978-1337276337 Test Bank Chapter 5 Part 5

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215. For each of the following, calculate the cost of inventory reported on the balance sheet.

(a)

The total merchandise inventory counted at the end of the year was $73,000. Purchases for $5,000 are in transit

under FOB shipping point terms.

(b)

The total merchandise inventory counted at the end of the year was $75,000. Purchases for $5,000 are in transit

under FOB destination point terms.

216. Hound Dog Bisquits reported the following financial data for 2016 and 2017:

2017 2018

Sales $ 700,000 $ 600,000

Sales returns and allowances (10,000) (D)

Net sales 690,000 580,000

Cost of goods sold:

Inventory, January 1 30,000 (E)

Net purchases (A) 340,000

Cost of goods available for sale $ 250,000 $ 380,000

Inventory, December 31 (40,000) (30,000)

Cost of goods sold (B) (F)

Gross profit (C) (G)

Provide the answer for each missing letter above.

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219. Gently Used Cars is a dealer that uses the periodic inventory system. The data presented below is from the

accounting records of Gently for the year ended December 31, 2017.

Sales $585,000

Sales discounts 3,000

Purchases 420,000

Purchase returns 5,000

Inventory (January 1, 2017) 33,000

Inventory (December 31, 2017) 37,000

Operating expenses 146,000

Transportation-in 10,000

Retained earnings (January 1, 2017) 71,000

Using the amounts provided above, calculate the cost of goods sold for 2017.

Grappa, Inc.

Grappa, Inc. reported the following information for 2018 and 2017:

2018 2017

Sales $951,200 $890,000

Sales discounts 12,000 23,000

Purchases 580,000 600,000

Inventory, December 31 46,000 40,000

Transportation-in 18,000 19,000

Purchase discounts 4,000 5,000

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220. Refer to the information for Grappa, Inc.

How much is the cost of goods purchased for 2018?

221. Refer to the information for Grappa, Inc.

What amount is cost of goods available for sale for 2018?

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222. Refer to the information for Grappa, Inc.

How much is cost of goods sold for 2018?

223. Refer to the information for Grappa, Inc.

(A) How much is net sales for 2018?

(B) What other components that Grappa did not report could be included in this computation?

224. Refer to the information for Grappa, Inc.

How much of every dollar is gross profit for 2018?

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Cooking Corner

Cooking Corner reported inventory on its balance sheet at December 31, 2016 at $32,000. During 2017, Cooking Corner

purchased goods totaling $634,000 on account with terms of 2/10, n/30, FOB shipping point. Total charges paid by

Cooking Corner directly to the freight company were $1,000. At the end of 2017, inventory on hand totaled to $45,000.

Net sales for 2017 totaled $1,300,000. Cooking Corner employs a periodic inventory system.

225. Refer to the information about Cooking Corner.

How much would Cooking Corner pay its supplier if Cooking Corner paid for one-half of the goods acquired within the

discount period, and the other half after the expiration of the discount period?

226. Refer to the information about Cooking Corner.

How much is cost of goods available for sale for 2017 assuming Cooking Corner takes advantage of one-half of the cash

discounts?

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227. Refer to the information about Cooking Corner.

How much is Cooking Corner’s cost of goods sold assuming that Cooking Corner takes advantage of one-half of the cash

discount?

Digital Forces

Selected data from the financial statements for Digital Forces is presented below.

Net sales—2017 $200,000

Cost of sales—2017 136,000

Selling and Administrative Expenses—2017 63,000

Other operating Expenses—2017 600

Income taxes—2017 3,000

Inventories—December 31, 2016 11,000

Inventories—December 31, 2017 13,000

Retained Earnings—December 31, 2017 39,000

228. Refer to the financial statement information for Digital Forces.

Determine the dollar amount of cost of goods purchased for Digital Forces for 2017.

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229. Refer to the financial statement information for Digital Forces.

What portion of every dollar is available to cover operating expenses and to contribute to profits for 2017?

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230. The following data is available for one of the products sold by Wild Optics Company, which uses the periodic

inventory system:

Dec. 1 On hand, 10 units at $8.00 each $ 80

5 Purchased 30 units at $7.80 each 234

18 Purchased 40 units at $8.15 each 326

24 Purchased 20 units at $8.25 each 165

Available for sale during December—100 units $805

At the end of December, Wild Optics had 25 units on hand. The 75 units sold created revenue of $13 each. Determine the

amounts for the December 31 ending inventory, the cost of goods sold for December, and the gross margin for December

for each of the inventory costing methods listed below.

Ending Inventory Cost of Goods Sold Gross Profit

a. Weighted average

b. FIFO

c. LIFO

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231. School Time Corp. completed a physical inventory at the end of 2017. A review of the physical inventory procedures

and records uncovered several errors that are described below. In the columns provided, indicate the effect, if any, on the

four financial statement items listed. Use the following codes for your answers:

OS = Overstatement US = Understatement NE = No Effect

Balance Sheet Income Statement

Ending Inventory Retained Earnings Cost of Goods Sold Net Income

a. One batch of goods was counted twice.

b. One page of items was misplaced when the inventory was calculated.

c. Goods sold FOB shipping point were included in School Time’s inventory.

d. Goods in transit from a supplier, FOB shipping point, were not included in inventory.

ANSWER:

Balance Sheet Income Statement

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232. The cost of Garmin Corp.’s inventory at the end of the year was $85,000; however, due to obsolescence, the cost to

replace the inventory was only $65,000. What is the effect on the accounting equation of the adjustment needed to write

down the inventory?

233. Carrington, Inc. began the year with $130,000 in merchandise inventory and ended the year with $190,000. Sales and

cost of goods sold for the year were $900,000 and $640,000, respectively. (Use a 360-day year in your calculations.)

Required

1. Compute Carrington’s inventory turnover ratio.

2. Compute the number of days’ sales in inventory.

Learning Tree, Inc.

The following data is available for one of the products sold by Learning Tree, Inc., which uses the perpetual inventory

system:

May 1 On hand, 1,000 units @ $2.00 each $2,000

5 Purchased 2,000 units @ $2.75 each 5,500

10 Sold 2,500 units @ $16.00 each

18 Purchased 2,000 units @ $4.00 each 8,000

24 Sold 1,500 units @ $12.00 each

31 On hand, 1,000 units

234. Refer to the data for Learning Tree, Inc.

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If the moving average method is used, what is the amount assigned to cost of goods sold for the 2,500 units sold on May

10?

235. Refer to the data for Learning Tree, Inc.

If the moving average method is used, what is the amount assigned to the ending inventory on May 30?

236. Refer to the data for Learning Tree, Inc.

If the LIFO method is used, what is the amount assigned to cost of goods sold for the 2,500 units sold on May 10?