solutions-ch08

# solutions-ch08 - EXERCISE 8-19 (a) Sales Cost of goods sold...

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EXERCISE 8-19 (a) February March April Sales \$29,000 \$35,000 \$40,000 Cost of goods sold Inventory, beginning 25,000 25,100 29,000 Purchases 20,000 24,000 26,500 Cost of goods available 45,000 49,100 55,500 Inventory, ending 25,100 29,000 23,000 Cost of goods sold 19,900 20,100 32,500 Gross profit 9,100 14,900 7,500 Gain (loss) due to market fluctuations of inventory* (7,000 ) 1,100 700 \$ 2,100 \$16,000 \$8,200 * Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost \$25,000 \$25,100 \$29,000 \$23,000 Inventory at the lower of cost or NRV 24,500 17,600 22,600 17,300 Allowance amount needed to reduce inventory to NRV \$ 500 \$ 7,500 \$ 6,400 \$ 5,700 Gain (loss) due to fluctuations in NRV of inventory** \$ (7,000 ) \$ 1,100 \$ 700 **\$500 – \$7,500 = \$(7,000) \$7,500 – \$6,400 = \$1,100 \$6,400 – \$5,700 = \$700 Page 1 of 14

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EXERCISE 8-19 (Continued) (b) Jan. 31 Loss Due to Decline in NRV of Inventory. . 500 Allowance to Reduce Inventory to NRV. .............................................. 500 Feb. 28 Loss Due to Decline in NRV of Inventory. . 7,000 Allowance to Reduce Inventory to NRV. .............................................. 7,000 Mar. 31 Allowance to Reduce Inventory to NRV. .... 1,100 Recovery of Loss Due to Decline in NRV of Inventory. ........................ 1,100 Apr. 30 Allowance to Reduce Inventory to NRV. .... 700 Recovery of Loss Due to Decline in NRV of Inventory. ........................ 700 Page 2 of 14
EXERCISE 8-21 (a) Inventory, May 1 (at cost) \$360,000 Purchases (gross) (at cost) 700,000 Purchase discounts (12,000) Freight-in 50,00 0 Goods available (at cost) 1,098,00 0 Sales (at selling price) \$1,200,000 Sales returns (at selling price) (70,000 ) Net sales (at selling price) 1,130,000 Less gross profit (25% of \$1,130,000) 282,500 Estimated cost of goods sold 847,50 0 Estimated inventory, May 31 (at cost) \$250,500 (b) Gross profit as a percent of sales must be calculated: 25% = 20% of sales. 100% + 25% Inventory, May 1 (at cost) \$360,000 Purchases (gross) (at cost) 700,000 Purchase discounts (12,000) Freight-in 50,00 0 Goods available (at cost) 1,098,00 0 Sales (at selling price) \$1,200,000 Sales returns (at selling price) (70,000 ) Net sales (at selling price) 1,130,000 Less gross profit (20% of \$1,130,000) 226,000 Estimated cost of goods sold 904,00 0 Estimated inventory, May 31 (at cost) \$194,000 Page 3 of 14

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PROBLEM 8-3 Zoe Limited Schedule of Adjustments December 31, 2010 Inventory Accounts Payable Net Sales Initial amounts \$1,720,000 \$1,300,000 \$8,550,000 Adjustments: 1. NONE NONE (57,000) 2. 51,000 51,000 NONE 3. 38,000 NONE NONE 4. 38,000 NONE (48,000) 5. 21,000 NONE NONE 6. 27,000 NONE NONE 7. NONE 56,000 NONE 8. 3,500 7,000 NONE Total adjustments 178,500 114,000 (105,000 ) Adjusted amounts \$1,898,500 \$1,414,000 \$8,445,000 1. The \$37,000 of tools on the loading dock was properly included in the physical count. The sale should not be recorded until the goods are picked up by the common carrier. Therefore, no adjustment is made to inventory, but sales must be reduced by
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## This note was uploaded on 12/10/2010 for the course AFM 291 taught by Professor Clark during the Spring '10 term at Waterloo.

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solutions-ch08 - EXERCISE 8-19 (a) Sales Cost of goods sold...

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