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Ch 8 Solutions - SOLUTIONS TO EXERCISES EXERCISE 8-1(1520...

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SOLUTIONS TO EXERCISES EXERCISE 8-1 (15–20 minutes) Items 2, 3, 5, 8, 10, 13, 14, 16, and 17 would be reported as inventory in the financial statements. The following items would not be reported as inventory: 1. Cost of goods sold in the income statement. 4. Not reported in the financial statements. 6. Cost of goods sold in the income statement. 7. Cost of goods sold in the income statement. 9. Interest expense in the income statement. 11. Advertising expense in the income statement. 12. Office supplies in the current assets section of the balance sheet. 15. Not reported in the financial statements. 18. Short-term investments in the current asset section of the balance sheet. EXERCISE 8-2 (10–15 minutes) Inventory per physical count .................................................. $441,000 Goods in transit to customer, f.o.b. destination .................... + 33,000 Goods in transit from vendor, f.o.b. shipping point .............. Inventory to be reported on balance sheet ............................ + 51,000 $525,000 The consigned goods of $61,000 are not owned by Garza and were properly excluded. The goods in transit to a customer of $46,000, shipped f.o.b. shipping point, are properly excluded from the inventory because the title to the goods passed when they left the seller (Oliva) and therefore a sale and related cost of goods sold should be recorded in 2010.
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The goods in transit from a vendor of $73,000, shipped f.o.b. destination, are properly excluded from the inventory because the title to the goods does not pass to Garza until the buyer (Garza) receives them.
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EXERCISE 8-3 (10–15 minutes) 1. Include. Merchandise passes to customer only when it is shipped. 2. Do not include. Title did not pass until January 3. 3. Include in inventory. Product belonged to Webber Inc. at December 31, 2010. 4. Do not include. Goods received on consignment remain the property of the consignor. 5. Include in inventory. Under invoice terms, title passed when goods were shipped. EXERCISE 8-4 (10–15 minutes) 1. Raw Materials Inventory .................................. 8,100 Accounts Payable ................................... 8,100 2. No adjustment necessary. 3. Raw Materials Inventory .................................. 28,000 Accounts Payable ................................... 28,000 4. Accounts Payable ............................................ 7,500 Raw Materials Inventory ......................... 7,500 5. Raw Materials Inventory .................................. 19,800 Accounts Payable ................................... 19,800
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EXERCISE 8-5 (15–20 minutes) (a) Inventory December 31, 2010 (unadjusted) ................. $234,890 Transaction 2 ................................................................. 10,420 Transaction 3 ................................................................. –0– Transaction 4 ................................................................. –0– Transaction 5 ................................................................. 8,540 Transaction 6 ................................................................. (10,438) Transaction 7 ................................................................. (11,520) Transaction 8 ................................................................. 1,500 Inventory December 31, 2010 (adjusted) ...................... $233,392 (b) Transaction 3 Sales .............................................................. 12,800 Accounts Receivable .......................... 12,800 (To reverse sale entry in 2010) Transaction 4 Purchases (Inventory) .................................. 15,630 Accounts Payable ................................ 15,630 (To record purchase of merchandise in 2010) Transaction 8 Sales Returns and Allowances .................... 2,600 Accounts Receivable .......................... 2,600
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EXERCISE 8-6 (10–20 minutes) 2009 2010 Sales ...................................................... 2011 $290,000 $360,000 $410,000 Sales Returns ........................................ 6,000 13,000 10,000 Net Sales ............................................... 284,000 347,000 400,000 Beginning Inventory ............................. 20,000 32,000 37,000** Ending Inventory .................................. 32,000* 37,000 34,000 Purchases ............................................. 247,000 260,000 298,000 Purchase Returns and Allowances ..... 5,000 8,000 10,000 Transportation-in .................................. 8,000 9,000 12,000 Cost of Good Sold ................................ 238,000 256,000 303,000 Gross Profit ........................................... 46,000 91,000 97,000 *This was given as the beginning inventory for 2010.
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