Accounting homework help
Accounting homework help.
- Submission file format: Word document with all the answers. CASE 1 (100 points)
Digital Wizards sells computer peripherals. At December 31, 2018, the company’s inventory amounted to $800,000. During the year 2019, the company made only one purchase and two sales.
These transactions were as follows:
- January 17. Purchased merchandise from PC Universe. The price of the merchandise was 340.000, discount terms 2/10; n/40
- February 15. Paid the accounts payable to PC Universe.
- March 25. Sold merchandise to Best Buy for $450.000 who paid cash. The cost of these items was $210.000
- December 18. Sold equipment to Shore Pharmaceuticals for $525.000. The cost of said equipment was $330.000, with discount terms 3/10; n/60. Said invoice was still unpaid at December 31, 2019
Instructions
- Prepare journal entries to record these transactions, assuming that Digital Wizards uses a perpetual inventory system. Provide with a developed explanation of the different entries and a justification of the amounts recorded. (10 points for the entries, 10 points for the explanations)
- Compute the ending balance in the Inventory account at the close of business on December 31. Explain your answer. (5 points for the entries, 5 points for the explanations)
- Prepare the company’s income statement for the year 2019 taking into account that the remaining expenses of the company during the whole year amounted to 90.500 (10 points). Explain the different entries of the income statement and in particular the effects of the discount terms on the operations where applicable (20 points).
- Explain the main differences between the perpetual and periodic inventory system and record the transactions using a periodic inventory system (10 points for the entries, 10 points for the explanations)
- Prepare the company’s trial balance at January 1, 2020 taking into account a Balance sheet at January 1, 2019 as follows: (20 points):