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Chapter 9: Question 19Q (page 442)
Of what significance is inventory turnover to a retail store?
Inventory turnover indicates the number of times the company's average inventory is converted into sales in the given period.
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Question:Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost togross profit percentages based on sales price: 25% and 331 /3%. Convert the following gross profit percentages based on sales price to gross profit percentages based on cost: 331 /3% and 60%.
John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2018. The company recomputed its ending inventory for 2017 in accordance with the procedures necessary to switch to LIFO retail. The inventory computed was \(212,600. Instructions Assuming that John Olerud Ltd.鈥檚 ending inventory for 2017 under the conventional retail inventory method was \)205,000, prepare the appropriate journal entry on January 1, 2018.
Reed Pentak, a finance major, has been following globalization and made the following observation concerning accounting convergence: 鈥淚 do not see many obstacles concerning development of a single accounting standard for inventories.鈥� Prepare a response to Reed to explain the main obstacle to achieving convergence in the area of inventory accounting
Dover Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below. Cost Net Realizable Value 12/31/17 \(346,000 \)322,000 12/31/18 410,000 390,000Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming that the inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method is used. (b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming that the inventory is recorded at cost and a perpetual system using the loss method is used. (c) Which of the two methods above provides the higher net income in each year?
What modifications to the conventional retail method are necessary to approximate a LIFO retail flow?
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