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Chapter 9: 19E (page 480)

Presented below is information related to Aaron Rodgers Corporation for the current year. Beginning inventory \( 600,000 Purchases 1,500,000 Total goods available for sale \)2,100,000 Sales revenue 2,500,000 Instructions Compute the ending inventory, assuming that (a) gross profit is 45% of sales, (b) gross profit is 60% of cost, (c) gross profit is 35% of sales, and (d) gross profit is 25% of cost.

Short Answer

Expert verified

(a) Ending inventory is $725,000.

(b) Ending inventory is $537,500.

(c) Ending inventory is $475,000.

(d) Ending inventory is $100,000.

Step by step solution

01

Calculation of gross profit on sales in case (b)

Gross profit on sales is calculated as follows:

Grossprofitpercentageonsales=Percentagemarkuponcost100%+Percentagemarkuponcost=60%100%+60%=37.50%

02

Calculation of gross profit on sales in case (d)

Gross profit on sales is calculated as follows:

Grossprofitpercentageonsales=Percentagemarkuponcost100%+Percentagemarkuponcost=25%100%+25%=20%

03

Calculation of ending inventory

Ending inventory is calculated as follows:


(a)

(b)

(c)

(d)

Beginning inventory

$600,000

$600,000

$600,000

$600,000

Purchases

1,500,000

1,500,000

1,500,000

1,500,000

Total goods available for sale (A)

$2,100,000

$2,100,000

$2,100,000

$2,100,000






Sales Revenue

$2,500,000

$2,500,000

$2,500,000

$2,500,000

Gross Profit (Sales Revenue*Gross Profit Percentage)

$1,125,000

$937,500

$875,000

$500,000

Cost of goods sold (B)

$1,375,000

$1,562,500

$1,625,000

$2,000,000






Ending inventory (A-B)

$725,000

$537,500

$475,000

$100,000

Thus, ending inventory equals $725,000, $537,500, $475000 and $100,000.

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Most popular questions from this chapter

LaTour Inc. is based in France and prepares its financial statements in accordance with IFRS. In 2017, it reported cost of goods sold of \(578 million and average inventory of \)154 million. Briefly discuss how analysis of LaTour’s inventory turnover (and comparisons to a company using GAAP) might be affected by differences in inventory accounting between IFRS and GAAP.

Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company’s inventory. Finished Desks A B C D 2017 catalog selling price \(45 \)48 \(90 \)105 FIFO cost per inventory list 12/31/17 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2018 catalog selling price 50 54 90 120 The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.

At December 31, 2017, Indigo Girls Company has outstanding noncancelable purchase commitments for 36,000 gallons, at \(3.00 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Instructions (a) Assuming that the market price as of December 31, 2017, is \)3.30, how would this matter be treated in the accounts and statements? Explain. (b) Assuming that the market price as of December 31, 2017, is \(2.70, instead of \)3.30, how would you treat this situation in the accounts and statements? (c) Give the entry in January 2018, when the 36,000-gallon shipment is received, assuming that the situation given in (b) above existed at December 31, 2017, and that the market price in January 2018 was $2.70 per gallon. Give an explanation of your treatment.

Question:Amiras Corporation began operations on January 1, 2017, with a beginning inventory of \(30,100 at cost and \)50,000 at retail. The following information relates to 2017. Retail Net purchases (\(108,500 at cost) \)150,000 Net markups 10,000 Net markdowns 5,000 Sales revenue 126,900 Instructions (a) Assume Amiras decided to adopt the conventional retail method. Compute the ending inventory to be reported in the balance sheet. (b) Assume instead that Amiras decides to adopt the dollar-value LIFO retail method. The appropriate price indexes are 100 at January 1 and 110 at December 31. Compute the ending inventory to be reported in the balance sheet. (c) On the basis of the information in part (b), compute cost of goods sold.

Use the information for Boyne Inc. from BE9-10, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method
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