Question.2967 - 1. Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright made the following purchases (listed in chronological order of acquisition): ? 40 units at $100 ? 70 units at $80 ? 170 units at $60 Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the FIFO method? (Points : 15) 2. You are the independent accountant assigned to the audit of Neophyte Company. The company's accountant, a graduate of Rival State University, has prepared financial statements that contained the following questionable items: a. The balance sheet reports land at $100,000. Included in this amount is a piece of property held for speculation at a cost of $30,000. b. Current liabilities include $50,000 for long-term debt that comes due in 3 months. The company has received a suitable firm commitment to refinance the debt for 5 years and intends to do so. c. Investments in marketable securities include $20,000 in short-term, high-grade commercial paper which is a cash equivalent. Please discuss how the above items should be classified and accounted for. 3. Briefly describe why companies that use perpetual inventory systems must still perform physical inventories. (Points : 25)4. Although the net method is theoretically more sound, most companies use the gross method of accounting for cash discounts related to sales on account. Explain this statement. (Points : 25)
Answer Below:
nbsp xxxxxxxxx Corp xxxx the xxxxxxxx inventory xxxxxx During xxx first xxxx of xxxxxxxxx Fulbright xxxx the xxxxxxxxx purchases xxxxxx in xxxxxxxxxxxxx order xx acquisition xxxxx at xxxxx at xxxxx at xxxxx for xxx year xxxxxxx units xxxxxxx units xx hand xx the xxx of xxx year xxxx is xxx ending xxxxxxxxx using xxx FIFO xxxxxx Points xxx x x x xx unit xxx are xxx independent xxxxxxxxxx assigned xx the xxxxx of xxxxxxxx Company xxx company xxx s xxxxxxxxxx a xxxxxxxx of xxxxx State xxxxxxxxxx has xxxxxxxx financial xxxxxxxxxx that xxxxxxxxx the xxxxxxxxx questionable xxxxx a xxx balance xxxxx reports xxxx at xxxxxxxx in xxxx amount xx a xxxxx of xxxxxxxx held xxx speculation xx a xxxx of xxx property xxxxx speculation xx no xxxxxx considered xxxx of xxxx land xxxxxx but xx investment xxxx only xxxxx consideration xxxxx be xx you xxxxxx to xxxx this xxxx within xxx year xx longer xxxx one xxxx to xxx if xx is x current xxxxx or xxxxxxxxx asset x Current xxxxxxxxxxx include xxx long-term xxxx that xxxxx due xx months xxx company xxx received x suitable xxxx commitment xx refinance xxx debt xxx years xxx intends xx do xx Debt xx be xxxxxxxxxx under xxxxx circumstances xxxxxx be xxxxxxxxxx as xxxxxxxxx liabilities x Investments xx marketable xxxxxxxxxx include xx short-term xxxxxxxxxx commercial xxxxx which xx a xxxx equivalent xxxxx items xxxxxx be xxxxxxxx with xxxx under xxx category xx cash xxx cash xxxxxxxxxxx Please xxxxxxx how xxx above xxxxx should xx classified xxx accounted xxx Briefly xxxxxxxx why xxxxxxxxx that xxx perpetual xxxxxxxxx systems xxxx still xxxxxxx physical xxxxxxxxxxx Points xxxxxxxxx inventory xxxxxxx still xxxxxxx periodic xxxxxxxx inventories xx verify xxx clerical xxxxxxxx of xxx data xxx to xxxxxxx changes xx inventories xxxx are xxx reflected xx the xxxxxxxxxx records xxxxx include xxxxxxx like xxxxx product xxxxxxxxxxxxx and xxxxxxxxxxxx Thus xx order xx maintain xx accurate xxxxxx of xxx inventory xxxxxxxxx using xxxxxxxxx inventory xxxxxxx should xxxxxxx physical xxxxxxxxx check xxxxxxxx the xxx method xx theoretically xxxx sound xxxx companies xxx the xxxxx method xx accounting xxx cash xxxxxxxxx related xx sales xx account xxxxxxx this xxxxxxxxx Points xxx net xxxxxx is xxxxxxxxx from x theoretical xxxxxxxxxx because xx values xxx sales xxx receivable xx its xxx realizable xxxxx In xxxxxxxx recording xxx sales xx net xxxxxxxx a xxxxxx assessment xx the xxxxxxx that xxx earned xxxx the xxxx of xxx product xx the xxxxxxxxxx company xxxxx to xxxx the xxxxxxxx then xxx company xxxxxx reflect xxxx amount xx income xxx gross xxxxxx for xxxxxxxxxxx and xxxxx is xxxx in xxxxxxxx normally xxxxxxx it xx expedient xxx its xxx does xxx generally xxxx any xxxxxxxxxxx effect xx the xxxxxxxxxxxx of xxx financial xxxxxxxxxxMore Articles From Finance
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