Problem 1

Sandvik Mining uses a periodic inventory system. One of the companys products is a special equipment for the oil drilling rig. The inventory quantities, purchases and sales of this equipment for the most recent year are as follows:

	Number of units	Cost per unit	Total Cost
Inventory, Jan. 1	35	$222	7 770
Feb. 1 purchase	47	225	10 575
Mar. 1 purchase	58	231	13 398
Apr. 1 purchase	22	235	5 170
Goods available for sale	162		36 913
Jun. 1 sale	129
Sept. 1 purchase	45	248	11 160
Inventory, Dec. 31	78

Instructions

1. Using the periodic costing procedures, compute the cost of December 31 inventory and the cost of goods sold for the year under each of the following cost assumptions:

1. First-in, first-out
2. Last-in, first-out
3. Average cost (round to the nearest dollar, except unit cost)

2. Prepare the journal entries to record cost of goods sold under each of the above assumptions.
3. Assuming that current market price of the one unit is $225 and materiality level is set at $600, make necessary journal entry to adjust the balance of ending inventory under each cost assumption FIFO, LIFO, Average cost.
4. How will your answers to requirement a. change if the company switch to perpetual inventory system? Calculate cost of goods sold as of June 1 and the amount of ending inventory as of December 1 using the same cost assumptions - FIFO, LIFO, Average cost (round to the nearest dollar, except unit cost).

Problem 2

The following is a series of related transactions between Company A, a wholesaler, and Company B, a chain of retail shoe stores:

April 9. Company A sold to Company B 450 units of product X on account, terms 3/15, n/60. The cost of product to company A was $210 per unit and the sales price was $250 per unit.

April 12. Kazpost Express charged $2,000 for delivering this merchandise to Company B. This charge was fully paid by Company B.

April 20. Company B returned 100 units of product to Company A because they were defective. Company A allowed to Company B full credit for this return.

April 22. Company B paid the remaining balance due to Company A within the discount period.

Instructions

1. Record this series of transactions in the general journal of Company A (The company records sales at sales gross price.)
2. Record this series of transactions in the general journal of Company B (The company records purchases of merchandise at net cost and uses a Transportation expense account to record charges from Kazpost.)
3. Assume Company B failed to make a payment on April 22 and did it on April 30 instead. Make a journal entries for April 30 for both Company A and Company B.