Chapter 5: Inventories and Cost of Goods Sold
182. Hound Dog Bisquits reported the following financial data for 2014 and 2015:
2014
2015
Sales
$700,000
$600,000
Sales returns and allowances
(10,000)
(D)
Net sales
Cost of goods sold: Inventory, January 1
690,000
30,000
580,000
E
Net purchases
A
340,000
Goods available for sale
250,000
380,000
Inventory, December 31
Cost of goods sold Gross profit
(40,000)
B
C
=======
(30,000)
F
G
=======
Provide the answer for each missing letter above.
Chapter 5: Inventories and Cost of Goods Sold
183. Presented below is a partially completed income statement of Deep Sea, Inc. for 2015.
Net Sales $ A
Cost of Sales:
Beginning Inventory B
Net Purchases 138,193
Available for Sale 149,315
Less: Ending Inventory C
Cost of Sales 136,225
Gross Profit 72,978
Selling, General and Administrative Expenses D
Operating Income $ 9,083
Using the partially completed income statement for Deep Sea, Inc., determine each of the following for
2015.
A) Net Sales
B) Beginning Inventory
C) Ending Inventory
D) Selling, General and Administrative Expenses
Chapter 5: Inventories and Cost of Goods Sold
184. The cost of goods sold for Johnnie, Inc. totaled $1,305,000. Sales returns and purchase returns were
$3,000 and $4,000, respectively. Purchases totaled $1,300,000. Discounts taken by Johnnie totaled $7,000,
while discounts taken by customers totaled $5,000. Beginning inventory was $90,000. Determine the
amount of ending inventory to be reported on Johnnie, Inc.‘s balance sheet.
185. 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, 2014.
Sales
Sales Discounts
Purchases
Purchase Returns
Inventory (January 1)
Inventory (December 31)
Operating Expenses
Transportation-in
Retained Earnings (January 1)
Using the amounts provided above, calculate the cost of goods sold for 2014.
Carlton, Inc.
Carlton, Inc. reported the following information for 2015 and 2014:
2015
2014
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
186. Refer to the information for Carlton, Inc.
How much is the cost of net purchases for 2015?
Chapter 5: Inventories and Cost of Goods Sold
187. Refer to the information for Carlton, Inc.
What amount is cost of goods available for sale for 2015?
188. Refer to the information for Carlton, Inc.
How much is cost of goods sold for 2015?
189. Refer to the information for Carlton, Inc.
How much is net sales for 2015? What other components that Carlton did not report could be included in
this computation?
190. Refer to the information for Carlton, Inc.
How much of every dollar is gross profit for 2015?
Cooking Corner
Cooking Corner reported inventory on its balance sheet at December 31, 2013 at $32,000. During 2014,
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
2014, inventory on hand totaled to $45,000. Net sales for 2014 totaled $1,300,000. Cooking Corner
employs a periodic inventory system.
191. 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?
Chapter 5: Inventories and Cost of Goods Sold
192. Refer to the information about Cooking Corner.
How much is cost of goods available for sale for 2014 assuming Cooking Corner takes advantage of one–
half of the cash discounts?
193. 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–2015
$200,000
Cost of Sales–2015
136,000
Selling, General & Administrative Expenses–2015
63,000
Other Operating Expenses–2015
600
Income Taxes–2015
3,000
Inventories–Dec. 31, 2014
11,000
Inventories–Dec. 31, 2015
13,000
Retained Earnings–Dec. 31, 2015
39,000
194. Refer to the financial statement information for Digital Forces.
Determine the dollar amount of cost of goods purchased for Digital Forces for 2015.
195. Refer to the financial statement information for Digital Forces.
What portion of every dollar is available to cover operating costs and to contribute to profits for 2015?
Chapter 5: Inventories and Cost of Goods Sold
196. 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
Chapter 5: Inventories and Cost of Goods Sold
197. School Time Corp. completed a physical inventory at the end of 2014. 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:
O Overstatement U 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.
Balance Sheet
Income Statement
a.
One batch of goods was
counted twice.
b.
One page of items was
misplaced when the
c.
Goods sold FOB shipping
School Time’s inventory.
d.
Goods in transit from a
supplier, FOB shipping
point, were not included in
inventory.
Chapter 5: Inventories and Cost of Goods Sold
198. 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. Identify the effects of this transaction on the accounting equation and
income statement accounts at the end of the year.
199. 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 at $2.00 each $2,000
5 Purchased 2,000 units at $2.75 each 5,500
10 Sold 2,500 units at $16 each
18 Purchased 2,000 units at $4.00 each 8,000
24 Sold 1,500 units at $12 each
31 On hand, 1,000 units
200. Refer to the data for Learning Tree, Inc.
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?
Chapter 5: Inventories and Cost of Goods Sold
201. 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?
202. 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?
203. Refer to the data for Learning Tree, Inc.
If the LIFO method is used, what is the amount assigned to the ending inventory on May 30?
204. Refer to the data for Learning Tree, Inc.
Explain why the amounts for ending inventory are different under the two average cost methods—weighted
average (periodic) and moving average (perpetual).
205. Refer to the data for Learning Tree, Inc.
Explain why the amounts are different for LIFO under periodic and perpetual inventory systems.
Chapter 5: Inventories and Cost of Goods Sold
Share, Inc.
The following data is available for one of the products sold by Share, Inc., which uses a perpetual inventory
system.
May 1 On hand, 10 units at $2 each
8 Sold 6 units at $10 each
14 Purchased 30 units at $3 each
23 Sold 24 units at $10 each
206. Refer to the data for Share, Inc.
If the moving average method is used, how much is cost of goods sold for May?
207. Refer to the data for Share, Inc.
If the moving average method is used, how much is ending inventory on May 30?
208. Refer to the data for Share, Inc.
Required:
1. If the FIFO method is used, how much is ending inventory on May 30?
2. How does this differ from the amount calculated using a periodic system and FIFO?
209. Refer to the data for Share, Inc.
If the LIFO method is used, how much is cost of goods sold for May?
210. Describe how the inventories of manufacturers differ from the inventories of retailers.
Chapter 5: Inventories and Cost of Goods Sold
211. Several transactions of sales and purchase activities for Genoa Department Store are described below.
A) Genoa purchases shoes from Nike on credit.
B) Genoa returns defective shoes to Nike before payment is made to Nike for the shoes purchased in transaction
A.
C) Genoa pays for the shoes purchased from Nike.
D) Genoa sells shoes to its customers for cash and on credit.
E) Credit customers return shoes to Genoa for a refund.
F) Credit customers pay their account balances to Genoa.
REQUIRED: For each transaction described above, describe the economic effects of the transaction on the
company under a periodic inventory system.
212. Flores Department Store currently uses the periodic inventory system.
REQUIRED: Explain what the advantages would be to Flores if it uses the perpetual inventory system. Assume that
Flores can use a computer system which is linked to its cash registers and that all products have bar codes that can
be read by bar code readers attached to the cash registers.
213. Giant-Mart purchased a big shipment of shoes from Right Balance, Inc. on credit near the end of its accounting
period. Right Balance shipped the shoes in January and Giant-Mart received the shoes in February. Assume that
Giant-Mart‘s accounting period ends on January 31, while Right Balance’s accounting period ends on May 31.
REQUIRED: If the shoes are shipped FOB destination, who will pay the freight costs? If the shoes are shipped
FOB shipping point, who will pay the freight costs?