Income statement partial year ended sales revenue

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Income Statement (Partial)Year Ended March 31, 2015Sales Revenue$ 117,000Cost of Goods Sold 46,000 (b)Gross Profit $ 71,000Calculations:(b)$ 45,000Cost of Goods Sold prior to adjustment 1,000Adjustment, Requirement 1 $ 46,000Cost of Goods Sold, adjustedHorngren’s Accounting   10/e    Solutions Manual6-39
E6-25(a)Correct gross profit is $24,000. Calculations:As Reported:Sales Revenue$52,000Less: Cost of Goods Sold22,000Gross Profit$ 30,000If ending inventory is overstated by $6,000,then cost of goods sold is understated by $6,000.And, if cost of goods sold is understated by $6,000,then gross profit is overstated by $6,000.$ 30,000Incorrect gross profit(6,000) Overstatement$ 24,000Correct gross profit(b)Correct gross profit is $36,000. Calculations:If ending inventory is understated by $6,000,then cost of goods sold is overstated by $6,000.And, if cost of goods sold is overstated by $6,000,then gross profit is understated by $6,000.$30,000Incorrect gross profit *6,000Understatement$36,000Correct gross profit* Calculated in (a).
Horngren’s Accounting   10/e    Solutions Manual6-40
E6-26Requirement 1Corrected income statements:GREAT FOODS GROCERYIncome StatementsYears Ended June 30, 2016 and 201520162015Sales Revenue$ 139,000$ 120,000Cost of Goods Sold:Beginning Merchandise Inventory$ 8,500(a)$ 12,000Net Cost of Purchases76,00070,000Cost of Goods Available for Sale84,50082,000Less: Ending Merchandise Inventory17,0008,500(a)Cost of Goods Sold67,50073,500Gross Profit71,50046,500Operating Expenses23,00018,000Net Income$ 48,500$ 28,500Calculations:(a)$ 13,000Incorrect Merchandise Inventory(4,500) Overstatement$ 8,500Correct Merchandise InventoryHorngren’s Accounting   10/e    Solutions Manual6-41
E6-26, cont.Requirement 2Before correction, net income for the year ended June 30, 2016 is understated by $4,500 and net income for the year ended June 30, 2015 is overstated by $4,500.Calculations:Year EndedJune 30, 2016June 30, 2015Incorrect net income$ 44,000$ 33,000Correct net income (b)(48,500)(28,500)Overstatement (understatement) of net income$ (4,500)$ 4,500(b)Calculated in Requirement 1.Horngren’s Accounting   10/e    Solutions Manual6-42
E6-27Requirement 1Inventory turnover is 4.73 times for the year.Calculations:Average merchandise inventory=(Beginning merchandise inventory + Ending merchandise inventory) / 2=($10,080 + $14,880) / 2 =$12,480Inventory turnover=Cost of goods sold / Average merchandise inventory=$59,040 / $12,480=4.73 times for the yearRequirement 2Days’ sales in inventory is 77.17 days for the year.Calculations:Days’ sales in inventory=365 days / Inventory turnover=365 days / 4.73 times*=77.17 days* Calculated in Requirement 1.Horngren’s Accounting   10/e    Solutions Manual6-43
E6A-28Requirement 1Using FIFO, ending merchandise inventory is $192, cost of goods sold is $724, and gross profit is $466.Calculations:Goods Available for Sale:DateQuantityUnit CostTotal CostJune 120 units× $ 20= $ 400126 units× $ 22= $ 1322416 units× $ 24= $ 384Totals42 units$ 916Number of unitssold=14 units for first sale + 20 units for second sale=34 unitsSales revenue=34 units sold × $35 sale price per unit=$1,190Number of units in ending merchandise inventory=42 units available for sale – 34 units sold=8 unitsFIFO ending merchandise inventory=8 units × $24 per unit=$192FIFO Cost of Goods Sold:Cost of Goods Available for Sale$ 916Less: Ending Merchandise Inventory192Cost of Goods Sold$ 724

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