Neverstop Corporation sells item A as part of its product line. Information about the beginning inventory, purchases, and sales of item A are given in the following table for the first six months of 2014. The company uses a perpetual inventory system:
1. Compute the cost of ending inventory by using the weighted- average costing method.
2. Compute the gross profit for the first six months of 2014 by using the FIFO costing method.
3. Would the gross profit be higher, lower, or the same if Neverstop used the weighted- average costing method rather than the FIFO method? Explain. No calculations are required.
4. Prepare journal entries to record the purchase and sale transactions, as well as the cost of sales, assuming that the weighted- average method is used.
5. Assume that because of a clerical error, the ending inventory is reported to be 440 units rather than the actual number of units (540) on hand. If FIFO is used, calculate the amount of the understatement or overstatement in
a. the cost of sales for the first six months of 2014.
b. the current assets at June 30, 2014.

  • CreatedAugust 04, 2015
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