Inventory costing transactions financial statements estimating inventory

You are an employee at a full service bookkeeping and auditing firm called Accounting Solutions. One of your clients is Jane Jewels, who owns a retail hobby store, Hobbies Galore. She just read an article on a supplier’s blog about how managing inventory costs can affect her profit. Jane is interested in growing her business and wants to report a high income. She feels investors are more likely to buy her stock when she shows a higher net profit. Jane recently acquired new technology and will be switching from a periodic inventory to a perpetual inventory system in the current month, August. Jane rotates her stock and sells the oldest items first.
Compare three different costing schedules for the August inventory
Journalize the transactions
Show which costing method reports the highest profit
Using the information Jane gives you, show the estimated ending inventory using the gross profit method.
Lastly, on the second workbook page (˜Financial Statements’ tab), using the information given, create a monthly multi-step income statement
(#1), statement of retained earnings (#2) and a classified balance sheet for Hobbies Galore

Sample Solution