Prime Fashion Merchandising Activities Accounting Journals

Background
The Final Assignment will focus on and consolidate your knowledge developed in the second half of the
course. It should give you an opportunity to demonstrate FULLY your knowledge and understanding.
Task
• You are required to do a report. This is an individual task
• The assignment consists of a case study which is attached
• The task will cover the contents from week 5 to week 8.
• Please ensure your address all the points are covered in your responses
• Format to be submitted: A word document
• Include a Cover, Table of Contents, References
Formalities:
• Cover, Table of Contents, References and Appendix are excluded of the total wordcount.
• Font: Arial 12,5 pts.
• Text alignment: Justified.
• The in-text References and the Bibliography have to be in Harvard’s citation style.
Submission: Week 8 – Via Moodle (Turnitin). 20 September 23:59 CEST
Weight: This task is 60% of your total grade for this subject.
Tips to achieve the highest success
• The answers should be clear and well presented
• There should be no mathematical errors, you have adequate time to do this properly.
• Show real understanding in any open questions.
• There are marks for presentation
• Wordcount: 1000 – 1500 words, excluding bibliography
2
Rubrics
Exceptional
90-100
Good
80-89
Fair
70-79
Marginal fail
60-69
Fail
<60
Knowledge
(30%)
Student correctly
defines and
describes the
topics of each at
all levels
demonstrating a
full understanding
of the essay
theme.
Student defines
and describes the
topics of each key
stage,
demonstrating a
good
understanding of
the essay theme
(may lack a key
aspect).
Student makes a
fair attempt at
defining and
describing the
topics however
details regarding
the business in
question are
missing.
Student makes an
attempt at defining
and describing the
topics, however
important details
regarding analysis
of the business in
question are
missing
Student fails to
correctly define or
describe the key
elements of the
business in
question,
demonstrating a
lack of
understanding of
the topic.
Critical
evaluation
(30%)
There is very good
evidence of
critical appraisal
of ideas and
concepts, the
insights are
outstanding.
Evidence of
critical appraisal
of ideas and
evaluation is good.
There is some
evidence of
critical appraisal
of ideas and
concepts, but the
analysis and
insights are
rudimentary for
this level of study.
There is limited
evidence of
critical appraisal
of ideas and
concepts and/or
those that are
offered are weak
There is no critical
appraisal of ideas
and concepts
and/or those that
are offered are
weak
Application
(30%)
Applies
knowledge and
skills in familiar
contexts with a
high degree of
effectiveness,
providing relevant
examples that
support points.
Applies
knowledge and
skills in familiar
contexts with
considerable
effectiveness,
providing some
relevant examples
that make a good
attempt at
supporting points.
Applies
knowledge and
skills in familiar
contexts with
limited
effectiveness, few/
irrelevant
examples
provided.
Applies
knowledge, but
does so incorrectly
with very weak
examples.
No application of
knowledge. No
examples are
provided.
Communication
(10%)
Uses conventions,
vocabulary, and
terminology of the
discipline with a
high
effectiveness.
Uses conventions,
vocabulary, and
terminology of the
discipline with
considerable
effectiveness.
Uses conventions,
vocabulary, and
terminology of the
discipline with
some
effectiveness.
Uses conventions,
vocabulary, and
terminology of the
discipline with
limited
effectiveness.
Work is poorly
written and/or
difficult to
understand.
3
1) Merchandising Activities (17 points)
The following is a series of related transactions between Prime Fashion and Mega Store,
a chain of retail clothing stores:
Jun. 01 Prime Fashion sells to Mega Store 200 T-Shirts on account, terms 02/10, n/30. Prime Fashion
bought each T-Shirt for $2.50 and sells it for $7.50 per T-Shirt to Mega Store.
Jun. 04 Mega Store returns 50 T-Shirts to Prime Fashion, since they have the wrong color.
Jun. 09 Mega Store pays the remaining balance to Prime Fashion.
Instructions:
(a) Record this series of transactions in the General Journal of Prime Fashion.
(The company uses the perpetual inventory system and records at gross costs).
(b) Record this series of transactions in the General Journal of Mega Store.
(The company uses the periodic inventory system and records at net costs).
Date Account Titles Debit Credit
4
2) Merchandising Activities (12 points)
One Lightning Corp. sold merchandise for $450 which cost them $200 on account. The customer was
dissatisfied with some of the goods and returned $100 worth (sales price) and received a cash refund.
Instructions:
(a) What Journal Entries should One Lightning Corp. enter at the time sold and at the time of the return?
Assume that One Lightning Corp. uses a Perpetual Inventory System.
(b) If One Lightning Corp. uses a Periodic Inventory System, what entries should be made?
Date Account Titles Debit Credit
At time of Sale
At time of Return
Date Account Titles Debit Credit
At time of Sale
At time of Return
5
3) Inventory Balance and COGS (10 points)
Sherman Electric shows the beginning inventory of a particular product, and the purchases during the current
year, as follows:
Jan. 1 Beginning Inventory 45 units @ $105 = $4,725
Mar. 8 Purchase 35 units @ $115 = $4,025
Aug. 11 Purchase 90 units @ $125 = $11,250
Oct. 23 Purchase 30 units @ $135 = $4,050
Total available for Sale 200 units $24,050
At December 31st, the ending inventory of this product consisted of 55 units.
Instruction: (show your calculations and round to 2 decimal places)
Determine the cost of the year-End Inventory and the Cost of Goods Sold for this product under each of the
following Methods of Inventory Valuation:
If Sherman Electric wants to achieve a high profit end of the year, which method should they choose?
Explain fully your answer.
Inventory at Dec. 31st Cost of Goods Sold
Average Cost
First-in, First-out
Last-in, First-out
6
4) Inventory Balance and COGS (10 points)
Canfield Trading shows the beginning inventory of a particular product, and the purchases during the current
year, as follows:
Jan. 1 Beginning Inventory 35 units @ $6.50 = $227.50
Apr. 8 Purchase 40 units @ $6.40 = $256.00
Aug. 11 Purchase 30 units @ $5.90 = $177.00
Dec. 23 Purchase 35 units @ $5.50 = $192.50
Total available for Sale 140 units $853.00
During the year Canfield Trading sold in total 95 units of this product.
Instruction: (show your calculations and round to 2 decimal places)
Determine the cost of the year-End Inventory and the Cost of Goods Sold for this product under each of the
following Methods of Inventory Valuation:
If Canfield Trading wants to achieve a high profit end of the year, which method should they choose?
Explain fully your answer.
Inventory at Dec. 31st Cost of Goods Sold
Average Cost
First-in, First-out
Last-in, First-out
7
5) Relation between Inventory System and Income Statement (9 points)
The following information is given by the accounting department. Fill in the gaps (blanks) with the correct
Dollar Amounts. Each line represents a new independent task.
Beginning
Inventory Purchases Ending
Inventory Net Sales COGS Gross
Profit Expenses Net Income
or Loss
a) $85,000 $168,000 $480,000 $200.000 $28,000
b) $420,000 $118.500 $810,000 $222,000 $165,000
c) $387,000 $144,000 $431.500 $97,000 $ (33,000)