You are given the following information for Amelia Company. All transactions are settled in cash. Returns are
Question:
You are given the following information for Amelia Company. All transactions are settled in cash. Returns are usually not damaged and are restored immediately to inventory for resale. Amelia uses a perpetual inventory system and the average cost formula. Increased competition has reduced the price of the product.
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Instructions
(a) Prepare the required journal entries for the month of July for Amelia Company. (Hint: Round the average cost per unit to two decimal places.)
(b) Determine the ending inventory for Amelia.
(c) On July 31, Amelia Company learns that the product has a net realizable value of $8 per unit. Prepare the journal entry, if required, to recognize the decrease in value of this product. If no entry is required, explain why.
(d) What amount should the ending inventory be valued at on the July 31 balance sheet? What amount should the cost of goods sold be valued at on the July income statement?
Taking It Further
What if Amelia had used FIFO instead of average? How would this affect the July 31 ending inventory on the balance sheet compared with average?
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Purchases Cost of Goods Sold Balance Date Units Cost Total Units Cost Total Units Cost Total July 1 25 1000 250 5 55 9 495 80 931 745 8 70 931 652 1...View the full answer
Accounting Principles Part 1
ISBN: 978-1118306789
6th Canadian edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
