Question

Part 1

On September 30, the bank statement of Fine Company showed a balance of $13,250. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records:

1. (1) deposits in transit amounted to $5,415

2. (2) outstanding checks amounted to $9,710

3. (3) a $780 check was incorrectly drawn on Fine's account

4. (4) NSF checks returned by the bank were $1,280

5. (5) bank service charge was $45

6. (6) credit memo for $190 for the collection of one of the company's account receivable

   Based on the above information, the true cash balance was:

• $9,735.

• $9,880.

• $8,600.

• $10,135.

Part 2

Owen Company's unadjusted book balance at June 30 is $14,780. The company's bank statement reveals bank service charges of $125. Two credit memos are included in the bank statement: one for $1,520, which represents a collection that the bank made for Owen, and one for $210, which represents the amount of interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's true cash balance is:

• $14,780.

• $16,385.

• $16,090.

• $16,635.

Part 3

Singleton Company's perpetual inventory records included the following information:

Date		Number of units and unit cost						Total cost
January 1	Beginning inventory	310	units	@	$	12.00		$	3,720
March 4	Purchase	260	units	@	$	20.00			5,200
September 28	Purchase	570	units	@	$	14.00			7,980
Number of units sold during the year: 850

If Singleton uses the FIFO cost flow method, its cost of goods sold would be $13,240.

True or False?

Part 4

Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company’s first day of operations, Koontz purchased 1,350 units of inventory that cost $6.30 each. On January 10, Year 1, the company purchased an additional 1,600 units of inventory that cost $8.70 each. If Koontz uses a weighted average cost flow method and sells 1,500 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately: (Round your intermediate calculations to one decimal place.)

A $11,020.

B $11,400.

C $13,050.

D $9,135.

Part 5

Melbourne Company uses the perpetual inventory method. Melbourne purchased 1,000 units of inventory that cost $5.75 each. At a later date the company purchased an additional 1,100 units of inventory that cost $6.25 each. If Melbourne uses a LIFO cost flow method, and sells 1,300 units of inventory, the amount of ending inventory appearing on the balance sheet will be:

• $8,025.

• $4,800.

• $5,000.

• $4,600.

Answer 1

Balance as per Bank statement = 13,250

Add: Deposits in transit = $5415

Less: Outstanding checks = $9710

Add: Rectification of Error = $780

True cash balance = $9,735

Rest adjustments are for book balance

True cash balance = 14,780-125+1520+210

= $16,385

FIFO assumes that goods purchased first will be sold first

Cost of goods sold = 3720+5200+280*14

= $12,840

Hence, false

Ending inventory balance = (1350*6.3+1600*8.7)*1450/2950

= $11,022.45

i.e. $11,020

LIFO states that inventory purchased later will be sold first

Value of ending inventory = 800*5.75

= $4600