22.Gage’s accounting records included the following information:Inventory, 01-01-15                                                                                                             $211,000Purchases during 2015                                                                                                        $805,000Purchase returns during 2015                                                                                                 $4,000Freight-out on 2015 sales                                                                                                      $10,000Sales during 2015                                                                                                              $1,662,000Sales returns during 2015                                                                                                      $60,000 Gage completed a physical inventory on 12-31-15 and calculated an ending inventory of $100,000, at retail selling price. In recent years, Gage's gross profit equaled 42% of Gage’s selling price. Gage suspects some inventory may have been shoplifted. Prepare the entry, if necessary, to reflect the estimated loss from any shoplifted items.

Question
Asked Nov 7, 2019

22.

Gage’s accounting records included the following information:

Inventory, 01-01-15                                                                                                             $211,000

Purchases during 2015                                                                                                        $805,000

Purchase returns during 2015                                                                                                 $4,000

Freight-out on 2015 sales                                                                                                      $10,000

Sales during 2015                                                                                                              $1,662,000

Sales returns during 2015                                                                                                      $60,000

 

Gage completed a physical inventory on 12-31-15 and calculated an ending inventory of $100,000, at retail selling price. In recent years, Gage's gross profit equaled 42% of Gage’s selling price. Gage suspects some inventory may have been shoplifted. Prepare the entry, if necessary, to reflect the estimated loss from any shoplifted items.

check_circleExpert Solution
Step 1

Freight Out is a transportation expense incurred to move the good out of the manufacturers factory once the sale is completed. This expense is included in the Cost of Goods Sold part of the income statement.

Formulas Used:
COGS Opening Inventory Purchases - Purchase returns + Freight Out cost Closing
Inventory
Sales COGS + Gross Profit
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Formulas Used: COGS Opening Inventory Purchases - Purchase returns + Freight Out cost Closing Inventory Sales COGS + Gross Profit

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Step 2

Working Note 1: Computation of COGS

Computation
Particulars
Amount
Amount
Sales
1662000
Sales Return
60000
Net Sales
100%
1602000
Gross Profit 42%
42%
672840
COGS
58%
929160
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Computation Particulars Amount Amount Sales 1662000 Sales Return 60000 Net Sales 100% 1602000 Gross Profit 42% 42% 672840 COGS 58% 929160

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Step 3

Working note 2: Computation of ...

COGS Opening Inventory Purchases - Purchase returns + Freight Out cost - Closing
Inventory
Therefore,
929160 211000+805000-4000+10000 Ending Inventory
Ending Inventory = 211000+805000-4000+10000-929 1 60
- $92,840
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COGS Opening Inventory Purchases - Purchase returns + Freight Out cost - Closing Inventory Therefore, 929160 211000+805000-4000+10000 Ending Inventory Ending Inventory = 211000+805000-4000+10000-929 1 60 - $92,840

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