From September 1st 2013 to February 22nd 2014, Tesco purchased


Question Description:

25

From September 1st 2013 to February 22nd 2014, Tesco purchased 1.75 billion units from CPC at £2 per unit. Before the end of its fiscal year 2014 on February 22nd 2014, Tesco sold 80 percent of the units purchased at a price of £2.12 per unit13, and carried the remaining 20 percent in inventory to the next fiscal year (2015). At the end of fiscal 2014, Tesco estimated that it would purchase additional 1.75 billion units from CPC before the end of the contract period. During fiscal 2015, Tesco purchased additional 1.9 billion units at £2.00 each from CPC, and sold at a price of £2.12 per unit all the units purchased as well as the units in its inventory at the beginning of fiscal 2015. Please note that the first half of the contract period (September 1st 2013 to February 22nd 2014) coincides with Tesco’s second half of fiscal year 2014, and the second half of the contract period (February 23rd 2014 to August 31st 2014) coincides with Tesco’s first half of fiscal year 2015. (a)  Compute (i) the amounts of sales allowances earned by Tesco in fiscal 2014 and fiscal 2015, and (ii) the amounts of sales allowances Tesco should recognize in its income statements for fiscal 2014 and fiscal 2015. Show supporting computations and explain your rationale. (b)  Prepare the fiscal 2014 journal entries in Tesco’s books for the following transactions in accordance with the existing U.S. GAAP. Assume that all purchases and sales are made with cash. Receipt of cash for sales allowances from CPC Purchase of inventory during fiscal 2014 (assume perpetual inventory system) Sale of 80% of the inventory purchased at £2.12 per unit Recording cost of goods sold (present supporting calculations) for fiscal 2014 (c)  Prepare the fiscal 2015 journal entries in Tesco’s books for the following transactions in accordance with existing U.S. GAAP. Assume that all purchases and sales are made with cash. Purchase of additional inventory during fiscal 2015 Sale of the inventory brought forward from fiscal 2014 and inventory purchased in fiscal 2015 at £2.12 per unit Recording cost of goods sold (present supporting calculations) for fiscal 2015 Cash settlement with CPC at the end of the contract period wuxiao513
posted a question · Oct 30, 2015 at 7:32pm

Answer

25