P65B Information for BigFishTackle Co Ltd is presented in P6

P6-5B

Information for BigFishTackle Co. Ltd. is presented in P6.4B. Use the same inventory data and assume that the company uses the perpetual inventory system.

Date

Explanation

Units

Unit Cost

Total Cost

Apr.1

Beginning inventory

50

$230

$11,500

6

Purchases

35

240

8,400

9

Sales

(55)

14

Purchases

40

245

9,800

20

Sales

(50)

28

Purchases

30

250

7,500

Instructions

(a) Determine the cost of goods sold and cost of ending inventory using average cost. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

(b) When the company counted its inventory at the end of April, it counted only 49 rods on hand. What journal entry, if any, should the company make to record this shortage?

(c) If the company had not discovered this shortage, identify what accounts would be overstated or understated and by what amount.

Record transactions using perpetual FIFO; apply LCNRV.

Date	Explanation	Units	Unit Cost	Total Cost
Apr.1	Beginning inventory	50	$230	$11,500
6	Purchases	35	240	8,400
9	Sales	(55)
14	Purchases	40	245	9,800
20	Sales	(50)
28	Purchases	30	250	7,500

Solution

Answer- 1. Average Costs Date Purchases Cost of Goods Sold Balance Unit Cost Total Unit Cost Total Unit Cost Total Apr-1               50       230.00    11,500.00 Apr-6               35       240.00      8,400.00               50       230.00    11,500.00               35       240.00      8,400.00               85       234.12    19,900.00 Apr-9               55      234.12    12,876.47               30       234.12      7,023.53 Apr-14               40       245.00      9,800.00               30       234.12      7,023.53               40       245.00      9,800.00               70       240.34    16,823.53 Apr-20               50      240.34    12,016.81               20       240.34      4,806.72 Apr-28               30       250.00      7,500.00               20       240.34      4,806.72               30       250.00      7,500.00               50       246.13    12,306.72 Total            105    25,700.00            105    24,893.28 Cost of Goods Sold = 105 Units = $24,893.28 Ending Inventory = 50 Units = $12,306.72 Answer b. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 30-Apr Cost of Goods Sold      492.27 Inventory      492.27 (record the shortage of inventory) Loss on Inventory = 2 Units X $246.13 = $492.27 (Approx.) Answer c. Cost of Goods Sold Understated            492.27 Inventory Overstated            492.27 Retained Earnings Overstated            492.27