Download Classwork 5-11 Income Statement for a Merchandiser Fill in the

Classwork Chapter 5
5-1 Items should be reported as part of the company's "inventory" at year end, if they are
a.
Purchased from a creditor, available for sale, and paid for the following year.
b.
Held in anticipation of an increase in market value.
c.
Determined to be part of cost of goods sold.
d.
Sold during the period.
e.
Planned, but not yet purchased.
5-2 Which one of the following accounts most likely would appear on the income statement of a merchandise
company, but not on the income statement of a service company?
a.
Cost of Goods Sold
b.
Selling Expenses
c.
Administrative Expenses
d.
Income Tax Expense
e.
Revenues
5-3 A customer returned damaged goods for credit. Which of the seller's accounts decreases?
a.
Purchase Returns
b.
Accounts Receivable
c.
Sales Returns
d.
Sales Revenue
e.
Accounts Payable
5-4 Using the following information, what is the amount of cost of goods sold?
Purchases
$32,000
Purchases discounts
$ 960
Merchandise inventory September 1
5,700
Merchandise inventory September 30 6,370
Sales returns and allowances
910
Sales
63,000
Purchases returns and allowances
1,200
Freight In
1,040
a. $26,900
b. $20,530
c. $28,130
d. $30,210
5-5 Undertoe, Inc. uses the periodic inventory system with the following information for September.
Sep
1
On hand, 100 units @ $10.00 each
$1,000
5
Purchased 200 units @ $12.00 each
2,400
12
Purchased 100 units @ $14.00 each
1,400
Total cost of goods available for sale
$4,800
30
On hand, 150 units
If Undertoe uses the FIFO inventory method, the amount assigned to the September 30th inventory would be
a. $1,800
b. $2,100
c. $1,500
d. $2,000
e. $1,600
If Undertoe, Inc. (see 5-5) uses the LIFO inventory method, the amount assigned to the September 30th inventory
would be:
a. $1,800
b. $2,100
c. $1,500
d. $2,000
e. $1,600
Classwork 5-6 Inventoriable Costs During the first month of operations, DEF Company incurred the following costs in
ordering and receiving merchandise for resale. No inventory was sold.
List price, $200 with 600 units purchased
Purchasing department salary, $6,000
Volume discount, 5% off list price
Supplies used to label goods at retail price, $18
Paid freight costs, $606
Interest paid to supplier, $20
Insurance cost while goods were in transit, $300
Salary of President, $60,000
Long-distance phone charge to place orders, $24
Required
What amount do you recommend the company record as merchandise inventory on its balance sheet? Explain your
answer.
For any items not to be included in inventory, indicate their appropriate treatment in the financial statements.
Classwork 5-7 Missing Amounts in Cost of Goods Sold Model
For each of the following independent cases, fill in the missing amounts.
Beginning inventory
(a)
82,000
16,000
Purchases (gross)
60,000
100,000 (d)
Purchase returns and allowances
5,000
10,000
200
Purchas discounts
550 (c)
718
Transportation-in
1,800
2,500
3,000
Cost of goods available for sale
71,250
173,600
90,082
Ending inventory
(b)
28,000
25,000
Cost of goods sold
61,250
145,600 (e)
Classwork 5-8 Shipping Terms and Transfer of Title
On December 27, 2015, Highlife Wholesalers ships merchandise to Luke Retailers with terms of FOB destination
point. The merchandise arrives at Luke's warehouse on January 4, 2016.
Required
1. Identify who pays to ship the merchandise.
2. Determine whether the inventory should be included as an asset on Luke's December 31, 2015, balance
sheet. Should the sale be included on Highlife's 2015 income statement? Explain.
3. Explain how your answers to part (2) would have been different if the terms of shipment had been FOB
shipping point.
Classwork 5-9 Cost of Goods Sold, FIFO, and LIFO Quandary, Inc. began operations early in 2016 and made the
following purchases:
February 5
3,000
$4.00
June 10
6,000
5.00
October 4
4,000
6.00
Quandary used the FIFO method to value its inventory and reported cost of goods sold expense for the year of
$27,000 and gross profit of $10,000.
Required
Determine the cost of goods sold and gross profit assuming Quandary had used the LIFO method instead of the FIFO
method.
Classwork 5-10 Inventory Costing Methods Limited Access, Inc. reported the following information for the month of
March:
Inventory, March 1 100 units @ $10
$1,000
PURCHASES:
March 10
50 units @ $11
550
March 17
50 units @ $12
600
March 24
50 units @ $13
650
Goods Available 250 units
$2,800
During February, Limited Access sold 150 units. The company uses a periodic inventory system.
Required
What is the value of ending inventory and cost of goods sold for February under the following assumptions:
1. Of the units sold, 50 cost $10, 25 cost $11, 50 cost $12, and 25 cost $13.
2. FIFO
3. LIFO
4. Weighted average
Classwork 5-11 Income Statement for a Merchandiser Fill in the missing amounts in the following income
statement for Carpenters Department Store Inc.
Net sales
300,000
Cost of goods sold:
Beginning inventory
25,800
Purchases
(b)
Less: Purchase discounts
2,500
Net purchases
(c)
Add: Transportation-in
8,000
Cost of goods purchased
200,000
Cost of goods available for sale
225,800
Less: Ending inventory
(d)
Cost of goods sold
(e)
Gross Profit
100,000
Operating expenses
(f)
Income before tax
30,000
Income tax expense
12,000
Net income
(g)
Classwork 5-12 Comparison of Inventory Costing Methods—Periodic System
Knaud Company's inventory records show 600 units on hand on November 1 with a unit cost of $4.00 each. The
following transactions occurred during the month of October:
Date Inv. & Purchases
Unit Sales
Goods
Sales
Units
Available
11/1 600 in Inventory
$2,400
1
300 @ $11.00
8
400 @ $5.00
9
600 @ $11.00
18
600 @ $5.50
20
600 @ $12.00
29
800 @ $6.00
Totals
Operating expenses, other than cost of goods sold, amount to $2,200 for the month. The company uses an estimated
tax rate of 40% to accrue monthly income taxes.
Required
1. Prepare a chart comparing cost of goods sold and ending inventory using the periodic system and the following
costing methods:
Cost of Goods Sold Ending Inventory
Total
Weighted average
FIFO
LIFO
2. Prepare income statements for each of the three methods.
Knaud Co.
Income Statement
For the month ending November 30th
Weighted Average
FIFO
Sales
Cost of goods sold
Gross profit
Operating expenses
Income before tax
Income tax (40%)
Net income
LIFO