E9-16B (15–20 minutes)
Furniture
Beds
Rugs
Inventory 1/1/14 (cost)
$ 76,000
$105,000
$211,000
Purchases to 9/9/14 (cost)
Cost of goods available
Deduct cost of goods sold*
Computation for cost of goods sold:*
Furniture:
$608,000
= $486,400
1.25
Beds:
$700,000
= $538,462
$656,000
*Alternative computation for cost of goods sold:
Markup on selling price: Cost of goods sold:
Furniture:
= 20% or 1/5
Beds:
= 3/13
Rugs:
= 1/3
E9-17B (20–25 minutes)
Ending inventory:
(a)
Gross profit is 25% of sales
Total goods available for sale (at cost) ………
$3,000,000
Sales (at selling price) ………………………………
Less: Gross profit (25% of sales) ……………..
(b)
Gross profit is 50% of cost
Total goods available for sale (at cost) ………
$3,000,000
Sales (at selling price) ………………………………
Less: Gross profit (33.33% of sales) …………
(c)
Gross profit is 40% of sales
Total goods available for sale (at cost) ………
$3,000,000
Sales (at selling price) ………………………………
Less: Gross profit (40% of sales) ……………..
E9-17B (Continued)
(d)
Gross profit is 25% of cost
25%
= 20% markup on selling price
100% + 25%
Total goods available for sale (at cost) ……..
$3,000,000
Sales (at selling price) ……………………………..
Less: Gross profit (20% of sales) ……………..
Sales (at cost) ………………………………………….
Ending inventory (at cost) ………………………..
$ 200,000
E9-18B (20–25 minutes)
(a)
Cost
Retail
Beginning inventory …………………………………
$ 81,000
$110,000
Purchases ……………………………………………….
176,000
305,000
Net markups ……………………………………………
Totals ……………………………………………..
451,000
Net markdowns ………………………………………..
(22,000)
Sales price of goods available ………………….
429,000
Deduct: Sales………………………………………….
Ending inventory at retail …………………………
(b)
1.
$257,000 ÷ $415,000 = 61.93%
2.
$257,000 ÷ $393,000 = 65.39%
3.
$257,000 ÷ $451,000 = 56.98%
4.
$257,000 ÷ $429,000 = 59.91%
(c)
Method 3.
Method 3.
Method 3.
(d)
56.98% X $109,000 = $62,108
(e)
$257,000 – $62,108 = $194,892
E9-19B (12–17 minutes)
Cost
Retail
Beginning inventory …………………..
$ 50,000
$ 70,000
Purchases …………………………………
343,750
535,000
Totals ………………………………..
393,750
605,000
Add: Net markups ……………………..
Markups …………………………...
$23,750
Markup cancellations ………..
(3,750)
20,000
Deduct: Net markdowns
Markdowns ………………………..
8,750
Markdowns cancellations …..
(1,250)
7,500
Sales price of goods available …….
617,500
Deduct: Sales …………………………...
550,000
E9-20B (20–25 minutes)
Cost
Retail
Beginning inventory ………………………..
$ 60,000
$ 93,000
Purchases ………………………………………
96,000
176,000
Purchase returns …………………………….
(4,000)
(6,000)
Freight on purchases ………………………
2,000
Totals …………………………………….
263,000
Add: Net markups…………………………...
Markups …………………………………
$20,000
Markup cancellations ………………
(3,000)
_______
17,000
Net markups ……………………………………
$154,000
280,000
Deduct: Net markdowns
Markdowns …………………………....
Markdowns cancellations ………..
(5,600)
Net markdowns ……………………………….
13,000
267,000
Deduct net sales ($204,000 – $4,000) ….
200,000
Cost-to-retail ratio =
$154,000
= 55%
$280,000
E9-21B (10–15 minutes)
(a) Inventory turnover:
(b) Average days to sell inventory:
(a)
Conventional Retail Method
Cost
Retail
Inventory, January 1, 2014 ……………
$ 21,000
$ 30,000
Deduct: Markdowns (net) …………….
15,000
Ending inventory, at retail …………….
*E9-22B (Continued)
(b)
LIFO Retail Method
Cost
Retail
Inventory, January 1, 2014 …………………..
$ 21,000
$ 30,000
Purchases (net) ………………………………….
111,000
190,000
Total (excluding beginning inventory) ….
111,000
195,000
Deduct: Sales (net) …………………………....
175,000
Ending inventory, at retail …………………..
Cost-to-retail ratio =
$111,000
= 56.92% (rounded)
$195,000
Computation of ending inventory at LIFO cost, 2014:
Ending
Inventory at
Retail Prices
Layers at
Retail Prices
Cost to Retail
(Percentage)
Ending Inventory
at LIFO Cost
*E9-23B (15–20 minutes)
(a)
Cost
Retail
Inventory, January 1, 2014 ……………….
$ 52,000
$ 70,000
Net Purchases …………………………………
191,000
268,000
Freight-in ………………………………………..
12,500
Net markups ……………………………………
Totals ……………………………………..
Sales ………………………………………………
(240,000)
Net markdowns …………………………..…..
Estimated theft ………………………………..
Ending inventory at retail …………………
Ending inventory at lower-of–average-cost-or-market =
$89,400 X 75.1% = $67,139
(b)
Cost
Retail
Purchases ………………………………………
$191,000
$268,000
Freight-in ………………………………………..
12,500
Net markups ……………………………………
Net markdowns ……………………………….
Totals ……………………………………..
Cost
Retail
Beginning inventory, 2014 ……………….
Increment ……………………………………….
Ending inventory, 2014 ……………………
*E9-24B (10–15 minutes)
(a)
Cost-to-retail ratio—beginning inventory:
$420,000
= 70%
$600,000
(b)
Ending inventory at retail prices deflated $745,500 ÷ 1.05 …
$710,000
Beginning inventory at beginning-of-year prices ……………..
600,000
Inventory increase in terms of beginning–of-year dollars ….
$110,000
Beginning inventory (at cost) ………………………………………….
$420,000
Additional layer, $110,000 X 1.05 X 75%* …………………………
*($720,000 ÷ $960,000)
*E9-25B (5–10 minutes)
Ending inventory at retail (deflated) $94,500 ÷ 1.05 …………………
$90,000
Beginning inventory at retail …………………………..…………………….
Increment at retail…………………………………………………………………
$15,000
First layer …………………………………………………………………….
$50,000
Second layer ($15,000 X 1.05 X 60%) ……………………………..
9,450
*E9-26B (20–25 minutes)
(a)
Cost
Retail
Beginning inventory …………………………..………
$ 10,600
$ 14,000
Net purchases ……………………………………………
126,800
180,000
Net markups ………………………………………………
20,000
Totals ………………………………………………..
Sales …………………………………………………………
(171,000)
Ending inventory at retail …………………………...
$ 31,000
Cost-retail ratio = 64.2% ($137,400/$214,000)
Ending inventory at cost ($31,000 X 64.2%) …
$ 19,902
(b)
Cost
Retail
Beginning inventory …………………………..………………
$ 10,600
$ 14,000
Net purchases ……………………………………………………
126,800
180,000
Net markups ………………………………………………………
20,000
Net markdowns …………………………..……………………..
Total (excluding beginning inventory) …………………
126,800
188,000
Total (including beginning inventory) ………………….
Ending inventory at retail (current) ……………………..
31,000
Ending inventory at retail (base year)
($31,000 ÷ 1.10) ……………………………………………….
$ 28,181
Cost-retail ratio for new layer:
$126,800/$188,000 = 67.4%
Layers:
Base layer
$14,000 X 1.00 X 75.7%* = …………………………
$ 10,600
New layer
($28,181 – $14,000) X 1.10 X 67.4% = …
10,514
$ 21,114
*($10,600/$14,000)
(c)
Cost of goods available for sale ………………………….
$137,400
Ending inventory at cost, from (b) ……………………….
(21,114)
Cost of goods sold …………………………………………….
$ 116,286
*E9-27B (20–25 minutes)
2013
Restate to base-year retail ($271, 000 ÷ 1.05) ……….
$ 258,095
Layers: 1. $250,000 X 1.00 X 58.4%* = ………………
2. $ 8,095 X 1.05 X 58.0% = ………………
Ending inventory ……………………………………………….
$ 150,930
2014
Restate to base-year retail ($291,500 ÷ 1.08) ………..
$ 269,907
Layers: 1. $250,000 X 1.00 X 58.4% = ………………..
$ 146,000
2. $ 8,095 X 1.05 X 58.0% = ……………….
3. $ 11,812 X 1.08 X 60.0% = ……………….
Ending inventory
$ 158,584
2015
Restate to base-year retail ($280,000 ÷ 1.10) ………..
$ 254,545
Layers: 1. $250,000 X 1.00 X 58.4% = ………………..
2. $ 4,545 X 1.05 X 58.0% = ……………….
2,768
Ending inventory
$ 148,768
2016
Restate to base-year retail ($311,000 ÷ 1.20) ………..
$ 259,167
Layers: 1. $250,000 X 1.00 X 58.4% = ………………..
$ 146,000
2. $ 4,545 X 1.05 X 58.0% = ……………….
3. $ 4,622 X 1.20 X 59.0% = ……………….
Ending inventory ……………………………………………….
$ 152,040
*E9-28B (5–10 minutes)
Inventory (beginning) ………………………………………………
1,400
Adjustment to Record Inventory at Cost*
($100,000 – $98,600) ……………………………………..