Question Details

What dollar amounts should be reported for the final inventory 



Pr. 1—Accounting for purchase discounts.
Otto Corp. purchased merchandise during 2010 on credit for $300,000; terms 2/10, n/30. All of the gross liability except $60,000 was paid within the discount period. The remainder was paid within the 30-day term. At the end of the annual accounting period, December 31, 2010, 90% of the merchandise had been sold and 10% remained in inventory. The company uses a periodic system.

Instructions
(a)	Assuming that the net method is used for recording purchases, prepare the entries for the purchase and two subsequent payments.
(b)	What dollar amounts should be reported for the final inventory and cost of goods sold under the (1) net method; (2) gross method?  Assume that there was no beginning inventory.
Pr. 2—Inventory methods.
Jones Company was formed on December 1, 2009. The following information is available from Jones's inventory record for Product X.
			Units	  Unit Cost
	January 1, 2010 (beginning inventory)	1,600	$18.00
	Purchases:
		January 5, 2010	2,600	$20.00
		January 25, 2010	2,400	$21.00
		February 16, 2010	1,000	$22.00
		March 15, 2010	1,800	$23.00

A physical inventory on March 31, 2010, shows 2,500 units on hand.
Instructions
Prepare schedules to compute the ending inventory at March 31, 2010, under each of the following inventory methods:
 (a)	FIFO.
 (b)	Weighted-average.
*(c)	LIFO.
Show supporting computations in good form.




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