Chapter 7--Inventories

# Item quantity unit cost price unit market price total

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Item Quantity Unit cost price Unit market price Total cost price Total market price Lower of cost or market A 300 \$15.00 \$14.50 \$4,500 \$4,350 \$4,350 B 200 \$14.00 \$15.00 \$2,800 \$3,000 \$2,800 C 100 \$17.00 \$17.50 \$1,700 \$1,750 \$1,700 \$8,850

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144. The following information was extracted from the Stone Company’s records. Gross Sales \$232,566 Gross Profit \$87,990 Sales Discounts \$1,125 (= 1/2 % of Net Sales) Total Operating Expenses \$88, 440 Selling Expenses \$33, 560 Complete the following: Gross Sales Sales Discounts Sales Returns & Allowances Net Sales Cost of Goods Sold Gross Profit Operating Expenses: Gen. & Admin Expenses Selling Expenses Total Operating Expenses Net Income (Loss) Complete the following: Gross Sales \$232,566 Sales Discounts \$1,125 Sales Returns & Allowances ** 6,441 Net Sales * \$225,000 Cost of Goods Sold *** \$137,010 Gross Profit \$ 87,990 Operating Expenses: Gen. & Adm. Expenses \$54,880 Selling Expenses \$33,560 Total Operating Expenses \$88,440 Net Income (Loss) (\$450) * Net Sales: \$1,125 = .005 X Net Sales \$1,125 / .005 = \$225,000 ** Sales Returns & Allowances: \$232,566 - \$225,000 - \$1,125 = \$6,441 *** Cost of Goods Sold: \$225,000 - \$87,990 = \$137,010 **** Gen. & Adm. Expenses = \$88,440 - \$33,560 = \$54,880 145. Determine the total value of the merchandise using Net Realizable Value: Item Quantity Selling Price Commission Doll 10 \$7 \$2 Horse 5 9 3
Item Quantity Selling Price Commission Total Doll 10 \$7 \$2 \$50 Horse 5 9 3 30 Total \$80 146. During the taking of its physical inventory on December 31, 2011, Gentry Supplies Company incorrectly counted its inventory as \$245,000 instead of the correct amount of \$254,000. Indicate the affect of the misstatement on Gentry Supplies Company’s balance sheet and income statement for the year ended December 31, 2011. Amount of Misstatement Overstatement (Understatement) Balance Sheet: Merchandise inventory understated (\$9,000) Current assets understated (\$9,000) Total assets understated (\$9,000) Owner’s equity understated (\$9,000) Income Statement: Cost of merchandise sold overstated \$9,000 Gross profit understated (\$9,000) Net Income understated (\$9,000) 147. While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement? Net income will be understated. 148. On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work. Item Inventory Quantity Unit Cost Price Unit Market Price Product C 420 \$6 \$5 Product D 370 12 14

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A B C D E F G 1 Unit Unit Total 1 2 Inventory Cost Market Lower 2 3 Item Quantity Price Price Cost Market of C or M 3 4 Product C 420 \$ 6 \$ 5 \$2,520 \$2,100 \$2,100 4 5 Product D 370 12 14 4,440 5,180 4,440 5 6 Total \$6,960 \$7,280 \$6,540 6 149. On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work. Item Inventory Quantity Unit Cost Price Unit Market Price Gear X 100 \$33 \$29 Gear Y 75 27 28 A B C D E F G 1 Unit Unit Total 1 2 Inventory Cost Market Lower 2 3 Item Quantity Price Price Cost Market of C or M 3 4 Gear X 100 \$33 \$29 \$3,300 \$2,900 \$2,900 4 5 Gear Y 75 27 28 2,025 2,100 2,025 5 6 Total \$5,325 \$5,000 \$4,925 6 150. The following data were taken from the annual reports of Jong Inc., a manufacturer of fireworks, and Hobson Inc., a manufacturer of computers.
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