Professional Documents
Culture Documents
Intermediate 1
PROBLEMS
Pr. 3-178Adjusting entries and account classification.
Selected amounts from Trent Company's trial balance of 12/31/10 appear below:
1. Accounts Payable
160,000
2. Accounts Receivable
150,000
3. Accumulated DepreciationEquipment
200,000
4. Allowance for Doubtful Accounts
20,000
5. Bonds Payable
500,000
6. Cash
150,000
7. Equipment
840,000
8. Insurance Expense
30,000
9. Interest Expense
10,000
10. Merchandise Inventory
300,000
11. Notes Payable (due 6/1/11)
200,000
12. Prepaid Rent
150,000
13. Retained Earnings
818,000
14. Salaries and Wages Expense
328,000
15. Share CapitalOrdinary
60,000
(All of the above accounts have their standard or normal debit or credit balance.)
Part A.
Prepare adjusting journal entries at year end, December 31, 2010, based on the
following supplemental information.
a. The equipment has a useful life of 15 years with no salvage value. (Straight-line method being
used.)
b. Interest accrued on the bonds payable is 15,000 as of 12/31/10.
c. Expired insurance at 12/31/10 is 20,000.
d. The rent payment of 150,000 covered the six months from November 30, 2010 through May
31, 2011.
e. Salaries and wages earned but unpaid at 12/31/10, 22,000.
Part B.
a.
b.
c.
d.
e.
Solution 3-178
Part A.
a. Depreciation ExpenseEquipment (840,000 0) 15 ...............
Accumulated DepreciationEquipment .............................
56,000
56,000
15,000
Page 1 of 33
15,000
Final Review
Intermediate 1
10,000
25,000
22,000
10,000
25,000
22,000
Part B.
a. Property, plant, and equipment3, 7
b. Current assets2, 4, 6, 10, 12
c. Equity13, 15
d. Non-current liabilities5
e. Current liabilities1, 11
Pr. 3-180Adjusting and closing entries.
The following trial balance was taken from the books of Fisk Corporation on December 31, 2010.
Account
Debit
Credit
Cash
$ 12,000
Accounts Receivable
40,000
Note Receivable
7,000
Allowance for Doubtful Accounts
$ 1,800
Merchandise Inventory
44,000
Prepaid Insurance
4,800
Furniture and Equipment
125,000
Accumulated Depreciation--F. & E.
15,000
Accounts Payable
10,800
Share CapitalOrdinary
44,000
Retained Earnings
55,000
Sales
280,000
Cost of Goods Sold
111,000
Salaries Expense
50,000
Rent Expense
12,800
Totals
$406,600
$406,600
At year end, the following items have not yet been recorded.
a. Insurance expired during the year, $2,000.
b. Estimated bad debts, 1% of gross sales.
c. Depreciation on furniture and equipment, 10% per year.
d. Interest at 6% is receivable on the note for one full year.
*e. Rent paid in advance at December 31, $5,400 (originally charged to expense).
f. Accrued salaries at December 31, $5,800.
Instructions
(a) Prepare the necessary adjusting entries.
(b) Prepare the necessary closing entries.
Solution 3-180
(a) Adjusting Entries
a. Insurance Expense ...............................................................
Prepaid Insurance ........................................................
b. Bad Debt Expense ................................................................
Allowance for Doubtful Accounts ..................................
Page 2 of 33
2,000
2,000
2,800
2,800
Ehab Abdou (97672930)
Final Review
c. Depreciation Expense ..........................................................
Accumulated Depreciation--F. & E. ..............................
d. Interest Receivable ...............................................................
Interest Revenue .........................................................
*e. Prepaid Rent ........................................................................
Rent Expense ..............................................................
f. Salaries Expense ..................................................................
Salaries Payable ..........................................................
(b) Closing Entries
Sales ...........................................................................................
Interest Revenue .........................................................................
Income Summary ..............................................................
Intermediate 1
12,500
12,500
420
420
5,400
5,400
5,800
5,800
280,000
420
280,420
191,500
88,920
55,800
7,400
12,500
2,800
2,000
111,000
88,920
18,690
450
7,000
Page 3 of 33
18,690
450
7,000
Final Review
Intermediate 1
PROBLEMS
Pr. 4-146Income statement.
Presented below is information (in thousands) related to Chen Company.
Retained earnings, December 31, 2010
650,000
Sales
1,400,000
Selling and administrative expenses
240,000
Loss on disposal of component (pre-tax)
290,000
Cash dividends declared on common stock
33,600
Cost of goods sold
780,000
Gain resulting from computation error on depreciation charge in 2009 (pre-tax)
520,000
Rent revenue
120,000
Impairment loss
90,000
Interest expense
10,000
Instructions
Prepare in good form an income statement for the year 2011. Assume a 30% tax rate and that
there were 80,000 ordinary shares outstanding during the year.
Solution 4-146
Chen Company
INCOME STATEMENT
For the Year Ended December 31, 2011
Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Other income and expense
Impairment loss
Income from operations
Interest expense
Income before taxes
Income taxes
Income from continuing operations
Discontinued operations, net of applicable income taxes of 87,000
Net income
Per share
Income from continuing operating
Discontinued operations net of tax
Net income
Page 4 of 33
1,400,000
780,000
620,000
240,000
120,000
90,000
410,000
10,000
400,000
(120,000)
280,000
(203,000)
77,000
3.50
(2.54)
0.96
Final Review
Intermediate 1
Solution 4-147
Wilcox Corporation
Partial Income Statement
For the Year Ended December 31, 2011
Income from continuing operations
Discontinued operations
Loss on disposal of a component of a business,
$150,000, less applicable income taxes, $45,000
Net income
Per shareIncome from cont. operations
Discontinued operations, net of tax
Net income
*Income from cont. operations (unadjusted)
Gain on sale of machinery (after tax)
Income from cont. operations (adjusted)
Page 5 of 33
$821,000*
(105,000)
$716,000
$4.11
(0.53)
$3.58
$800,000
21,000
$821,000
Final Review
Intermediate 1
$945,000
19,500
(408,500)
(145,000)
(215,000)
(13,000)
183,000
(30,000)
(45,900)
$107,100
Instructions
Prepare a multiple-step income statement for 2011 for Howell Corporation that is presented in
accordance with IFRS (including format and terminology). Howell Corporation has 50,000 ordinary
shares outstanding and has a 30% income tax rate on all tax related items. Round all earnings per
share figures to the nearest cent.
Solution 4-148
Howell Corporation
INCOME STATEMENT
For the Year Ended December 31, 2011
Sales
Cost of goods sold
Gross profit
Selling expenses
$145,000
Administrative expenses
215,000
Other income: Investment revenue
Income from operations
Interest expense
Income before income taxes
Income taxes
Income from continuing operations
Loss from discontinued operations, net of applicable income tax of $9,000
Net income
Per share of share
Income from continuing operations
Discontinued operations loss net of tax
Net income
Page 6 of 33
$945,000
408,500
536,500
360,000
19,500
196,000
13,000
183,000
54,900
128,100
21,000
$107,100
$2.56
(0.42)
$2.14
Final Review
Intermediate 1
$800,000
640,000
70,000
20,000
730,000
70,000
21,000
$ 49,000
Additional information:
1. "Selling, general, and administrative expenses" included a charge of $7,000 for impairment of
intangibles.
2. "Other, net" consisted of interest expense, $10,000, and a discontinued operations loss of
$10,000 before taxes. If the loss had not occurred, income taxes for 2011 would have been
$24,000 instead of $21,000.
3. Kinder had 20,000 ordinary shares outstanding during 2011.
Instructions
Prepare a corrected income statement, including the appropriate per share disclosures.
Page 7 of 33
Final Review
Intermediate 1
Solution 4-149
Kinder Company
Income Statement
For the Year Ended December 31, 2011
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expenses
Other income and expense
Loss on impairment
Income from operations
Interest expense
Income before taxes
Income taxes
Income from continuing operations
Discontinued operations
Loss on disposal of component
Less applicable taxes
Net income
Per share
Income from continuing operations
Discontinued operations, net of tax
Net income
Page 8 of 33
$800,000
640,000
$160,000
63,000
7,000
90,000
10,000
80,000
24,000
56,000
10,000
3,000
7,000
$ 49,000
$2.80
(0.35)
$2.45
Final Review
Intermediate 1
1,100,000
18,000
642,000
42,000
128,000
60,000
90,000
200,000
180,000
8,000
152,000
125,000
4,400
1,000
370,000
100,000
290,000
17,000
150,000
29,000
5,000
200,000
450,000
40,000
60,000
The amount of income taxes applicable to ordinary income was 48,600, excluding the tax effect of
the discontinued operations loss which amounted to 18,000.
Instructions
(a) Prepare an income statement.
(b) Prepare a retained earnings statement.
Page 9 of 33
Final Review
Intermediate 1
Solution 4-150
Wang Corporation
INCOME STATEMENT
For the Year Ended December 31, 2011
Sales
Cost of goods sold:
Merchandise inventory, Jan. 1
Purchases
Less purchase discounts
Net purchases
Merchandise available for sale
Less merchandise inv., Dec. 31
Cost of goods sold
1,100,000
152,000
642,000
18,000
Gross profit
Selling expenses
General and administrative expenses
Other income and expense:
Dividend revenue
Income from operations
Interest expense
Income before income taxes
Income taxes
Income from continuing operations
Discontinued operations
Loss on disposal, less applicable taxes of $18,000
Net income
Per share of share capital
Income from continuing operations
Discontinued operations,
Net income
624,000
776,000
125,000
651,000
449,000
128,000
150,000
278,000
8,000
179,000
17,000
162,000
48,600
113,400
42,000
71,400
2.27
(0.84)
1.43
Wang Corporation
RETAINED EARNINGS STATEMENT
For the Year Ended December 31, 2011
Retained earnings, January 1, 2011
Add: Net income
Deduct: Dividends declared
Retained earnings, December 31, 2011
Page 10 of 33
290,000
71,400
29,000
42,400
332,400
Final Review
Intermediate 1
PROBLEMS
Pr. 5-130Statement of financial position presentation.
The following statement of financial position was prepared by the bookkeeper for Kraus Company
as of December 31, 2012.
Kraus Company
Statement of Financial Position
as of December 31, 2012
Investments
Equipment (net)
Patents
Inventories
Accounts receivable (net)
Cash
76,300
96,000
32,000
57,000
52,200
80,000
393,500
Shareholders' equity
Non-current liabilities
Accounts payable
218,500
100,000
75,000
393,500
Page 11 of 33
Final Review
Intermediate 1
Solution 5-130
Kraus Company
Statement of Financial Position
As of December 31, 2012
Assets
Investments
Available-for-sale securities
Cash surrender value
48,300
9,400
135,000
40,000
Intangible assets
Patents
Franchises
Current assets
*Equipment held for sale
Inventories
Accounts receivable
Less: Allowance for doubtful accounts
Trading securities
Cash
Total current assets
Total assets
(5)
95,000
32,000
9,000
57,000 (2)
3,800
41,000
1,000
60,000
(4)
(3)
53,200
19,000
73,100
(1)
57,700
206,300
400,000
218,500
181,500
400,000
Page 12 of 33
Final Review
Intermediate 1
Page 13 of 33
40,000
2,400
600
?
50,400
137,320
102,000
78,000
14,400
60,000
10,000
5,000
331,400
80,400
1,860
3,000
1,320
1,560
53,040
900
15,000
30,000
8,000
Final Review
Intermediate 1
Solution 5-131
Leong Corporation
Statement of Financial Position
December 31, 2012
Assets
Property, Plant and Equipment
Land
Building
Accumulated depreciation - building
Equipment
Accumulated depreciation -equipment
Total Property, Plant and Equipment
Current Assets
Inventory
Supplies
Prepaid advertising
Cash
Total Current Assets
Total assets
Equity & Liabilities
Equity
Share capital-ordinary
Retained earnings (265,080*- 50,400)
Total shareholders' equity
Non-current liabilities
Bond payable
Current Liabilities
Notes payable
Taxes payable
Salaries payable
Interest payable
Total current liabilities
Total liabilities
Total liabilities & stockholders' equity
137,320
80,400
(15,000)
40,000
(10,000)
65,400
30,000
232,720
102,000
1,860
5,000
30,000
138,860
371,580
60,000
214,680
274,680
78,000
14,400
3,000
900
600
18,900
96,900
371,580
Page 14 of 33
Final Review
Intermediate 1
2012
Land
58,800
Equipment .............................................. 504,000
Inventory ................................................ 168,000
Accounts receivable (net) ....................... 84,000
Cash....................................................... 42,000
TOTAL ........................................ 856,800
487,200
205,800
302,400
29,400
86,000
115,600
1,226,400
21,000
789,600
201,600
151,200
63,000
1,226,400
Page 15 of 33
Final Review
Intermediate 1
Solution 5-132
Stanislaus Co.
Statement of Cash Flows
For the year ended December 31, 2012
Net Income
Cash flow from operating activities
Depreciation expense
Increase in accounts receivable
Increase in inventory
Increase in accounts payable
Decrease in short-term notes payable
Net cash provided by operating activities
Cash flow from investing activities
Purchase equipment
Sale of land
Net cash used by investing activities
Cash flow from financing activities
Payment of cash dividend
Net increase in cash
Cash at beginning of year
Cash at end of the year
235,200
31,600
(67,200)
(33,600)
35,600
(37,800)
(71,400)
163,800
(84,000)
37,800
(46,200)
(96,600)
21,000
42,000
63,000
Page 16 of 33
Final Review
Intermediate 1
HK$1,547,000
HK$1,445,000
Shareholders' Equity:
Share capitalordinary
Retained Earnings
Total Shareholders' Equity
HK$ 510,000
374,000
884,000
HK$ 467,500
340,000
807,500
Non-Current Liabilities:
Bonds Payable
340,000
391,000
Current Liabilities:
Accounts Payable
Notes Payable
Income Tax Payable
Total Current Liabilities
187,000
51,000
85,000
323,000
102,000
68,000
76,500
246,500
Total Liabilities
663,000
637,500
HK$1,547,000
HK$1,445,000
Sales
Less Cost of Goods Sold
Gross Profit
Expenses:
Depreciation Expense
Salary Expense
Interest Expense
Loss on Sale of Equipment
Income Before Taxes
Less Income Tax Expense
Net Income
HK$1,615,000
731,000
884,000
HK$1,513,000
731,000
782,000
153,000
391,000
34,000
17,000
289,000
119,000
HK$ 170,000
136,000
357,000
34,000
0
255,000
102,000
HK$ 153,000
Additional Information:
During the year, Johnston sold equipment with an original cost of HK$153,000 and accumulated
depreciation of HK$119,000 and purchased new equipment for HK$272,000.
Page 17 of 33
Final Review
Intermediate 1
Solution 5-133
Johnston Enterprises
Statement of Cash Flows
For the Year Ended December 31, 2012
Net Income
HK$ 170,000
263,500
433,500
(255,000)
17,000
(272,000)
(51,000)
42,500
(136,000)**
(144,500)
34,000
119,000
HK$153,000
Page 18 of 33
Final Review
Intermediate 1
PROBLEMS
Pr. 7-159Entries for bad debt expense.
The trial balance before adjustment of Risen Company reports the following balances:
Accounts receivable
Allowance for doubtful accounts
Sales (all on credit)
Sales returns and allowances
Dr.
$100,000
Cr.
$ 2,500
750,000
40,000
Instructions
(a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to
be (1) 6% of gross accounts receivable and (2) 1% of net sales.
(b) Assume that all the information above is the same, except that the Allowance for Doubtful
Accounts has a debit balance of $2,500 instead of a credit balance. How will this difference
affect the journal entries in part (a)?
Solution 7-159
(a)
(1)
(2)
(b)
3,500
7,100
3,500
7,100
Page 19 of 33
8,500
8,500
Final Review
Intermediate 1
(b) Prepare a Schedule of Note Discount Amortization for Green Company under the effective
interest method. (Round to whole dollars.)
Solution 7-160
(a) Present value of interest
Present value of maturity value
=
=
$20,000 2.48685
$400,000 .75132
=
=
$ 49,737
300,528
$350,265
Date
12/31/10
12/31/11
12/31/12
12/31/13
Cash
Interest
(5%)
Effective
Interest
(10%)
$20,000
20,000
20,000
$60,000
$ 35,027
36,529
38,179*
$109,735
Discount
Amortized
$15,027
16,529
18,179
$49,735
Unamortized
Discount
Balance
$49,735
34,708
18,179
0
Present
Value
of Note
$350,265
365,292
381,821
400,000
Final Review
Intermediate 1
Solution 7-161
(a) Cash .......................................................................................
Finance Charge.........................................................................
Notes Payable ...............................................................
410,000
15,000
200,000
450
530
200,000
4,250
Page 21 of 33
425,000
200,980
204,250
Final Review
Intermediate 1
Solution 7-162
(a) Cash .............................................................................................
Due from Factor (2% $800,000).................................................
Loss on Sale of Receivables (6% $800,000) .............................
Accounts Receivable ....................................................
736,000
16,000
48,000
800,000
736,000
16,000
48,000
Page 22 of 33
800,000
16,000
48,000
736,000
800,000
Final Review
Intermediate 1
Ex. 8-173FIFO and Average Cost Mitchell Companys record of transactions for the month of
June was as follows.
Purchases
June 1 (balance on hand)
4
8
13
21
29
600 @ $3.00
1,500 @ 3.04
800 @ 3.20
1,200 @ 3.25
700 @ 3.30
500 @ 3.13
5,300
Sales
June 3 (balance on hand)
9
11
23
27
500 @ $5.00
1,300 @ 5.00
600 @ 5.50
1,200 @ 5.50
900 @ 6.00
4,500
Instructions
(a) Assuming that periodic inventory records are kept, compute the inventory at
June 30 using (1) FIFO and (2) average cost.
(b) Assuming that perpetual inventory records are kept in both units and dollars, determine the
inventory at June 30 using (1) FIFO and (2) average cost.
Solution 8-173
(a) 1.
2.
FIFO
Average Cost
Total cost
Total units
800 @ 3.15
*Units
600
1,500
800
1,200
700
500
5,300
Page 23 of 33
@
@
@
@
@
@
=
=
=
=
=
=
Total Cost
$1,800
4,560
2,560
3,900
2,310
1,565
$16,695
Final Review
Intermediate 1
(b) 1.
2.
FIFO
Average Cost
Purchase
No. of Unit
units cost
Date
June 1
3
4 1,500 $3.04
8 800 3.20
9
11
13 1,200 3.25
21 700 3.30
23
27
29 500 3.13
Sold
No. of Unit
units cost
500 $3.000
1,300
600
3.0917
3.0917
1,200
900
3.2317
3.2317
No. of
units
600
100
1,600
2,400
1,100
500
1,700
2,400
1,200
300
800
Balance
Unit
cost
Amount
$3.0000
$1,800
3.0000
300
3.0375
4,860
3.0917
7,420
3.0917
3,401
3.0917
1,546
3.2035
5,446
3.2317
7,756
3.2317
3,878
3.2317
969
3.1675
2,534
PROBLEMS
Pr. 8-178Inventory cut-off.
Vogts Company sells TVs. The perpetual inventory was stated as $28,500 on the books at
December 31, 2010. At the close of the year, a new approach for compiling inventory was used
and apparently a satisfactory cut-off for preparation of financial statements was not made. Some
events that occurred are as follows.
1. TVs shipped to a customer January 2, 2011, costing $5,000 were included in inventory at
December 31, 2010. The sale was recorded in 2011.
2. TVs costing $12,000 received December 30, 2010, were recorded as received on January 2,
2011.
3. TVs received during 2010 costing $4,600 were recorded twice in the inventory account.
4. TVs shipped to a customer December 28, 2010, f.o.b. shipping point, which cost $10,000, were
not received by the customer until January, 2011. The TVs were included in the ending
inventory.
5. TVs on hand that cost $6,100 were never recorded on the books.
Instructions
Compute the correct inventory at December 31, 2010.
Page 24 of 33
Final Review
Intermediate 1
Solution 8-178
Inventory per books
Add: Shipment received 12/30/10
TVs on hand
$28,500
$12,000
6,100
Deduct:
4,600
10,000
18,100
46,600
14,600
$32,000
NE
Inventory
U
Accounts
Payable Sales
NE
NE
Cost of
Goods Sold
O
___________________________________________________________________________
1. Goods in transit shipped "f.o.b.
destination" by supplier were
recorded as a purchase but were
excluded from ending inventory.
___________________________________________________________________________
2. Goods held on consignment were
included in inventory count and
recorded as a purchase.
___________________________________________________________________________
3. Goods in transit shipped "f.o.b.
shipping point" were not recorded
as a sale and were included in
ending inventory.
___________________________________________________________________________
4. Goods were shipped and appropriately excluded from ending
inventory but sale was not
recorded.
___________________________________________________________________________
Solution 8-179
1.
2.
3.
4.
NE
NE
U
U
Page 25 of 33
NE
O
O
NE
O
O
NE
NE
NE
NE
U
U
O
NE
U
NE
Final Review
Intermediate 1
Original Cost
$25
$42
$120
$18
Estimated
Completion Cost
$6
$12
$25
$3
Expected
Selling Price
$40
$58
$150
$26
Estimated
Cost to sell
$4
$8
$15
$2
Instructions
Using the lower-of-cost-or-net realizable value approach applied on an individual-item basis,
compute the inventory valuation that should be reported for each product on December 31, 2010.
Solution 9-145
Net Real.
Value
$30
Cost
$25
Lower-ofCost-orNRV
$25
$38
$42
$38
$110
$120
$110
$21
$18
$18
Product
A
Ex. 9-146LCNRV
Pinkel Company uses the LCNRV method, on an individual-item basis, in pricing its inventory
items. The inventory at December 31, 2011, consists of products D,E,F,G,H, and I, Relavant perunit data for these products appear below.
Item
D
180
110
45
15
Item
E
165
120
45
27
Item
F
140
120
35
15
Item
G
135
120
50
30
Item
H
165
75
45
15
Item
I
135
54
45
30
Instructions
Using the LCNRV rule, determine the proper unit value for statement of financial position reporting
purposes at December 31, 2011, for each of the inventory items above.
Page 26 of 33
Final Review
Intermediate 1
Solution 9-146
Item
D
Net
Realizable.
Value
120*
Cost
110
LCNRV
110
93
120
93
90
120
90
55
120
55
105
75
75
1
60
54
54
*Estimated selling price Estimated selling costs and cost to
complete = 180 45 15 = 120.
12/31/10
520,000
485,000
12/31/11
615,000
585,000
Instructions
(a) Prepare the journal entries required at December 31, 2010, and December 31, 2011,
assuming that the inventory is recorded at LCNRV, using a perpetual inventory system and
the cost-of-goods-sold method.
(b) Prepare the journal entries required at December 31, 2010, and December 31, 2011,
assuming that the inventory is recorded at cost, using a perpetual system and the loss
method.
(c) Which of the two methods above provides the higher net income in each year?
Solution 9-147
(a) 12/31/10 Cost of Goods Sold 35,000
Allowance to Reduce
Inventory to NRV..
12/31/11 Allowance to Reduce
Inventory to NRV..5,000
Costs of Goods Sold
35,000 (615,000 585,000)
(b) 12/31/10 Loss Due to Decline of
Inventory to NRV35,000
Allowance to Reduce
Inventory to NRV..
Page 27 of 33
35,000
5,000
35,000
Final Review
Intermediate 1
5,000
$ 84,000
63,000
120,000
Past records indicate that sales are made at 50% above cost.
Instructions
Estimate the inventory of goods on hand at the close of business on March 11 by the gross profit
method and determine the amount of the theft loss. Show appropriate titles for all amounts in your
presentation.
Solution 9-150
Beginning Inventory
Purchases
Goods Available
Goods Sold ($120,000 150%)
Estimated Ending Inventory
Physical Inventory
Theft Loss
Page 28 of 33
$ 84,000
63,000
147,000
80,000
67,000
60,000
$ 7,000
Final Review
Intermediate 1
Solution 9-151
Beginning Inventory
Purchases
Goods available
Cost of sale ($90,000 125%)
Estimated ending inventory
Cost of undamaged inventory ($5,000 125%)
Estimated fire loss
$ 48,000
46,000
94,000
(72,000)
22,000
(4,000)
$18,000
$21,000
27,000
90,000
45,000
58,000
Instructions
Calculate the estimated cost of the inventory on May 31.
Solution 9-152
Collections of accounts
Add accounts receivable, May 31
Deduct accounts receivable, May 1
Sales during May
$ 90,000
27,000
(21,000)
$ 96,000
Inventory, May 1
Purchases during May
Goods available
Cost of sales ($96,000 120%)
Estimated cost of inventory, May 31
$ 45,000
58,000
103,000
(80,000)
$ 23,000
Page 29 of 33
Final Review
Intermediate 1
Cost
Retail
280,000
390,000
1,820,000
3,000,000
Markups
130,000
Markup cancellations
20,000
Markdowns
47,000
Markdown cancellations
7,000
Sales
3,150,000
Instructions
Compute the inventory by the conventional retail inventory method.
Solution 9-153
Beginning inventory.
Purchases.
Totals..
Add: Net marksups
Markups.
Markup cancellations
Totals
Cost
280,000
1,820,000
2,100,000
130,000
(20,000)
2,100,000
Retail
390,000
3,000,000
3,390,000
47,000
(7,000)
110,000
3,500,000
40,000
3,460,000
3,150,000
310,000
2,100,000
60%
3,500,000
Page 30 of 33
Final Review
Intermediate 1
Solution 9-155
Beginning inventory
Add: Purchases
Cost of goods available
Sales
Less 40%
Estimated inventory lost
$ 170,000
980,000
1,150,000
$1,400,000
(560,000)
840,000
$ 310,000
Sales............................................................................................... 1,400,000
Income Summary ................................................................
Cost of Goods Sold .........................................................................
Fire Loss .........................................................................................
Inventory .............................................................................
Purchases ...........................................................................
1,400,000
840,000
310,000
170,000
980,000
Page 31 of 33
Final Review
Intermediate 1
Solution 9-156
At Cost
Beginning inventory, 2/1/10
$ 70,800
Purchases
$219,500
Less purchase returns
4,300
215,200
Totals
$286,000
Add markups (net)
Totals
Deduct markdowns (net)
Sales price of goods available
Sales less sales returns
Ending inventory, 1/31/11 at retail
Ending inventory at cost: Ratio of cost to retail =
$286,000 $440,000 = 65%;
$90,000 65% = $58,500
$ 58,500
Page 32 of 33
At Retail
$ 98,500
$294,000
5,500
288,500
387,000
53,000
440,000
15,000
425,000
335,000
$ 90,000
Final Review
Intermediate 1
Inventory, 12/31/10
Purchases
Purchase returns
Purchase discounts
Gross sales (after employee discounts)
Sales returns
Markups
Markup cancellations
Markdowns
Markdown cancellations
Freight-in
Employee discounts granted
Loss from breakage (normal)
Retail
$ 550,000
2,050,000
120,000
2,110,000
145,000
180,000
60,000
65,000
30,000
12,000
8,000
63,000
Instructions
Assuming that carpenter Inc. uses the conventional retail inventory method, compute the cost of its
ending inventory at December 31, 2011.
Solution 9-157
Beginning Inventory..
Purchases..
Purchase returns
Purchase discounts
Freight-in..
Markups
Markup cancellations.
Totals.
Markdowns..
Markdown cancellations
Sales.
Sales returns
Inventory losses due to breakage.
Employee discounts
Ending inventory at retail
Cost-to-retail ratio =
Cost
375,000
1,369,000
(90,000)
(27,000)
63,000
$
180,000
(60,000)
$1,690,000
(65,000)
30,000
(2,110,000)
145,000
Retail
$ 550,000
2,050,000
(120,000)
120,000
2,600,000
(35,000)
(1,965,000)
(8,000)
(12,000)
$ 580,000
$1,690,500
65%
$2,600,000
Page 33 of 33