During 2015, Ms. Kim, a young entrepreneur, stumbled upon a new business idea while traveling in Italy. The product, an industrial smoothie blender, was gaining popularity in Europe where restaurant and café customers were demanding healthy, blended fruit and vegetable drinks. Seeing a business opportunity, Ms. Kim singed an exclusive license to distribute the product in Korea. On January 1, 2016, BlenderSoul Inc. began operation with 200 blenders, valued at $80,000. Ms. Kim decided to use the periodic system for inventory valuation.

PURCHASES

Ms. Kim made several purchases throughout fiscal year 2016, which came from two different European suppliers: Matto Foods and Dante Sales. Matto offered credit terms of 2/10, 20 EOM and shipped FOB destination. Metto promised that as purchase volumes increased, the gross invoice cost per unit would decrease. Dante offered more attractive credit terms of 2/15, n/90, and delivered goods FOB shipping points (see Exhibit 1). The discount period was calculated from the date of ownership.

SHIPPING INFORMAITON

1. All shipments were delivered by Thomas Transpiration. Freights and insurance charges amounted to

$7 per unit, when applicable.

2. Customs duties were equal to 15 per cent of the invoice price and were paid by Thomas Transportation at the point of importation. These charges were collected by the shipping company at the point of destination. Thomas Transportation demanded cash on delivery.

INVENTORY

Several incidences occurred with regards to inventory during the first year of operations. Ten blenders from September 3 shipment were badly damaged and had to be returned to the supplier. Dante agreed to credit Ms. Kim’s account for the invoice cost and duties. Dante also offered to pay return transportation in order to maintain a good relationship. Then, on December 23, 2016, Ms.Kim’s warehouse was robbed and three blenders were stolen. Ms. Kim performed a physical inventory count on December 31, 2016, which revealed that a total of 262 blenders remained on hand.

SALES and PROMOTIONS

Gross Sales of $283,920 (546 units) had pleased Ms. Kim. She noted that although six units had been returned to BlendSoul Inc throughout the year, none of them were damaged.

REQUIRED:

1. Post all opening balances and inventory-related transactions in T-accounts for fiscal year 2016. Calculate the average unit cost for each purchase (after any returns) during fiscal year 2016 and the cost of goods available for sale. Please take average unit costs to three decimal places.
2. Calculate to the nearest dollar the ending inventory value and the subsequent cost of goods sold using FIFO and the average cost method.
3. Assume that the manufacturer announced the introduction of a new model with additional accessories and better design in December 2016. Production of the old model would be discontinued immediately. Ms.Kim estimated that the remaining units on hand could be liquidated at a price of $410 per unit. Assuming the drop in net realizable value per unit, would this affect BlenderSoul’s balance sheet?

Exhibit 1.

Fiscal Year 2016 Purchase Schedule

Supplier	Date Ordered	Date Shipped	Date Received	Unites Ordered	Gross Invoice Cost	Date Paid
Matto	March 12	March 17	March 20	360	$142,200	March 29
Dante	Aug 2	Aug 29	Sep 3	255	$370 per unit	Sep 21
Matto	Dec 17	Dec 25	In-transit	600	$365 per unit	N/A