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Horngren'S Financial And Managerial Accounting
Found in: Page 358

Short Answer

Determining inventory accounting principles

Ward Hardware used the FIFO inventory costing method in 2018. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward’s decision?

The principle of consistency has been used in the given case.

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Step by Step Solution

Accounting principle

The accounting principle is the concept and the notion that is assumed to be followed while preparing the accounting records. All the accounting standards are based on accounting principles

Accounting principle in the given case

In the given case, the most relevant accounting principle that has been used is the principle of consistency.

As per this principle, there should be uniformity and consistency in the accounting method and procedures that have been used in maintaining the books of accounts.

Most popular questions for Business-studies Textbooks

Question: This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued through Chapter 5.

Consider the December transactions for Crystal Clear Cleaning that were presentedin Chapter 5. (Cost data have been removed from the sale transactions.) Crystal Clearuses the perpetual inventory system.

Dec. 2 Purchased 1,000 units of inventory for $4,000 on account from Sparkle

Company on terms, 5/10, n/20.

5 Purchased 1,200 units of inventory from Borax on account with terms

4/10, n/30. The total invoice was for $6,000, which included a $300

freight charge.

7 Returned 300 units of inventory to Sparkle from the December 2

purchase.

9 Paid Borax.

11 Sold 500 units of goods to Happy Maids for $5,500 on account with

termsn/30.

12 Paid Sparkle.

15 Received 100 units with a sales price of $1,100 of goods back from

customer Happy Maids.

21 Received payment from Happy Maids, settling the amount due in full.

28 Sold 500 units of goods to Bridget, Inc. on account for $6,500. Terms

1/15,n/30.

29 Paid cash for utilities of $550.

30 Paid cash for Sales Commission Expense of $214.

31 Received payment from Bridget, Inc., less discount.

31 Recorded the following adjusting entries:

a. Physical count of inventory on December 31 showed 800 units of

goods on hand.

b. Depreciation, $150.

c. Accrued salaries expense of $2,100.

d. Estimated sales returns of $1,500, with cost of $540.

e. Prepared all other adjustments necessary for December (Hint: You willneed to review the adjustment information in Chapter 3 to determinethe remaining adjustments). Assume the cleaning supplies left atDecember 31 are $50.

Requirements

2. Journalize the transactions for December 11th, 28th, and 31st (adjusting entry aonly) using the perpetual inventory record created in Requirement 1.

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