Compute gross profit for Plastic Products Company assuming the use of the lower

# Compute gross profit for plastic products company

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Compute gross profit for Plastic Products Company assuming the use of the lower-of-cost-or- market rule to value ending inventory.
CHAPTER 6Accounting                                                 Aamer Waheed Satti 111. Determine the effect on cost of goods sold and net income for the current year of the following inventory errors. Indicate your answer with either a + (overstated) or a - (understated).ItemErrorEffect on Cost ofGoods SoldEffect on NetIncome 1) Beginning inventory is understated.2)Ending inventory is understated.3)Beginning inventory is overstated.4)Ending inventory is overstated.112. The following data are available for three products of the McGuire Company:A B Beginning inventory\$ 15,000\$27,000\$15,000Purchases45,00065,00062,000Goods available for sale60,00092,00077,000Ending inventory18,00013,0009,000Cost of goods sold42,00079,00068,000You discover the following errors:a)Ending inventory for product A was overstated by \$6,000.b)Ending inventory for product B was understated by \$5,000.c)Beginning inventory for product C was overstated by \$3,000.Considering these errors, recalculate cost of goods sold for each product.113. The bookkeeper for the Duncan Corporation made an error in recording the year-end inventory balance on December 31, 20X5. As a result, ending inventory was understated by \$37,000.a)What effect will this error have on cost of goods sold, gross profit, net income, and owner’s equityin 20X5?b)As of December 31, 20X6, what will be the cumulative effect of this error on owner’s equity?114. Late on the night of November 30, 20X5, an arsonist destroyed the Salem Company warehouse which was full of inventory. Luckily the accounting records were stored in another facility and not destroyed in the fire. Salem Company is in the process of filing a claim with its insurance company for the inventory loss due to the fire. Beginning inventory\$375,500Purchases through November 30, 20X5470,250C
CHAPTER 6Accounting                                                 Aamer Waheed Satti Net sales revenue through November 30, 20X5 765,200 The gross profit percent has historically been 40% of net sales revenue.Estimate the value of the inventory destroyed in the fire using the gross profit method.115. The following data pertain to Computer Bytes for the year ended December 31, 20X5:January 1, 20X5, inventory balance\$180,500Purchases of inventory on credit during year388,000Sales (40% on credit) during year650,000December 31, 20X5, inventory balance250,700a)Prepare all necessary journal entries under the periodic inventory system to record purchases and sales for the year and any necessary adjusting entries on December 31, 20X3.b)Calculate cost of goods sold under the periodic inventory system.