Question 1 (25 marks) Banana Corporation uses the perpetual inventory system. The accounting records for Banana...

 

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Question 1 (25 marks) Banana Corporation uses the perpetual inventory system. The accounting records for Banana Corporation yield the following inventory data for the year ended 31 March 2022: Details Description Inventory, 1 April 2021 Purchases of inventory, 5 May 2021 20% on credit; 80% paid immediately On 31 March 2022, twenty-two units of inventory were on hand. Required: A sale took place on 20 February 2022. The selling price was $4,300 per unit and all sales were on credit. (i) (ii) (iii) Unit 30 50 Total cost (S) 63,000 85,000 (a) Compute the cost of goods sold and ending inventory for the year ended 31 March 2022 using each of the following inventory costing methods: First-In-First-Out (FIFO); Last-In-First-Out (LIFO); and Weighted Average Cost method. (10 marks) (b) Prepare journal entries to record Banana Corporation's inventory transactions for the year. Assuming FIFO is adopted. Narration is NOT required. (7 marks) (c) Report ending inventory, sales, cost of goods sold, and gross profit on the appropriate financial statements. Assuming FIFO is adopted. (4 marks) (d) A staff of the purchasing department of Banana Corporation regularly orders the goods from the suppliers. When the staff receives the goods from the suppliers, he will cross- check the quality and quantity of the received goods with those on the invoice. He will then ask his accounts clerk to make payments for the goods received to the suppliers. Banana Corporation also believes that the perpetual inventory system is reliable for inventory management and recording, and therefore physical count of inventory is not necessary. (i) Identify TWO weaknesses in the control procedures of Banana Corporation. (2 marks) (ii) Suggest ONE necessary control, for EACH of the internal control weaknesses that you have identified in (i), to address that weakness. (2 marks) [Total marks for Question 1: 25 marks] Question 1 (25 marks) Banana Corporation uses the perpetual inventory system. The accounting records for Banana Corporation yield the following inventory data for the year ended 31 March 2022: Details Description Inventory, 1 April 2021 Purchases of inventory, 5 May 2021 20% on credit; 80% paid immediately On 31 March 2022, twenty-two units of inventory were on hand. Required: A sale took place on 20 February 2022. The selling price was $4,300 per unit and all sales were on credit. (i) (ii) (iii) Unit 30 50 Total cost (S) 63,000 85,000 (a) Compute the cost of goods sold and ending inventory for the year ended 31 March 2022 using each of the following inventory costing methods: First-In-First-Out (FIFO); Last-In-First-Out (LIFO); and Weighted Average Cost method. (10 marks) (b) Prepare journal entries to record Banana Corporation's inventory transactions for the year. Assuming FIFO is adopted. Narration is NOT required. (7 marks) (c) Report ending inventory, sales, cost of goods sold, and gross profit on the appropriate financial statements. Assuming FIFO is adopted. (4 marks) (d) A staff of the purchasing department of Banana Corporation regularly orders the goods from the suppliers. When the staff receives the goods from the suppliers, he will cross- check the quality and quantity of the received goods with those on the invoice. He will then ask his accounts clerk to make payments for the goods received to the suppliers. Banana Corporation also believes that the perpetual inventory system is reliable for inventory management and recording, and therefore physical count of inventory is not necessary. (i) Identify TWO weaknesses in the control procedures of Banana Corporation. (2 marks) (ii) Suggest ONE necessary control, for EACH of the internal control weaknesses that you have identified in (i), to address that weakness. (2 marks) [Total marks for Question 1: 25 marks]

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a b Cost of goods sold Ending inventory Working notes FIFO April 1 2021 May 5 2021 Total LIFO April ... View the full answer