Accounting Excel File Format with all the answers, clearly identifying all steps, results, journals and including comments besides each answer

Accounting

Excel File Format with all the answers, clearly identifying all steps, results, journals and including comments besides each answer.

Jim has recently opened a snack food wholesale company dedicated to the sale of peanuts, almonds and pistachios. During its first month of activity, the company has made the following transactions:

Besides these transactions, the company has had the following expenses:

Salaries: $3,750
Electricity bill: $400
Renting of equipment: $1,50

 Rent of warehouse and office: $3,250

Miscellaneous: $1,250

Questions

Jim’s accountant recommended that he should use the average cost method in order to determine the cost of the inventory sold but he is not sure about the consequences it may have on his financial situation.

Relying on your accounting knowledge, Jim asks you the following questions:

1: Why in your opinion did Jim’s accountant recommend the average cost method and what difference is there with the three other methods? Explain the main characteristics of each method of valuation of the inventory and the consequences they may have on the valuation of the inventory and determination of the net income in case of price fluctuation.

2: Prepare an Income statement of the company at the end of February using as method of valuation of the inventory the average cost method, FIFO and LIFO for each one of the products sold by Jim and calculate the balance of the inventory at the end of the month. Explain the calculations.  

3: In order to compare with the records made by his accountant, Jim asks you to prepare the different journal entries for the purchases and sales mentioned above for each one of the 3 different methods used above.  

4: Jim would like to know a forecast of the number of days to sell the inventory based on the results of the month of February. Explain your calculation and the steps followed.