Pet and Produce Ltd balances its books at month-end, uses special journals, and uses the perpetual inventory
Question:
Pet and Produce Ltd balances its books at month-end, uses special journals, and uses the perpetual inventory system with the moving average cost flow assumption. All purchases and sales of inventory are made on credit. Reporting date is 31 December. Ignore GST.
Sales and purchases of product AZL-002 in October 2015 were:
Date | Transaction | No. | Unit cost | Total cost | ||||||||||
Oct. 1 Oct. 8 Oct. 10 Oct. 13 Oct. 16 Oct. 20 Oct. 26 | Inventory on hand Purchase Purchase return Sale@$15/unit Sale return (on Oct. 13 sale) Purchase Sale@$16/unit | 52 30 10 36 12 50 42 | $12.00 $13.00 $13.00 $14.00 | $624 $390 $130 $700 | ||||||||||
Accounts Receivable Control and Accounts Payable Control ledger account balances at 31 October 2015 were $86600 Dr and $82470 Cr respectively.
Transactions involving Pet and Produce Ltd’s customers and suppliers for November 2015 were:
Inventory sales Inventory purchases Cash payments to suppliers Cash receipts from customers Discount received from suppliers Discount allowed to customers Nov. 13: Inventory (not yet paid for) returned by customer Nov. 19: Inventory (paid for) returned to supplier Nov. 22: Inventory (not yet paid for) returned to supplier Nov. 26: Offset of accounts receivable and payable recorded Nov. 29: Debt written off | $112930 137440 139820 117470 3080 2760 8100 4130 6170 3940 5160 |
The Inventory Control ledger account balance at 31 December 2015 was $85590, and net realisable value for each product line exceeded cost. The cost of inventory on hand at 31 December 2015 determined by physical count, however, was only $83510. In investigating the reasons for the discrepancy, Pet and Produce Ltd discovered the following:
· Goods costing $1150 were ordered on 26 December 2015 on EXW terms. The transport firm took possession of the goods from the supplier on 28 December 2015. The purchase was recorded on 28 December 2015 but, as the goods had not yet arrived, the goods were not included in the physical count.
· $1860 of goods held on consignment for Druin Ltd were included in the physical count.
· Goods costing $980 were sold for $1130 on 29 December 2015 on DDP terms. The goods were in transit at 31 December 2015. The sale was recorded on 28 December 2015 and the goods were not included in the physical count.
Required
A. For Product AZL-002 calculate October 2015’s cost of sales and the cost of inventory on hand at 31 October 2015. (Round each average unit cost to the nearest cent, but round each total cost amount to the nearest dollar.)
B. Prepare the Accounts Receivable Control and Accounts Payable Control general ledger accounts (T-format) for the period 31 October to 30 November 2015.
C. Prepare any journal entries necessary on 31 December 2015 to correct error(s) and adjust inventory (Use the general journal).
Accounts PayableAccounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett