Section 1–INTRODUCTION TO ACCOUNTING FOR INVENTORY

1. Your calendar year company places the following orders on December 27. Indicate which of
the orders will be reflected on this year’s financial statements.
a. Goods shipped December 28, FOB shipping point and received January 2.
b. Goods shipped December 27, FOB destination and received January 4.
c. Goods shipped January 2, FOB shipping point and received January 3.
d. Goods shipped FOB destination December 28 and received December 30.

2. Your company places the following orders on September 25. Indicate which orders will be
reflected on the balance sheet for the year ended September 30.
a. Goods are shipped FOB destination September 28 and received September 30.
b. Goods are shipped FOB destination September 27 and received October 2.
c. Goods are shipped FOB shipping point September 28 and received October 2.
d. Goods are shipped FOB shipping point October 1 and received October 3.

3. XYZ orders goods costing $5,000 from ABC. A trucker charges $300 for shipping. What
amount will XYZ record as the purchase cost in each of the following cases?
a. FOB destination with freight paid in advance by ABC.
b. FOB shipping point with the freight cost added to ABC’s invoice.
c. FOB shipping point with XYZ paying the shipping cost upon delivery.

4. Fill in the missing data in the following table:
A B C D E
Beginning inventory $10,000 $12,000 $8,000
Purchases $20,000 $16,000 $16,000
Goods available for sale $30,000 $31,000
Ending inventory $5,000 $7,000 $13,000 $9,000
Cost of goods sold $25,000 $17,000 $12,000

Mastering Inventory

Section 2–INVENTORY RECORDKEEPING USING THE PERPETUAL METHOD

1. On July 13, Ainsley Co. orders inventory with an invoice price of $20,000, FOB destination. On July 17, the goods and invoice are received. On July 21, Ainsley pays the invoice in full. On July 30, the inventory is sold on account for $30,000. Prepare the journal entries to record each transaction under the perpetual method.

2. Cooke Enterprises orders inventory from Advantage Systems, FOB shipping point. The units list for $10,000, but Cooke gets a 5% trade discount. Freight is $150, which Cooke pays the trucker upon delivery. Before paying the invoice, Cooke notices that goods were damaged and returns the entire shipment. Prepare the journal entries to record each transaction under the perpetual method.

3. Wasatch Tech purchases goods with an invoice price of $4,200 and terms of 3/10, n/30 and pays the net amount after 8 days. Prepare the journal entries to record the purchase and payment if Wasatch books cash discounts:
a. at gross.
b. at net.

4. Good Thymes Produce purchases goods with an invoice price of $6,300 and terms of 2/10 n/30. It pays the full amount after 15 days. Prepare the journal entries to record the purchase and payment if Good Thymes records cash discounts:
a. at gross.
b. at net.

5. Gemstone sells 500 units of inventory for $12,000 on account. The units cost $10 each. The customer returns 50 units before paying the invoice. Prepare the journal entries to record each transaction under the perpetual method.