Financial Accounting, Student Value Edition (5th Edition)
5th Edition
ISBN: 9780134728520
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Chapter 5, Problem 38BE
To determine
Ascertain the amount of inventory loss for Incorporation T through the gross profit method.
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Learning Objectives 1, 2: Show how to account for inventory in a perpetual systemusing the average-costing method) Western Trading Company purchases inventory in cratesof merchandise; each crate of inventory is a unit. The fiscal year of Western Trading ends eachJanuary 31. Assume you are dealing with a single Western Trading store in Nashville, Tennessee. The Nashville store began the year with an inventory of 20,000 units that cost a total of$1,060,000. During the year, the store purchased merchandise on account as follows:July (29,000 units at $59) ..................................... $1,711,000November (49,000 units at $63) ........................... 3,087,000December (59,000 units at $69)............................ 4,071,000Total purchases..................................................... $8,869,000Cash payments on account totaled $8,541,000. During fiscal year 2018, the store sold 155,000units of merchandise for $15,887,500, of which $4,900,000 was for cash and the balance…
For all problems, assume the perpetual inventory system is used unless stated otherwise.
P6-28A Accounting for inventory using the perpetual inventory system-
FIFO, LIFO, and weighted-average
Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost
a total of $4,290. During the month, Fit Gym purchased and sold merchandise on
Merchandise Inventory 363
Learning Objectives 2, 3
2. Ending Merch. Inv., $990
account as follows:
Jan. 5 Purchase
156 crates @ $ 64 each
13 Sale
180 crates @$ 100 each
18 Purchase
114 crates @ $ 75 each
26 Sale
150 crates @ $ 116 each
Requirements
1 Prepare a perpetual inventory record, using the FIFO inventory costing method,
and determine the company's cost of goods sold, ending merchandise inventory,
and gross profit.
2. Prepare a perpetual inventory record, using the LIFO inventory costing method,
and determine the company's cost of goods sold, ending merchandise inventory,
and gross profit.
3. Prepare a perpetual inventory record,…
years ended June 30, 2019 and 2018:
Cost of Goods Available for Sale
Nature Foods Grocery reported the following comparative income statements for the
Beginning Merchandise Inventory
Less: Ending Merchandise Inventory
During 2019, Nature Foods Grocery discovered that ending 2018 merchandise inven-
inventory error-two years
an
Merchandise Inventory 361
Learning Objective 5
1.2019, NI $36,500
NATURE FOODS GROCERY
Income Statements
Years Ended June 30, 2019 and 2018
2019
Net Sales Revenue
Cost of Goods Sold:
2018
$ 134,000
$ 119,000
$ 17,000
78,000
$ 14,000
67,000
81,000
Net Cost of Purchases
95,000
18,000
17,000
Cost of Goods Sold
77,000
64,000
57,000
Gross Profit
55,000
Operating Expenses
26,000
21,000
$ 31,000
Net Income
$ 34,000
tory was overstated by $5,500.
Requirements
1. Prepare corrected income statements for the two years.
2.
2 State whether each year's net income-before your corrections-is understated or
overstated, and indicate the amount of the understatement or…
Chapter 5 Solutions
Financial Accounting, Student Value Edition (5th Edition)
Ch. 5 - Prob. 1DQCh. 5 - How are the financial statements of a manufacturer...Ch. 5 - What is a cost-flow assumption? Why is a cost-flow...Ch. 5 - If a company had two units that cost 1 each in its...Ch. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - During April, Bargain Hardware made sales of...Ch. 5 - Prob. 2SCCh. 5 - Prob. 3SCCh. 5 - Prob. 4SCCh. 5 - Prob. 5SCCh. 5 - Prob. 6SCCh. 5 - Prob. 7SCCh. 5 - Prob. 8SCCh. 5 - Prob. 9SCCh. 5 - Prob. 10SCCh. 5 - Prob. 11SCCh. 5 - Prob. 12SCCh. 5 - Prob. 1SECh. 5 - Prob. 2SECh. 5 - Prob. 3SECh. 5 - Prob. 4SECh. 5 - Prob. 5SECh. 5 - Prob. 6SECh. 5 - Prob. 7SECh. 5 - Prob. 8SECh. 5 - Lower-of-cost-or-market rule (Learning Objective...Ch. 5 - Prob. 10SECh. 5 - Inventory principles and terminology (Learning...Ch. 5 - Prob. 12SECh. 5 - Prob. 13SECh. 5 - Prob. 14SECh. 5 - Prob. 15SECh. 5 - Prob. 16AECh. 5 - Prob. 17AECh. 5 - Prob. 18AECh. 5 - Prob. 19AECh. 5 - Prob. 20AECh. 5 - Prob. 21AECh. 5 - Prob. 22AECh. 5 - Prob. 23AECh. 5 - Prob. 24AECh. 5 - Prob. 25AECh. 5 - Prob. 26AECh. 5 - Prob. 27AECh. 5 - FIFO (Learning Objective 2) 10-15 min. Tee Time,...Ch. 5 - LIFO (Learning Objective 2) 10-15 min. Refer to...Ch. 5 - Prob. 30BECh. 5 - Prob. 31BECh. 5 - Prob. 32BECh. 5 - Prob. 33BECh. 5 - Prob. 34BECh. 5 - Prob. 35BECh. 5 - Prob. 36BECh. 5 - Prob. 37BECh. 5 - Prob. 38BECh. 5 - Prob. 39BECh. 5 - Computing LIFO and journalizing inventory...Ch. 5 - Prob. 41APCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 43APCh. 5 - Prob. 44APCh. 5 - Prob. 45APCh. 5 - Estimating ending inventory (Learning Objective 7)...Ch. 5 - Prob. 47APCh. 5 - Prob. 48BPCh. 5 - Prob. 49BPCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 51BPCh. 5 - Prob. 52BPCh. 5 - Prob. 53BPCh. 5 - Prob. 54BPCh. 5 - Prob. 55BPCh. 5 - Continuing Exercise This exercise continues the...Ch. 5 - Prob. 1CPCh. 5 - Prob. 1CFSAPCh. 5 - Prob. 1EIACh. 5 - Prob. 2EIACh. 5 - Prob. 1FACh. 5 - Prob. 1IACh. 5 - Prob. 1SBACh. 5 - Prob. 1WCCh. 5 - Comprehensive Problem The Accounting Cycle for a...
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- P5-5B. Journalizing inventory purchases, sales, returns, and freight transactions using the perpetual inventory system; calculating gross profit (Learning Objectives 3, 4, 5, & 6) 25-30 min. The following transactions for Westcoast Tire Co. occurred during July: Jul Purchased $5,500 of merchandise on account from Meridian Tire Supply. Terms, 1/15, n/45, 4 FOB shipping point. Meridian Tire Supply prepaid the $475 shipping cost and added the amount to the invoice. 7 9 11 13 15 16 18 20 22 23 Purchased $300 of supplies on account from Office Express. Terms, 3/10, n/30, FOB destination. Sold $5,100 (cost, $2,800) of merchandise on account to P. Larson. Terms, 2/15, n/45, FOB destination. Paid $50 freight charges to deliver goods to P. Larson. Returned $500 of the merchandise purchased on July 4 and received a credit. Sold $900 (cost, $545) of merchandise to cash customers. Paid for the supplies purchased on July 7. Paid Meridian Tire Supply the amount due from the July 4 purchase in full.…arrow_forwardLearning Objective 2: Compare ending inventory and cost of goods sold—FIFOvs. LIFO) Paulson’s specializes in sound equipment. Company records indicate the followingdata for a line of speakers:Unit Cost$4964JunDate12713ItemBalance...................Purchase.................Sale ........................Sale ........................Quantity18376Sale Price$115103Requirements1. Determine the amounts that Paulson’s should report for cost of goods sold and endinginventory two ways:a. FIFOb. LIFO2. Paulson’s uses the FIFO method. Prepare the company’s income statement for the monthended June 30, 2018, reporting gross profit. Operating expenses totaled $340, and theincome tax rate was 35%.arrow_forwardI IBM Learning = Copy of Jacqueline. Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 4 units at $4,200 $16,800 Aug. 7 Purchase 15 units at $4,300 64,500 Dec. 11 Purchase 13 units at $4,400 57,200 32 units $138,500 There are 18 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method (Round per unit cost to two decimal places and your final answer to the nearest whole dollar). a. First-in, first-out (FIFO) $ 78,700 V b. Last-in, first-out (LIFO) 77,000 V Weighted average cost C. Feedback Check My Work a. When the FIFO method is used, costs are included in cost of merchandise sold in the order in which they were purchased. b. When the LIFO method is used, the cost of the units…arrow_forward
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- (Learning Objectives 1, 2: Show how to account for inventory transactions; applythe FIFO cost method) Spear Corporation’s inventory records for its retail division show thefollowing at May 31:May 1 Beginning inventory ............... 10 units @ $160 = $1,60015 Purchase................................. 5 units @ 161 = 80526 Purchase................................. 14 units @ 170 = 2,380At May 31, 11 of these units are on hand. Journalize the following for Spear Corporation underthe perpetual system:1. Total May purchases in one summary entry. All purchases were on credit.2. Total May sales and cost of goods sold in two summary entries. The selling price was $560per unit, and all sales were on credit. Assume that Spear uses the FIFO inventory method.3. Under FIFO, how much gross profit would Spear earn for the month ending May 31? Whatis the FIFO cost of Spear Corporation’s ending inventory?arrow_forwardLESSON 10: THE PERPETUAL SYSTEM ACTIVITY L. Give the necessary journal entries under the periodic inventory system and the perpetual inventory system. Bum Supplies purchases P 150,000 worth of merchandise from Clumsy Traders on account, terms 1/10, n/30 on August 15. P 20,000 worth of damage goods were returned to Clumsy Traders the following day. Full payment was made on August 25. Periodic Inventory Perpetual Inventory Aug 15 16 25arrow_forwardE6A-27 Computim Learning Objective 7 Appendix 6A ventory Consider the data of the following companies which use the PEHOUI system: Beginning Merchandise Inventory Ending Merchandise Inventory Cost of Goods Sold Net Cost of Net Sales Gross Profit Purchases Company Revenue $ 105,000 $ 23,000 $ 59,000 $ 22,000 24 (a) $ 45,000 Large Small (b) 27,000 94,000 (c) 99,000 40,000 Medium 96,000 (d) 58,000 24,000 68,000 (e) Petite 80,000 8,000 (f) 6,500 (g) 44,000 Requirements 1. Supply the missing amounts in the preceding table. 2. Prepare the income statement for the year ended December 31, 2019, for Large Company, which uses the periodic inventory system. Include a complete headıng and show the full computation of cost of goods sold. Large's operating expenses for the year were $12,000.arrow_forward
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