Compute ending inventory and cost of goods sold under LIFO, assuming Matthias Company uses the…

On December 1, 2014, Matthias Company had the account balances shown below.

Debit

Credit

Cash

$ 4,800

Accumulated Depreciation—Equipment

$ 1,500

Accounts Receivable

3,900

Accounts Payable

3,000

Inventory

1,800*

Owner"s Capital

27,000

Equipment

21,000

$31,500

$31,500

The following transactions occurred during December.

3

Purchased 4,000 units of inventory on account at a cost of $0.72 per unit.

5

Sold 4,400 units of inventory on account for $0.90 per unit. (It sold 3,000 of the $0.60 units and 1,400 of the $0.72.)

7

Granted the December 5 customer $180 credit for 200 units of inventory returned costing $120. These units were returned to inventory.

17

Purchased 2,200 units of inventory for cash at $0.80 each.

22

Sold 2,000 units of inventory on account for $0.95 per unit. (It sold 2,000 of the $0.72 units.)

Adjustment data:

1. Accrued salaries payable $400.

2. Depreciation $200 per month.

Instructions

(a) Journalize the December transactions and adjusting entries, assuming Matthias uses the perpetual inventory method.

(b) Enter the December 1 balances in the ledger T-accounts and post the December transactions. In addition to the accounts mentioned above, use the following additional accounts: Cost of Goods Sold, Depreciation Expense, Salaries and Wages Expense, Salaries and Wages Payable, Sales Revenue, and Sales Returns and Allowances.

(c) Prepare an adjusted trial balance as of December 31, 2014.

(d) Prepare an income statement for December 2014 and a classified balance sheet at December 31, 2014.

(e) Compute ending inventory and cost of goods sold under FIFO, assuming Matthias Company uses the periodic inventory system.

(f) Compute ending inventory and cost of goods sold under LIFO, assuming Matthias Company uses the periodic inventory system.

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