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Chapter 9: Question 14Q (page 474)

A fire destroys all of the merchandise of Assante Company on February 10, 2017. Presented below is information compiled up to the date of the fire. Inventory, January 1, 2017 $ 400,000 Sales revenue to February 10, 2017 1,950,000 Purchases to February 10, 2017 1,140,000 Freight-in to February 10, 2017 60,000 Rate of gross profit on selling price 40% What is the approximate inventory on February 10, 2017?

Short Answer

Expert verified

The inventory as of February 10, 2017, equals $430,000.

Step by step solution

01

Calculation of cost of goods sold

The cost of goods sold is calculated as follows:

CostofGoodsSold=SalesRevenue-Salesrevenue脳Grossprofitrate=$1,950,000-1,950,000脳40%=$1,170,000

02

Calculation of cost of goods available for sale

The cost of goods available for sale is calculated as follows:

Costofgoodsavailableforsale=BeginningInventory+Purchases+Freight-in=$400,000+$1,140,000+$60,000=$1,600,000

03

Calculation of inventory on February 10, 2017

The inventory on February 10, 2017, is calculated as follows:

InventoryonFebruary10,2017=Costofgoodsavailableforsale-Costofgoodssold=$1,600,000-$1,170,000=$430,000

Thus, the inventory on February 10, 2017, equals $430,000.

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Most popular questions from this chapter

Question:Where there is evidence that the utility of inventory goods, as part of their disposal in the ordinary course of business, will be less than cost, what is the proper accounting treatment?

Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware Inventory, Jan. 1, 2017 \( 250,000 \) 90,000 $ 45,000 Purchases to Aug. 18, 2017 1,500,000 375,000 160,000 Sales revenue to Aug. 18, 2017 2,080,000 533,000 210,000 Exercises 479 480 Chapter 9 Inventories: Additional Valuation Issues Instructions Submit your estimate of the inventory amounts immediately preceding the fire.

Starfish Company (a company using GAAP and the LIFO inventory method) is considering changing to IFRS and the FIFO inventory method. How would a comparison of these methods affect Starfish鈥檚 financials? (a) During a period of inflation, working capital would decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. (b) During a period of inflation, the taxes will decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. During a period of inflation, net income would be greater if IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. (d) During a period of inflation, the current ratio would decrease when IFRS and the FIFO inventory methodare used as compared to GAAP and LIFO.

Keller Company began operations on January 1, 2016, adopting the conventional retail inventory system. None of the company鈥檚 merchandise was marked down in 2016 and, because there was no beginning inventory, its ending inventory for 2016 of \(38,100 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2017, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2017, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level. Cost Retail Inventory, Jan. 1, 2017 \) 38,100 $ 60,000 Markdowns (net) 13,000 Markups (net) 22,000 Purchases (net) 130,900 178,000 Sales (net) 167,000 Instructions Determine the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method

Deere and Company reported inventory in its balance sheet as follows. Inventories $1,999,100,000 What additional disclosures might be necessary to present the inventory fairly?
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