On June 30, 2021, a fire at Norianna Company's only warehouse caused severe damage to its inventory. Based on recent history, Norianna has a gross profit of 25% on cost. The following information is available from the records for the six months ended June 30, 2021: Inventory- January 1 Net purchases 4,000,000 18,000,000 Net sales 20,000,000 A physical inventory disclosed undamaged goods with selling price of P1,000,000. On June 30, 2021, unsold goods on consignment with selling price of P1,500,000 are in the hands of the consignee. What is the estimated cost of inventory destroyed by fire? Judy Company uses the retail inventory method to approximate its ending inventory. The following information is available for the current year: Cost Retail Beginning inventory Purchases 650,000 1,200,000 9,000,000 14,700,000 Freight in Purchase returns 200,000 300,000 500,000 Purchase allowance 150,000 Departmental transfer in 200,000 Net markups 300,000 300,000 Net markdowns 1,000,000 Sales 11,500,000 Sales discounts 100,000 Employee discounts 500,000 What should be reported as the estimated cost of ending inventory using the lower of average cost or market? What should be reported as estimated cost of ending inventory using the average cost approach on applying retail inventory?
On June 30, 2021, a fire at Norianna Company's only warehouse caused severe damage to its inventory. Based on recent history, Norianna has a gross profit of 25% on cost. The following information is available from the records for the six months ended June 30, 2021: Inventory- January 1 Net purchases 4,000,000 18,000,000 Net sales 20,000,000 A physical inventory disclosed undamaged goods with selling price of P1,000,000. On June 30, 2021, unsold goods on consignment with selling price of P1,500,000 are in the hands of the consignee. What is the estimated cost of inventory destroyed by fire? Judy Company uses the retail inventory method to approximate its ending inventory. The following information is available for the current year: Cost Retail Beginning inventory Purchases 650,000 1,200,000 9,000,000 14,700,000 Freight in Purchase returns 200,000 300,000 500,000 Purchase allowance 150,000 Departmental transfer in 200,000 Net markups 300,000 300,000 Net markdowns 1,000,000 Sales 11,500,000 Sales discounts 100,000 Employee discounts 500,000 What should be reported as the estimated cost of ending inventory using the lower of average cost or market? What should be reported as estimated cost of ending inventory using the average cost approach on applying retail inventory?
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 67P
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Transcribed Image Text:On June 30, 2021, a fire at Norianna Company's only warehouse caused severe damage to its
inventory. Based on recent history, Norianna has a gross profit of 25% on cost. The following
information is available from the records for the six months ended June 30, 2021:
Inventory - January 1
Net purchases
Net sales
4,000,000
18,000,000
20,000,000
A physical inventory disclosed undamaged goods with selling price of P1,000,000. On June 30, 2021,
unsold goods on consignment with selling price of P1,500,000 are in the hands of the consignee. What
is the estimated cost of inventory destroyed by fire?
Judy Company uses the retail inventory method to approximate its ending inventory. The following
information is available for the current year:
Cost
Retail
Beginning inventory
650,000
1,200,000
Purchases
9,000,000
14,700,000
Freight in
200,000
Purchase returns
300,000
150,000
500,000
Purchase allowance
Departmental transfer in 200,000
Net markups
Net markdowns
300,000
300,000
1,000,000
11,500,000
Sales
Sales discounts
100,000
Employee discounts
500,000
What should be reported as the estimated cost of ending inventory using the lower of average cost or
market?
What should be reported as estimated cost of ending inventory using the average cost approach on
applying retail inventory?
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