Tutorial Solutions 5e

PROBLEM SET A 5.1

(A) EAGLE RIDGE GOLF PTY LTD

Date Particulars Debit Credit

Oct. 5 Purchases 5,460

Accounts Payable 5,460

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 7 Freight-in 168
Cash 168

9 Accounts Payable 210

Purchase Returns and Allowances 210

10 Accounts Receivable 2,520

Sales 2,520

12 Purchases 1,386
Accounts Payable 1,386

12 Accounts Payable ($5,460 - $210) 5,250

Discount Received ($5,250 x 2%) 105
Cash ($5,250 - $105) 5,145

17 Accounts Payable 126

Purchase Returns and Allowances 126

18 Accounts Payable ($1,386 - $126) 1,260

Discount Received 13
Cash ($1,260 - $13) 1,247

20 Accounts Receivable 1,890

Sales 1,890
27 Sales Returns and Allowances 63
Accounts Receivable 63
30 Cash 1,260
Sales 1,260

30 Cash 2,310
Accounts Receivable 2,310
(b)

Cash
1/10 Opening Balance 5,250 7/10 Freight in 168
30/10 Sales 1,260 12/10 Accounts payable 5,145
30/10 Accounts receivable 2,310 21/10 Accounts payable 1,247
31/10 Closing Balance 2,260

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 8,820 8,820
1/11 Opening Balance 2,260

Accounts Receivable
10/10 Sales 2,520 27/10 Sales returns 63
20/10 Sales 1,890 30/10 Cash 2,310
31/10 Closing Balance 2,037
4,410 4,410
1/11 Opening Balance 2,037
Inventory
1/10 Opening Balance 7,350

Accounts Payable
9/10 Purchase returns 210 5/10 Purchases 5,460
12/10 Discounts and cash 5,250 12/10 Purchases 1,386
17/10 Purchase returns 126
18/10 Discounts and cash 1,260
6,846 6,846
1/11 Opening Balance $-
Share Capital
1/10 Opening Balance 12,600
Sales
10/10 Accounts 2,520
Receivable
20/10 Accounts 1,890
Receivable
30/10 Cash 1,260
5,670

Sales Returns and Allowances

27/10 Accounts receivable 63

Purchases
5/10 Accounts payable 5,460
12/10 Accounts payable 1,386

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 6,846

Purchase Returns and Allowances

9/10 Accounts payable 210
17/10 Accounts payable 126
336

Discount Received
12/10 Accounts payable 105
18/10 Accounts payable 13
118

Freight-in
7/10 Cash 168

(c)
Eagle Ridge Golf Pty Ltd

Trial Balance

as at 31 October 2015

Debit Credit

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Cash $2,260
Accounts Receivable 2,037
Inventory 7,350
Accounts Payable -
Share Capital 12,600
Sales 5,670
Sales Returns and Allowances 63
Purchases 6,846
Purchase Returns and Allowances 336
Discount Received 118
Freight-in 168
$18,724 $18,724

(d)
Date Particulars Debit Credit
Oct 31 Profit or loss summary 14,427

Beginning inventory 7,350

Sales returns and 63

allowances

Purchases 6,846

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 Freight inwards 168

(To close various debits amounts to the Profit or Loss Summary)

Oct 31 Ending inventory 8,820

Sales 5,670

Purchases returns and allowances 336

Discount received 118

Profit or loss summary 14,944

(To close various credit accounts to profit or loss summary)

(e) Eagle Ridge Golf Pty Ltd

Statement of Profit or Loss (partial)

for the month ended 31 October 2015

Sales revenues:
Sales $5,670

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 Less: Sales returns and allowances (63)
Net sales revenue 5,607
Cost of sales:
Beginning inventory 1 October 7,350
Purchases $6,846
Less: Purchase returns and allowances (336)
Net purchases 6,510
Add: Freight-in 168
Cost of goods purchased 6,678
Cost of goods available for sale 14,028
Ending inventory 31 October (8,820)
Cost of sales (5,208)
Gross profit $399

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PROBLEM SET A 5.3

Modelmania Ltd

(a) Cost of Goods available for Sale

Date Explanation Units Unit Cost Total Cost

March 1 Beginning inventory 90 $35 $3,150

5 Purchase 210 40 8,400

13 Purchase 330 45 14,850

21 Purchase 240 50 12,000

26 Purchase 90 55 4,950

Total 960 $43,350

(b) FIFO

(1) Ending Inventory

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 Date Units Unit Cost Total Cost

March 26 90 $55 $4,950

21 60 50 3,000

*150 $7,950

*960 – 810

(2) Cost of sales

Cost of goods available for sale $43,350

Less: Ending inventory (7,950)
Cost of sales $35,400

Proof of Cost of sales

Date Units Unit Cost Total Cost

March 1 90 $35 $3,150

5 210 40 8,400
13 330 45 14,850
21 180 50 9,000
810 35,400

LIFO

(1) Ending Inventory

Date Units Unit Cost Total Cost

March 1 90 $35 $3,150

5 60 40 2,400

150 $5,550

(2) Cost of sales

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 Cost of goods available for sale $43,350
Less: Ending inventory (5,550)
Cost of sales $37,800

Proof of Cost of sales

Date Units Unit Cost Total Cost

March 26 90 $55 $4,950

21 240 50 12,000

13 330 45 14,850

5 150 40 6,000

810 37,800

AVERAGE COST

(1) Ending Inventory

$43,350 ÷ 960 = $45.15

Units Unit Cost Total Cost

150 $45.15 $6,773

(2) Cost of sales

Cost of goods available for sale $43,350

Less: Ending inventory (6,773)
Cost of sales $36,577

(c) (1) As shown in (b) above, FIFO produces the highest inventory amount, $7,950.

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 (2) As shown in (b) above, LIFO produces the highest Cost of sales, $37,800.

PROBLEM SET A 5.6

FONTANA LTD
(a) (1) FIFO

Date Purchases Sales Balance

1/7 (5 @ $95) $475 (5 @ $95) $475
6/7 (3 @ $95) $285 (2 @ $95) $190
11/7 (4 @ $106) $424 (2 @ $95)
(4 @ $106) $614
14/7 (2 @ $95)}
(1 @ $106)} $296 (3 @ $106) $318
21/7 (3 @ $112) $336 (3 @ $106)}
(3 @ $112)} $654
27/7 (3 @ $106)}
(1 @ $112) $430 ($2 @ $112) $224
Ending inventory=$224

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 (2) AVERAGE COST

Date Purchases Sales Balance

1/7 (5 @ $95) $475 (5 @ $95) $475
6/7 (3 @ $95) $285 (2 @ $95) $190
11/7 (4 @ $106) $424 (6 @ $102)* $614
14/7 (3 @ $102.3) $308 (3 @ $102) $306
21/7 (3 @ $112) $336 (6 @ $107)** $642
27/7 (4 @ $107) $428 (2 @ $107) $214

*$614 ÷ 6 = $102.3
**$642 ÷ 6 = $107
Ending inventory = $214
(3) LIFO

Date Purchases Sales Balance

1/7 (5 @ $95) $475 (5 @ $95) $475
6/7 (3 @ $95) $285 (2 @ $95) $190
11/7 (4 @ $106) $424 (2 @ $95)}
(4 @ $106)} $614
14/7 (3 @ $106) $318 (2 @ $95)}
(1 @ $106)} $296
21/7 (3 @ $112) $336 (2 @ $95)}
(1 @ $106)}
(3 @ $112)} $632
27/7 (3 @ $112)}
(1 @ $106)} $442 (2 @ $95) $190
Ending inventory=$190

(b) The highest ending inventory is $224 under the FIFO method.

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