V 20 points A The Acct 201 Co purchased 4 identical units of

V. (20 points) A. The Acct 201 Co. purchased 4 identical units of Beta during March, as shown below March 8 March 15 March 22 Unit Cos S40 42 45 Assume that two units are sold on March 31 for $75 each. Assuming that ACCT 201 uses the periodic inventory method, calculate the gross profit and ending inventory on March 31 using: GROSS ENDING FIFO LIFO WEIGHTED AVERAGIE Which method would management prefer if their bonuses are based on net income, and why? B. The following data were gathered to use in reconciling the bank account of the Act 201 Co: Balance per bank $13,450 Bank service charges $11,655 Balance per general ledger cash acct Deposit in transit Outstanding checks 45 3,000 6,640 NSF check 1,800 a. What is the correct bank balance? b. What is the correct book balance? c. Prepare any necessary journal entries based on the reconciliation.

Solution

Solution A:

Cost of goods available for sale = 1*$40 + 1*$42 + 2*$45 = $172

Total sales = 2*$75 = $150

Total units available for sale = 4

Total units in ending inventory = 4 - 2 = 2 units

FIFO Method:

2 units in ending inventory will consist of purchase on March 22.

Cost of ending inventory = 2 * $45 = $90

Gross Profit = $150 - $90 = $60

LIFO:

2 units in ending inventory will consist of 1 unit from march 8 and 1 unit from march 15

Cost of ending inventory = $40 + $42 = $82

Gross profit = $150 - $82 = $68

Weighted average:

Weighted average cost per unit = $172 / 4 = $43

Cost of ending inventory = 2*$43 = $86

Gross profit = $150 - $86 = $64

Management should prefer LIFO method as Gross marign under this option is highest.

Solution B:

ACT 201
Bank Reconciliation
Bank\'s Cash balance	Company\'s cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$13,450.00	Ending Balance as per cash books	$11,655.00
Additions:		Additions:
Outstanding cash receipt	$3,000.00
Deductions:		Deductions:
Outstanding Checks	$6,640.00	NSF Cheque	$1,800.00
		Bank Service charge	$45.00
Up to date cash balance as per bank	$9,810.00	Up to date cash balance as per books	$9,810.00