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Chapter 6: Q31PGA_3 (page 326)

Empire State Carpets’s 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’ 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’ 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:Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

Requirements

1. Prepare a perpetual inventory record for the putters assuming Golf Unlimited usesthe FIFO inventory costing method. Then identify the cost of ending inventoryand cost of goods sold for the month.

Discuss some measures that should be taken to maintain control over merchandise inventory.

Accounting for inventory using the perpetual inventory system—

FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

4. Determine the company’s cost of goods sold for August using FIFO, LIFO, and weighted-average inventory costing methods.

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month’s milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

3. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the weighted-average inventory costing method. Round allamounts to the nearest cent.

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries— Weighted-average

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.
See all solutions

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