Brief Exercise 6-14 (LO 6-6)
Inventory Quantity
Lower-of-Cost
-or-Market
Ending
Inventory
Ski jackets 20 $ 95 $1,900
Skis 25 300 7,500
Brief Exercise 6-15 (LO 6-6)
Inventory Quantity
Lower-of-Cost
-or-Market
Ending
Inventory
Optima cameras 110 $45 $4,950
Inspire speakers 50 45 2,250
Brief Exercise 6-16 (LO 6-7)
Inventory
turnover ratio =Cost of goods sold =$180,000
Average inventory ($55,000 + $45,000) / 2
Average days
in inventory =365 =365
Inventory turnover ratio 3.6
Gross profit
ratio =Gross profit =($250,000 − $180,000)
Net sales $250,000
Brief Exercise 6-17 (LO 6-8)
February 2, 2015 Debit Credit
Purchases 40,000
March 17, 2015 Debit Credit
Accounts Receivable 60,000
No entry for cost of goods sold
Brief Exercise 6-18 (LO 6-8)
February 2, 2015 Debit Credit
Purchases 40,000
February 2, 2015 Debit Credit
Freight-In 600
Brief Exercise 6-19 (LO 6-8)
February 2, 2015 Debit Credit
Purchases 60,000
February 5, 2015 Debit Credit
Accounts Payable 4,000
Brief Exercise 6-20 (LO 6-8)
February 2, 2015 Debit Credit
Purchase 40,000
February 10, 2015 Debit Credit
Accounts Payable 40,000
Purchase Discounts 1,200
Brief Exercise 6-21 (LO 6-9)
Overstating ending inventory by $15,000 in 2015 has the following effects:
2015
Cost of goods sold is understated by $15,000.
2016
Cost of goods sold is overstated by $15,000.
Brief Exercise 6-22 (LO 6-9)
Overstating ending inventory by $15,000 in 2015 has the following effects:
2015
Inventory is overstated by $15,000.
2016
Inventory is not affected.
Exercise 6-1 (LO 6-2)
Beginning inventory $ 55,000
Add: Purchases 910,000
Cost of goods available for sale 965,000
Less: Ending inventory (45,000)
EXERCISES
Exercise 6-2 (LO 6-2)
Wayman Corporation
Multiple-step Income Statement
For the year ended December 31, 2015
Sales revenue $390,000
Gross profit $260,000
Salaries expense 40,000
Utilities expense 50,000
Advertising expense 30,000
Operating income 140,000
Income before income taxes 120,000
Net income $ 70,000
Exercise 6-3 (LO 6-2)
Requirement 1
Tisdale Incorporated
Multiple-step Income Statement
For the year ended December 31, 2015
Net sales $300,000
Gross profit $110,000
Selling expenses 60,000
General expenses 50,000
Administrative expenses 40,000
Operating income (loss) (40,000)
Income before income taxes 70,000
Net income $ 40,000
Requirement 2
While Tisdale Incorporated is able to report positive net income ($40,000), the
company does not appear to have much profit-generating potential. For its core
operations, the company reports a negative operating income or loss (−$40,000).
Exercise 6-4 (LO 6-3)
Requirement 1 FIFO
(a)
Date Transaction
Number
of units
Unit
cost
Ending
Inventory
Oct. 6 Purchase 50 $48 $2,400
(b)
Date Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Jan. 1 Beginning inventory 50 $42 $ 2,100
Apr. 7 Purchase 130 44 5,720
Jul. 16 Purchase 200 47 9,400
Oct. 6 Purchase 60 48 2,880
(d) Gross profit = Sales revenue − Cost of goods sold
Exercise 6-4 (continued)
Requirement 2 LIFO
(a)
Date Transaction
Number
of units
Unit
cost
Ending
Inventory
Jan. 1 Beginning Inventory 50 $42 $2,100
(b)
Date Transaction
Number
of units
Unit
cost
Cost of
Goods Sold
Apr. 7 Purchase 130 $44 $ 5,720
Jul. 16 Purchase 200 47 9,400
a Last 440 units purchased are assumed sold
(d) Gross profit = Sales revenue − Cost of goods sold