Question $2$

$(35$ marks$)$

Necks Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business uses

a perpetual inventory system and began the last quarter of $2020$ with merchandise inventory of $10$ batteries of the

"NeverDie" brand at a total cost of $$168,200.$

The following transactions, relating to the "NeverDie" brand were completed during the quarter:

All purchases were on account and received on the dates stated.

Required:

a$)$ Prepare a perpetual inventory record for Necks Auto, using the first in$,$ first out $($FIFO$)$ method of

inventory valuation to determine the value of ending inventory at December $31,2020,$ and the total amount

to be assigned to cost of goods sold for the period.

b$)$ Given that selling distribution and administrative costs associated with the NeverDie brand of batteries for

the quarter were $$23,445,$$$10,250$ and $$75,435$ respectively, prepare an income statement for Necks Auto

$($NeverDie$)$ for the quarter ended December $31,2020,$ to determine the net profit for the quarter.

$(6$ marks$)$

c$)$ Journalize the transactions on November $12$ and November $27,$ assuming the freight was paid by cash and

the business uses a: $-$ Periodic inventory system.

Perpetual inventory system

$(7$ marks$)$

d$)$ Explain the difference between a product cost and a period cost. How does the product cost of a

manufacturer differ from the product cost of a merchandiser?

$(2$ marks$)$