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E5-16 Computing inventory and cost of goods sold amounts
Consider the following incomplete table of merchandiser’s profit data:
Sales Sales Net Cost of Gross profit
discounts sales goods sold
$89,500 $1,560 $87,940 $60,200 (a)
103,600 (b) 99,220 (c) $34,020
66,200 2,000 (d) 40,500 (e)
(f) 2,980 (g) 75,800 36,720
1. Calculate the missing table values to complete the table.
P5-29A Journalizing purchase and sale transactions—perpetual inventory
Thelma’s Amusements completed the following transactions during November 2012:
1-Nov Purchased supplies for cash, $700.
4 Purchased inventory on credit terms of 3/10, n/eom, $9,600.
8 Returned half the inventory purchased on November 4. It was not the inventory ordered.
10 Sold goods for cash, $1,200 (cost, $700).
13 Sold inventory on credit terms of 2/15, n/45, $9,900 (cost, $5,300).
14 Paid the amount owed on account from November 4, less the return (November 8) and the discount.
17 Received defective inventory as a sales return from the November 13 sale, $600. Thelma’s cost of the inventory received was $450.
18 Purchased inventory of $4,100 on account. Payment terms were 2/10, net 30.
26 Paid the net amount owed for the November 18 purchase.
28 Received cash in full settlement of the account from the customer who purchased inventory on November 13, less the return and the discount.
29 Purchased inventory for cash, $12,000, plus freight charges of $20
1. Journalize the transactions on the books of Thelma’s Amusements
E6-23 Comparing cost of goods sold in a perpetual system—FIFO, LIFO, and average-cost methods
Assume that a JR Tire Store completed the following perpetual inventory transactions for a line of tires:
Beginning inventory . . . . . . 16 tires @ $65
Purchase . . . . . . . . . . . . . . . 10 tires @ $78
Sale . . . . . . . . . . . . . . . . . . 12 tires @ $90
1. Compute cost of goods sold and gross profit using FIFO.
2. Compute cost of goods sold and gross profit using LIFO.
3. Compute cost of goods sold and gross profit using average-cost. (Round average cost per unit to the nearest cent and all other amounts to the nearest dollar.)
4. Which method results in the largest gross profit and why?
E6-28 Estimating ending inventory by the gross profit method
Deluxe Auto Parts holds inventory all over the world. Assume that the records for one auto part show the following:
Beginning inventory . . . . . . $220,000
Net purchases . . . . . . . . . . . 800,000
Net sales . . . . . . . . . . . . . . . 1,100,000
Gross profit rate . . . . . . . . . 45%
Suppose this inventory, stored in the United States, was lost in a fire.
1. Estimate the amount of the loss to Deluxe Auto Parts. Use the gross profit method.