Homework Problems

# Allowance to reduce inventory to market c both

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Allowance to reduce inventory to market C) Both methods have the same effect on net income. E9-6 Value per unit should have been 50-14 for \$36. 38-36 = \$2 overstatement per unit 1000 x \$2 = \$2,000 Net income for 2010 was overstated and 2011 was understated by \$2,000. E9-11 1) .20/1.20 = 16.67% 2) .25/1.25 = 20% 3) .3333/1.3333 = 25% 4) .50/1.50 = 33.33% E9-12 A) Inventory, May 1 (cost) Purchases (cost) Purchase discounts Freight in          Goods available (cost)

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Sales (selling price) 1,000,000  Sales returns (selling price) (70,000) Net sales (selling price) 930,000  Less: Gross profit 232,500            Sales(cost)                Aproximate inventory, May 31 E9-19 Cost Beginning inventory 200,000  Purchases 1,425,000  Merchandise available for sale 1,625,000  Add: Markups 95,000  Less: Markup cancellations (15,000)           Net markups 1,625,000  Deduct:      Markdowns 35,000       Less: Markdown cancellations (5,000)           Net markdowns Sale price of goods available Less: Sales Ending inventory 1,625,000/2,500,000 = 65% x 220,000 = 143,000 E9-23 A) Beginning inventory 14,000  Purchases 55,500  Freight in 7,500  Net markups 77,000  Less: Net markdowns Sale price of goods available Less: Sales Less: Estimated theft Ending inventory 77,000/111,000 = 70% 30,500 x 70% = \$21,350
B) Cost Purchases 55,500  Freight in 7,500  Net markups Net markdowns           Totals 63,000  63,000/87,500 = 72% 30,500-20,000 = 10,500 x 72% = 7,560 Cost Beginning inventory 2011 14,000 Increment 7,560  Ending inventory, 2011 21,560  P9-9

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Total market Lower of cost/market 60,000 57000 52,000 52000 38,000 38000 36,000 34000 83,200 82000 800 800 70,500 70500 340,500 334,300 24,000 20,000 24,000 4,000 160,000  B) 160,000  640,000  640,000  (12,000) (12,000) 30,000  30,000  818,000  818,000
1,000,000  (70,000) 930,000  186,000  697,500  744,000  120,500  74,000  .25/1.25 = 20% for gross profit Retail 280,000  2,140,000  2,420,000  80,000  2,500,000  30,000  2,470,000  2,250,000  220,000  20,000  81,000  9,000  110,000  2,500  107,500  75,000  2,000  30,500

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Retail 81,000  9,000  (2,500) 87,500  Retail 20,000  10,500  30,500
E10-1   Item   Land   Land Improvements   Building   Other Accts   a   (275,000)  b   275,000   c   10,000   d   7,000   e   6,000   f   (1,000)  g   25,000   h   250,000   i   9,000   j   4,000   k   11,000   l   (5,000)  m   13,000   n   19,000   o   p   14,000   3,000   E10-3   1   List price 15,000 paid cash 13,9000   Truck #1   13,900             Cash   13,900   2   list price 20,000 down payment 2,000 18,000 loan with no interest norm  Truck #2   18,364   Discount on notes payable   1,636             Cash   2,000             Notes payable   18,000   3   list 16,000 in exchange for computer 12,000 sold for 15,200 perpetual   Truck #3   15,200   Cost of goods sold   12,000             Inventory   12,000             Sales   15,200   4   list 14,000 exchange for 1,000 shares at \$10 par value \$13 market val  Truck #4   13,000             Common Stock   10,000             Paid-in capital in excess of par   3,000   E10-4   Purchase   Cash paid for equipment, including sales tax of 5,000   Freight and insurance cost while in transit   Cost of moving equipment into place at factory

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Wage cost of equipment into place at factory   Special plumbing fixtures required for new equipment   Total   Construction   Material and purchased parts   Labor costs   Overhead costs (fixed 20,000 and variable 30,000)   Cost of installing equipment
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• Spring '10
• George
• Accounting, Net Income, Doubtful Accounts, total

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