(A)Prepare a perpetual inventory record for this merchandise, using the first in, first out (FIFO) method of inventory valuation to determine the company’s cost of goods sold for the quarter and the value of ending inventory. (B) Given that selling, distribution and administrative costs associated with the V380PRO brand of WIFI SMART camera bulbs for the quarter were $27,255, $42,400, and $145,600 respectively, prepare an income statement for Rennie’s Electronic Gadgets (V380PRO) for the quarter ended June 30, 2020. (C) Journalize the transactions for the month of April, assuming the company uses a: - Periodic inventory system - Perpetual inventory system (D) The owner of the business, Rennie Showdown, has stated that his objective is to cut back on his tax liability as much as possible and at the same time have his balance sheet looking at its best and is of the view that the LIFO method would be best to achieve both. Do you agree with Rennie? Justify your answer clearly distinguishing between the first in, first out (FIFO) and last in, first out (LIFO) methods of inventory valuation, with reference to IAS 2.
Rennie’s Electronic Gadgets sells a variety of electronic devices including a variety of WIFI SMART
camera bulbs. The business began the second quarter (April to June) of 2020 with 15 (V380PRO)
camera bulbs at a total cost of $108,750. The following transactions relating to the “V380PRO” camera
bulbs were completed during the quarter.
April 7 90 bulbs were purchased at a cost of $6,850 each. In addition, the business paid freight
charges of $800 cash on each bulb to have the inventory shipped from the point of
purchase to their business location.
April 30 The sales for April were 75 bulbs which yielded total sales revenue of $803,250. (15 of
these bulbs were sold on account to longstanding customers of the business)
May 6 A new batch of 80 bulbs was purchased at a total cost of $654,800
May 9 Upon inspection of the bulbs purchased on May 6, five (5) of the units were found to be
defective and were returned to the supplier.
May 31 During the month 62 of the camera bulbs were sold at a price of $11,450 each.
June 5 A customer, to whom 7 of the bulbs were sold during the first business day of May,
returned 3 units of the merchandise, as they were of another make & model.
June 14 Owing to an increased demand, a further 110 bulbs were purchased at a cost of $9,000
each; the supplier gave a 3% quantity discount on the purchase.
June 30 116 bulbs were sold during June at a unit selling price of $12,250.
June 30 An actual count of inventory was carried out at the close of business which revealed that
there were 36 units of the V380PRO brand of merchandise in the storeroom.
Unless otherwise stated, assume that all purchases were on
Required:
(A)Prepare a perpetual inventory record for this merchandise, using the first in, first out (FIFO) method
of
ending inventory.
(B) Given that selling, distribution and administrative costs associated with the V380PRO brand of WIFI
SMART camera bulbs for the quarter were $27,255, $42,400, and $145,600 respectively, prepare an
income statement for Rennie’s Electronic Gadgets (V380PRO) for the quarter ended June 30,
2020.
(C) Journalize the transactions for the month of April, assuming the company uses a:
- Periodic inventory system
- Perpetual inventory system
(D) The owner of the business, Rennie Showdown, has stated that his objective is to cut back on his tax
liability as much as possible and at the same time have his balance sheet looking at its best and is of
the view that the LIFO method would be best to achieve both. Do you agree with Rennie? Justify
your answer clearly distinguishing between the first in, first out (FIFO) and last in, first out (LIFO)
methods of inventory valuation, with reference to IAS 2.
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