7. A fire caused heavy damage to the Anatolia Antique Store on May 21, 2023. All merchandise was destroyed. In conjunction with an insurance investigation, you have been to estimate the cost of inventory destroyed. The following data for 2023 (recorded before the fire) are available: Merchandise inventory on January 1 Gross purchases Freight-in Purchase returns and allowances Cash discounts on purchases Gross sales Sales returns and allowances Gross profit percentage on net sales Required: Estimate the cost of inventory destroyed Ł80.000 170.000 10.000 5.000 2.000 206.000 6.000 20%

7. A fire caused heavy damage to the Anatolia Antique Store on May 21, 2023. All merchandise was destroyed. In conjunction with an insurance investigation, you have been to estimate the cost of inventory destroyed. The following data for 2023 (recorded before the fire) are available: Merchandise inventory on January 1 Gross purchases Freight-in Purchase returns and allowances Cash discounts on purchases Gross sales Sales returns and allowances Gross profit percentage on net sales Required: Estimate the cost of inventory destroyed Ł80.000 170.000 10.000 5.000 2.000 206.000 6.000 20%

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 10E: Gross Profit Method: Estimation of Theft Loss You are requested by a client on September 28 to...

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Company Edgar reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 12,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
Refer to the information in E22-13. Required: Prepare the correcting journal entries if the company discovers each error 2 years after it is made and it has closed the books for the second year. Ignore income taxes. E22-13: The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, 10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for 2,000 was expensed. The machine has a 4-vear life, no residual value, and straight-line depreciation is used. c. Wages payable of 2,000 were not accrued. d. Payment of next years rent, 4,000, was recorded as rent expense. e. Allowance for doubtful accounts of 5,000 was not recorded. The company normally uses the aging method. f. Equipment with a book value of 70,000 and a fair value of 100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for 129,960 was received and recorded at its face value, and a gain of 59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest.
Gross Profit Method: Estimation of Theft Loss You are requested by a client on September 28 to prepare an insurance claim for a theft loss that occurred on that day. You immediately take an inventory and obtain the following data: The inventory on September 28 indicates that an inventory of 15,000 remains after the theft. During the past year, net sales were made at 50% above the cost of goods sold. Required: 1. Compute the inventory lost during the theft. Round the gross profit percentage to 3 decimal places. 2. Next Level What concerns might you have about the inventory estimation under the gross profit method?
Questions M7-6 and M7-7 are based on the following data: City Stationers Inc. had 200 calculators on hand on January 1, 2019, costing 18 each. Purchases and sales of calculators during the month of January were as follows: City uses a periodic inventory system. According to a physical count, 150 calculators were on hand at January 31, 2019. M7-6 The cost of the inventory on January 31, 2019, under the FIFO method is: a. 400 b. 2,700 c. 3,100 d. 3,200 M7-7 The cost of the inventory on January 31, 2019, under the LIFO method is: a. 400 b. 2,700 c. 3,100 d. 3,200
Business with gross receipts of $25 million or less may treat inventory as nonincidental materials and supplies. Find Regulation Section 1.162-3 and read paragraphs (a)(1) and (a)(2) to help answer the following: Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as non-incidental materials and elects to do so. In December of 2019 he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters. Explain how Frank will treat his oil filter inventory.
Effects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in 2019 appear below. During 2019, Graul discovered that the 2017 ending inventory had been misstated due to the following two transactions being recorded incorrectly. a. A purchase return of inventory costing $42,000 was recorded twice. b. A credit purchase of inventory' made on December 20 for $28,500 was not recorded. The goods were shipped F.O.B. shipping point and were shipped on December 22, 2017. Required: 1. Was ending inventory for 2017 overstated or understated? By how much? 2. Prepare correct income statements for all 3 years. 3. CONCEPTUAL CONNECTION Did the error in 2017 affect cumulative net income for the 3-year period? Explain your response. 4. CONCEPTUAL CONNECTION Why was the 2019 net income unaffected?
Review the following transactions, and prepare any necessary journal entries for Renovation Goods. A. On May 12, Renovation Goods purchases 750 square feet of flooring (Flooring Inventory) at $3.00 per square foot from a supplier, on credit. Terms of the purchase are 2/10, n/30 from the invoice date of May 12. B. On May 15, Renovation Goods purchases 200 measuring tapes (Tape Inventory) at $5.75 per tape from a supplier, on credit. Terms of the purchase are 4/15, n/60 from the invoice date of May 15. C. On May 22, Renovation Goods pays cash for the amount due to the flooring supplier from the May 12 transaction. D. On June 3, Renovation Goods pays cash for the amount due to the tape supplier from the May 15 transaction.
Borys Companys periodic inventory at December 31, 2019, is understated by 10,000, but purchases are correct. Johnson correctly values its 2020 ending inventory. What is the effect of this error on Boryss 2019 and 2020 financial statements?
The moving average inventory cost flow assumption is applicable to which of the following inventory systems? Questions M7-6 and M7-7 are based on the following data: City Stationers Inc. had 200 calculators on hand on January 1, 2019, costing 18 each. Purchases and sales of calculators during the month of January were as follows: City uses a periodic inventory system. According to a physical count, 150 calculators were on hand at January 31, 2019.
On January 5, 2019, ShoeKing Corp. sells for cash 500 pairs of volleyball shoes to FootAction, a shoe retailer, for 70 each. FootAction has the right to return the shoes for any reason up to March 31, 2019, for a full refund. The cost of each pair of shoes is 32. ShoeKing predicts that it is probable that 40 pairs of the shoes will be returned. ShoeKing uses the perpetual method for inventory. Required: 1. Prepare ShoeKings journal entry on January 5, 2019, to account for this transaction. 2. Assume that FootAction returns 35 pairs of shoes on March 31, 2019. Prepare the journal entry to record this return.
Errors As controller of Lerner Company, which uses a periodic inventory system, you discover the following errors in the current year: 1. Merchandise with a cost of 17,500 was properly included in the final inventory, but the purchase was not recorded until the following year. 2. Merchandise purchases are in transit under terms of FOB shipping point. They have been excluded from the inventory, but the purchase was recorded in the current year on the receipt of the invoice of 4,300. 3. Goods out on consignment have been excluded from inventory. 4. Merchandise purchases under terms FOB shipping point have been omitted from the purchases account and the ending inventory. The purchases were recorded in the following year. 5. Goods held on consignment from Talbert Supply Co. were included in the inventory. Required: For each error, indicate the effect on the ending inventory and the net income for the current year and on the net income for the following year.
A retailer discovers that 50% of the total inventory items delivered from the manufacturer are damaged. The original purchase for all inventory was $1,100. The retailer decides to return 20% of the damaged inventory for a full refund and keep the remaining 80% of damaged inventory. What is the value of the merchandise returned?