 2565746 • Letter: M
Question
Mini-Project #5 Inventony STUDENT ROLE: You are employed with Johnson Accounting Firm as an entry-level accountant. Today you have been assigned to work with Spare Parts, Inc. to help answer some of their inventory questions CUENT PROFILE: Spare Parts, Inc. is a regional retail chain that sells repair parts for vehicles, tractors and yard Parts, Inc. recently hired a new CEO and he is reviewing the accounting His company currently uses LuFO for tax reporting and financial reporting and wants to understand the impact of switching to FIFO for financial reporting. The company uses a has a 28% tax rate. The client has 80,000 shares of common stock outstanding with a par value of S0.50 per share. equipment. They have been in business since 2010, and are a publicly traded company. Spare practices related to Inventory. periodic inventory method, and ASSIGNMENT: To help him make this decision, your supervisor has asked you to complete several t In Blackboard you have been provided a PURCHASE AND Scenario #1, also been provided with a Trial Balance for December 31, 2016. All account balances are current and adjusted except for the Inventory account and Cost of Goods Sold, which are at beginning balances Because the company uses the periodic method, these accounts have not been adjusted yet. SALES DATA table, with two scenarios. Under purchase prices are increasing. In Scenario #2, purchase prices are decreasing. You have SCENARIO #1 CALCULATIONS Task 1: Using the PURCHASE AND SALES DATA table and TRIAL BALANCE for Scenario #1: Apply the FIFO method to calculate Ending Inventory and Cost of Goods Sold for Prepare the year-end adjusting entry to record Inventory and Cost of Goods Sold for both Scenario #1. Show your work in either Excel or word. scenarios. HINT: Beginning Inventory is $20,000. The PURCHASE account does have a balance, but the company did not have any purchase returns, purchase discounts or freight- in. Prepare a Multiple-Step Income Step and a Balance Sheet for both scenarios. The client has a 28% tax rate. Using the PURCHASE AND SALES DATA table and TRIAL BALANCE for Scenario #1: Apply the LIFO method to calculate Ending Inventory and Cost of Goods Sold for Task 2: Scenario #1. Show your work in either Excel or word. Prepare the year-end adjusting entry to record Inventory and Cost of Goods Sold for both scenarios. HINT: Beginning inventory is $20,000. The PURCHASE account does have a balance, but the company did not have any purchase returns, purchase discounts or freight- in. Prepare a Multiple-Step Income Step and a Balance Sheet for both scenarios. The client has a 28% tax rate. .Explanation / Answer
TASK 1
Scenario I FIFO
TASK 2
Scenario I LIFO
TASK 3
Scenario II FIFO
TASK 4
Scenario II LIFO
SCENARIO I FIFO Date Beginning inventory Purchase Sale Units Cost Units Cost Value 1/1 1000 20 4/2 500 5/1 2000 23 46000 7/17 1400 10/5 600 11/2 1950 24 46800 12/8 1670 1000 3950 92800 4170 Ending inventory = 1000+3950-4170 = 780 Under FIFO method : The ending inventory will be from the latest purchase Ending inventory = 780 units @$24 per unit = $18720.00 Cost of goods sold = Opening inventory + Purchases - Ending inventory = 20000 + 92800 - 15600= $94,080.00