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Chapter 6: Q31PGA_3 (page 326)

Empire State Carpets鈥檚 books show the following data. In early 2020, auditors found that the ending merchandise inventory for 2017 was understated by \(8,000 and that the ending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandise inventory at December 31, 2018, was correct.

Requirements

3. Compute the inventory turnover and days鈥� sales in inventory using the corrected income statements for the three years. (Round all numbers to two decimals.)

Short Answer

Expert verified

2019 2018 2017

Inventory Turnover--------------- 5.82 3.6 2.05

Days鈥� sales in inventory-------- 62.71 101.38 178.05

Step by step solution

01

Correct Income statement

02

Inventory turnover

For2019=CostofgoodssoldAverageInventory=$131,000$22,000+$23,0002=$131,000$22,500=5.82For2018=CostofgoodssoldAverageInventory=$105,000$37,000+$22,0002=$105,000$29,000=3.6For2017=CostofgoodssoldAverageInventory=$8,5000$46,000+$37,0002=$85,000$41,500=2.05

03

Days’ sales in inventory

For2019=365Inventoryturnover=3655.82=62.71For2018=365Inventoryturnover=3653.6=101.38For2017=365Inventoryturnover=3652.05=178.05

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Most popular questions from this chapter

Question:Hot Bread Bakery reported Net sales revenue of \(44,000 and cost of goods sold of \)33,000. Compute Hot Bread鈥檚 correct gross profit if the company made either of thefollowing independent accounting errors. Show your work.

a. Ending merchandise inventory is overstated by $8,000.

Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows

Jan. 5 Purchase 156 crates @ \) 64 each

13 Sale 180 crates @ \( 100 each

18 Purchase 114 crates @ \) 75 each

26 Sale 150 crates @ $ 116 each

Requirements

3. Prepare a perpetual inventory record, using the weighted-average inventory costing method, and determine the company鈥檚 cost of goods sold, ending merchandise inventory, and gross profit. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Which principle states that businesses should use the same accounting methods and procedures from period to period?

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

2. Net sales revenue for October totaled $26,000. Compute Right Now鈥檚 gross profitfor October using each method.

Nutriset Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2019, Nutriset鈥檚 preliminary income statement, before the year-end adjustments, appears as follows:

NUTRISET FOODS

Income Statement (Partial)

Year Ended March 31, 2019

Net Sales Revenue \( 118,000

Cost of Goods Sold 47,000

Gross Profit \) 71,000

Nutriset has determined that the current replacement cost of ending merchandise inventory is \(19,500. Cost is \)24,000.

Requirements

2. Prepare a revised partial income statement to show how Nutriset Foods should report sales, cost of goods sold, and gross profit.
See all solutions

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