Esperado Furnishings are retailers who purchase and sell household furnishings, including table lamps. The business uses a perpetual inventory system and adjusts cost of goods sold for any shortage or excess inventory. The business began the last quarter of 2018 with merchandise inventory of 10 pairs of “Italia” table lamps at a total cost of $168,200. The following transactions, relating to the “Italia” brand were completed during the quarter:October 5 Purchased 15 pairs of lamps at a cost of $17,020 per pair.October 14 Sold 18 pairs of lamps to Muller Furnishings at $22,250 per pairOctober 22 Purchased 24 pairs at a cost of $18,175 per pair but the supplier gave a 4% quantity discount. November 10 Sold 15 pairs of lamps to Orion Household Ltd and 10 pairs to Brown’s Furnishings which yielded total sales revenue of $589,750. November 12 Owing to an increased demand for this product, 30 pairs of lamps were purchased on account at a cost of $17,612 per pair. In addition, Esperado paid $288 in cash on each pair of lamps to have the inventory shipped from the vendor’s warehouse to Esperado’s showroom. November 27 Sold 23 pairs of lamps to Middletown Company at a price of $25,080 per pair.November 30 An actual count of inventory was carried out which revealed that there were 15 pairs of the “Italia” brand in the warehouse.December 2 In preparation for the festive season, Esperado purchased 25 pairs of lamps at a total cost of $474,500. December 15 5 pairs of the lamps purchased on December 2 were returned to the supplier, as they were not of the brand ordered.December 30 Sold 22 pairs of lamps to two customers (Omega Traders & Middleton Furnishings) at a selling price of $26,550 per pair. Prepare a perpetual inventory record for Esperado Furnishings, using the first in, firstout (FIFO) method to determine the value of ending inventory at December 31, 2018, and thetotal amount to be assigned to cost of goods sold for the period. ii) Given that selling, distribution and administrative costs for the quarter were $23,445, $10,250 and$75,435 respectively, prepare an income statement for Esperado Furnishings for theperiod, to determine the net profit for the quarter, assuming the perpetual inventory system. iii) You are told that 8 pairs of lamps sold on November 27, 2018 were on account. State thejournal entries necessary to record the transactions on November 12 and November 27,assuming the business uses a: - Perpetual inventory system- Periodic inventory system 1.Assuming that Esperado sold 86 pairs of “Italia” brand of lamps during the quarter; determine the value of ending inventory and cost of goods sold assuming the business used the periodic system and the LIFO method? Compute ending inventory units as shown below: Step 2 Compute value of ending inventory and cost of goods sold assuming the business used periodic inventory system as shown below: It is assumed that lamps purchased on 22nd Oct for the 24 pairs is net of discount. The freight charges paid for purchase of inventory purchase on 12th November should not be included in cost of inventory under periodic method.
Esperado Furnishings are retailers who purchase and sell household furnishings, including table lamps. The business uses a perpetual inventory system and adjusts cost of goods sold for any shortage or excess inventory. The business began the last quarter of 2018 with merchandise inventory of 10 pairs of “Italia” table lamps at a total cost of $168,200.
The following transactions, relating to the “Italia” brand were completed during the quarter:
October 5 Purchased 15 pairs of lamps at a cost of $17,020 per pair.
October 14 Sold 18 pairs of lamps to Muller Furnishings at $22,250 per pair
October 22 Purchased 24 pairs at a cost of $18,175 per pair but the supplier gave a 4% quantity discount. November 10 Sold 15 pairs of lamps to Orion Household Ltd and 10 pairs to Brown’s Furnishings which yielded total sales revenue of $589,750. November 12 Owing to an increased demand for this product, 30 pairs of lamps were purchased on account at a cost of $17,612 per pair. In addition, Esperado paid $288 in cash on each pair of lamps to have the inventory shipped from the vendor’s warehouse to Esperado’s showroom. November 27 Sold 23 pairs of lamps to Middletown Company at a price of $25,080 per pair.
November 30 An actual count of inventory was carried out which revealed that there were 15 pairs of the “Italia” brand in the warehouse.
December 2 In preparation for the festive season, Esperado purchased 25 pairs of lamps at a total cost of $474,500. December 15 5 pairs of the lamps purchased on December 2 were returned to the supplier, as they were not of the brand ordered.
December 30 Sold 22 pairs of lamps to two customers (Omega Traders & Middleton Furnishings) at a selling price of $26,550 per pair.
Prepare a perpetual inventory record for Esperado Furnishings, using the first in, first
out (FIFO) method to determine the value of ending inventory at December 31, 2018, and the
total amount to be assigned to cost of goods sold for the period.
ii) Given that selling, distribution and administrative costs for the quarter were $23,445, $10,250 and$75,435 respectively, prepare an income statement for Esperado Furnishings for the
period, to determine the net profit for the quarter, assuming the perpetual inventory system.
iii) You are told that 8 pairs of lamps sold on November 27, 2018 were on account. State the
assuming the business uses a:
- Perpetual inventory system
- Periodic inventory system
1.Assuming that Esperado sold 86 pairs of “Italia” brand of lamps during the quarter; determine the value of ending inventory and cost of goods sold assuming the business used the periodic system and the LIFO method?
Compute ending inventory units as shown below:
Compute value of ending inventory and cost of goods sold assuming the business used periodic inventory system as shown below:
It is assumed that lamps purchased on 22nd Oct for the 24 pairs is net of discount. The freight charges paid for purchase of inventory purchase on 12th November should not be included in cost of inventory under periodic method.
Journal entry is the primary entry that records the transactions initially.
(i)
Calculation of ending inventory:
Calculation of cost of goods sold:
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