Examination of the records of Hopper Company for the year ended December 31, 2021 revealed the following: Inventory at January 1, 2021 was overstated by P71,000. • Inventory at December 31, 2021 was understated by P96,000. • During 2021, Hopper received a P60,000 cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P60,000 was credited to sales revenue. • Profit (before adjustments) reported on the 2021 profit or loss was P658,000. Explain the right profit for 2021

Examination of the records of Hopper Company for the year ended December 31, 2021 revealed the following: Inventory at January 1, 2021 was overstated by P71,000. • Inventory at December 31, 2021 was understated by P96,000. • During 2021, Hopper received a P60,000 cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P60,000 was credited to sales revenue. • Profit (before adjustments) reported on the 2021 profit or loss was P658,000. Explain the right profit for 2021

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter14: Financial Statement Analysis

Section: Chapter Questions

Problem 14.5BE: Inventory analysis A company reports the following: Cost of goods sold 435,000 Average inventory...

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Cost of merchandise sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2019: Increase in estimated returns inventory 11,600 Merchandise inventory, May 1, 2018 380,000 Merchandise inventory, April 30, 2019 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2019, using the periodic inventory system. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2019. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
(Appendix 8.1) Inventory Write-Down Frost Companys inventory records tor the years 2019 and 2020 reveal the cost and market of the January 1, 2019, inventory to be 125,000. On December 31, 2019, the cost of inventory was 130,000, while the market value was only 128,000. The December 31, 2020, market value of inventory was 140,000, and the cost was only 135,000. Frost uses a periodic inventory system. Purchases for 2019 were 100,000 and for 2020 were 110,000. Required: 1. Assume the inventory that existed at the end of 2019 was sold in 2020. Prepare the journal entries at the end of 2019 and 2020 to record the lower of cost or net realizable value under the (a) allowance method and (b) direct method. 2. Prepare the cost of goods sold section of the income statement and show how the company would record the inventory on its balance sheet for 2019 and 2020 under the (a) allowance method and (b) direct method. 3. Next Level Refer to your answer for P8-3. How does the use of a periodic inventory system versus a perpetual inventory system affect the valuation of inventory and the amount reported as income?
Periodic inventory accounts, multiple-step income statement, closing entries On June 30, 2019, the balances of the accounts appearing in the ledger of Simkins Company are as follows: Cash 125,000 Accounts Receivable 340,000 Merchandise Inventory. July 1,2018 415,000 Estimated Returns Inventory 25,000 Office Supplies 9,000 Prepaid Insurance 18,000 Land 300,000 Store Equipment 550,000 Accumulated DepreciationStore Equipment 190,000 Office Equipment 250,000 Accumulated DepreciationOffice Equipment 110,000 Accounts Payable 85,000 Customer Refunds Payable 20,000 Salaries Payable 9,000 Unearned Rent 6,000 Notes Payable 50,000 Amy Gant, Capital 820,000 Amy Gant, Drawing 275,000 Sales 6,590,000 Purchases 4,100,000 Purchases Returns and Allowances 32,000 Purchases Discounts 13,000 Freight In 45,000 Sales Salaries Expense 580,000 Advertising Expense 315,000 Delivery Expense 18,000 Depreciation ExpenseStore Equipment 12,000 Miscellaneous Selling Expense 28,000 Office Salaries Expense 375,000 Rent Expense 43,000 Insurance Expense 17,000 Office Supplies Expense 5,000 Depreciation Expense-Office Equipment 4,000 Miscellaneous Administrative Expense 16,000 Rent Revenue 32,500 Interest Expense 2,500 Instructions 1.Does Simkins Company use a periodic or perpetual inventory system? Explain. 2.Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2019. The merchandise inventory as of June 30, 2019, was 508,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was 33,000. 3.Prepare the closing entries for Simkins Company as of June 30, 2019. 4.What would the net income have been if the perpetual inventory system had been used?
Periodic inventory accounts, multiple-step income statement, closing entries On December 31, 2019, the balances of the accounts appearing in the ledger of Wyman Company are as follows: Cash 13,500 Accounts Receivable 72,000 Merchandise Inventory, January 1,2019 257,000 Estimated Returns Inventory 35,000 Office Supplies 3,000 Prepaid Insurance 4,500 Land 150,000 Store Equipment 270,000 Accumulated DepreciationStore Equipment 55000 Office Equipment 78,500 Accumulated DepreciationOffice Equipment 16000 Accounts Payable 27,800 Customer Refunds Payable 50,000 Salaries Payable 3,000 Unearned Rent 8,300 Notes Payable 50,000 Shirley Wyman, Capital 515,600 Shirley Wyman, Drawing 25,000 Sales 3280000 Purchases 2650000 Purchases Returns and Allowances 93,000 Purchases Discounts 37,000 Freight In 48,000 Sales Salaries Expense 300,000 Advertising Expense 45,000 Delivery Expense 9,000 Depreciation ExpenseStore Equipment 6,000 Miscellaneous Selling Expense 12,000 Office Salaries Expense 175,000 Rent Expense 28,000 Insurance Expense 3,000 Office Supplies Expense 2,000 Depreciation Expense-Office Equipment 1,500 Miscellaneous Administrative Expense 3,500 Rent Revenue 7,000 Interest Expense 2,000 Instructions 1. Does Wyman Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2019. The merchandise inventory as of December 31, 2019, was 305,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was 30,000. 3. Prepare the closing entries for Wyman Company as of December 31, 2019. 4. What would the net income have been if the perpetual inventory system had been used?
Cost of merchandise sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2016: Merchandise inventory. May 1, 2015 380,000 Merchandise inventory, April 30,2016 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2016, using the periodic inventory system. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2016. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory' system?
Cost of goods sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2018: Estimated returns of current year sales 11,600 Inventory, May 1, 2017 380,000 Inventory, April 30,2018 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 A. Prepare the cost of goods sold section of the income statement for the year ended April 30, 2018, using the periodic inventory system. B. Determine the gross profit to be reported on the income statement for the year ended April 30, 2018. C. Would gross profit he different if the perpetual inventory system was used instead of the periodic inventory system?
Refer to RE22-2. Assume Heller Company had sales revenue of 510,000 in 2019 and 650,000 in 2020. Prepare Hellers partial income statements (through gross profit) for 2019 and 2020. RE22-2 Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
Appendix Cost of goods sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 20Y8: Estimated returns of current year sales 11,600 Inventory, May 1,20Y7 380,000 Inventory, April 30,20Y8 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 a. Prepare the Cost of goods sold section of the income statement for the year ended April 30. 20Y8, using the periodic inventory system. b. Determine the gross profit to be-reported on the income statement for the year ended April 30, 20Y8. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventors-system?
Appendix Periodic inventory accounts, multiple-step income statement, closing entries On December 31, 2018, the balances of the accounts appearing in the ledger of Wyman Company are as follows: Cash 13,500 Dividends 25,000 Accounts Receivable 72,000 Sales 3,280,000 Inventory, January 1, 2018 257,000 Purchases 2,650,000 Estimated Returns Inventory, January 1,2018 35,000 Purchases Returns and Allowances 93,000 Purchases Discounts 37,000 Office Supplies 3,000 Freight In 48,000 Prepaid Insurance 4,500 Sales Salaries Expense 300,000 Land 150,000 Advertising Expense 45,000 Store Equipment 270,000 Delivery Expense 9,000 Accumulated Depreciation Store Equipment 55,900 Depreciation Expense Store Equipment 6,000 Office Equipment 78,500 Miscellaneous Selling Expense 12,000 Accumulated Depreciation Office Equipment 16,000 Office Salaries Expense 175,000 Rent Expense 28,000 Accounts Payable 77,800 Insurance Expense 3,000 Salaries Payable 3,000 Office Supplies Expense 2,000 Customer Refunds Payable 50,000 Depreciation Expense Office Equipment 1,500 Unearned Rent 8,300 Notes Payable 50,000 Miscellaneous Administrative Expense 3,500 Common Stock 150,000 Rent Revenue 7,000 Retained Earnings 365,600 Interest Expense 2,000 Instructions 1. Does Wyman Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2018. The inventory as of December 31, 2018, was 305,000. The estimated cost of customer returns inventory for December 31, 2018, is estimated to increase to 40,000. 3. Prepare the closing entries for Wyman Company as of December 31, 2018. 4. What would be the net income if the perpetual inventory system had been used?
Inventory Errors McLelland Inc. reported net income of $175,000 for 2019 and $210,000 for 2020. Early in 2020, McLelland discovers that the December 31, 2019 ending inventory was overstated by $20,000. For simplicity, ignore taxes. Required: 1. What is the correct net income for 2019? For 2020? 2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2019? At December 31, 2020?