16BP Sprint Shoes Inc. had a beginnin... [FREE SOLUTION]

91影视

Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 16BP (page 116)

Sprint Shoes Inc. had a beginning inventory of 9,250 units on January 1, 20X1. Here were the costs associated with the inventory:
Material
$15.00 per unit
Labor
8.00 per unit
Overhead
7.10 per unit
During 20X1, the firm produced 43,000 units with the following costs:
Material
$17.50 per unit
Labor
8.80 per unit
Overhead
10.30 per unit
Sales for the year were 47,350 units at $44.60 each. Sprint Shoes uses LIFO accounting. What was the gross profit? What was the value of ending inventory?

Short Answer

Expert verified

The gross profit of the company is $407,075 and the value of ending inventory is $147,490.

Step by step solution

Unit price of beginning inventory

$\begin{array}{rcl} Beginning unit price & = & Material cost + Labor cost + Overheads \\ = & $ 15 + $ 8 + $ 7.10 \\ = & $ 30.10 \end{array}$

Beginning cost of inventory

$\begin{array}{rcl} Beginning inventory cost & = & Beginning units 脳 Unit price \\ = & 9, 250 脳 $ 30.10 \\ = & $ 278, 425 \end{array}$

Cost of units produced

$\begin{array}{rcl} Cost of units produced & = & Material cost + Labor cost + Overhead \\ = & $ 17.50 + $ 8.80 + $ 10.30 \\ = & $ 36.60 \end{array}$

Cost of production

$\begin{array}{rcl} Cost of production & = & Units produced 脳 Cost of units produced \\ = & 43, 000 脳 $ 36.60 \\ = & $ 1, 573, 800 \end{array}$

Cost of sales assuming LIFO inventory accounting method

$\begin{array}{rcl} Cost of sales & = & (Units produced 脳 Cost of units produced) + (Balance units 脳 Beginning unit cost) \\ = & (43, 000 脳 $ 36.60) + ((47, 350 - 43, 000) 脳 $ 30.10) \\ = & $ 1, 573, 800 + $ 130, 935 \\ = & $ 1, 704, 735 \end{array}$

Gross profit

$\begin{array}{rcl} Gross profit & = & Sales - Cost of sales \\ = & (47, 350 脳 $ 44.60) - $ 1, 704, 735 \\ = & $ 407, 075 \end{array}$

Value of ending inventory

$\begin{array}{rcl} Ending inventory & = & Beginning inventory + Cost of production - Cost of sales \\ = & $ 278, 425 + $ 1, 573, 800 - $ 1, 704, 735 \\ = & $ 147, 490 \end{array}$

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

JONES CORPORATION
Current assets		Liabilities
Cash	\(20,000	Accounts payable	\)100,000
Accounts receivable	80,000	Bonds payable (long term)	80,000
Inventory	50,000
Long Term Assets		Stockholder鈥檚 Equity
Fixeed assets	\(500,000	Common Stock	\)150,000
Less: Accumulated Depreciation	(150,000)	Paid in capital	70,000
Net fixed assets*	350,000	Retained earnings	100,000
Total assets	\(500,000	Total Liab. And equity	\)500,000

JONES CORPORATION
Sales (on credit)	\(1,250,000
Cost of goods sold	750,000
Gross profit	\)500,000
Selling and administrative expenses	257,000
Less: depreciation expenses	50,000
Operating profits	\(193,000
Interest expenses	8,000
Earning before taxes	\)185,000
Tax expenses	92,500
Net income	\(92,500

SMITH CORPORATION
Current assets		Liabilities
Cash	\(35,000	Accounts payable	\)75,000
Marketable securities	7,500	Bonds payable (long term)	210,000
Accounts receivable	70,000
Inventory	75,000
Long term assets		Stockholder鈥檚 equity
Fixed assets	\(500,000	Common stock	\)75,000
Less: accumulated depreciation	250,000	Paid in capital	30,000
Net fixed assets*	250,000	Retained earnings	47,500
Total assets	\(437,500	Total liab. And equity	\)437,500

SMITH CORPORATION
Sales (on credit)	\(1,000,000
Cost of goods sold	600,000
Gross profit	\)400,000
Selling and administrative expenses	224,000
Less: depreciation expenses	50,000
Operating profits	\(126,000
Interest expenses	21,000
Earning before taxes	\)105,000
Tax expenses	52,500
Net income	\(52,500

BALANCE SHEET End of year (in \) million)
Assets		Liabilities and Stockholder鈥檚 equity
Cash	\(25	Accounts payable	\)64
Accounts receivable	40	Accrued expenses	31
Inventory	82	Other payables	45
Plant and equipment	133	Common stock	50
		Retained earnings	90
Total assets	\(280	Total liabilities and stockholder鈥檚 equity	\)280

91影视

Short Answer

Step by step solution

Unit price of beginning inventory

Beginning cost of inventory

Cost of units produced

Cost of production

Cost of sales assuming LIFO inventory accounting method

Gross profit

Value of ending inventory

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Business Development

Influences On Business

Strategic Direction

Project Planning & Management

Public Relations Business Studies

Intermediate Accounting

Study anywhere. Anytime. Across all devices.

Material	\(15.00 per unit
Labor	8.00 per unit
Overhead	7.10 per unit

Material	\)17.50 per unit
Labor	8.80 per unit
Overhead	10.30 per unit

Retained earning	Bond payable
Accounts payable	Accrued wages payable
Prepaid expenses	Accounts receivable
Plant and equipment	Capital in excess of par
Inventory	Preferred stock
Common stock	Marketable security