Problem 4 On July 21, 2021, there was a fire that destroyed PIRENA Company's warehouse and inventory records. The following information about sales and salvaged documents revealed the following: • Inventory, Jan. 1 - P485,000 • Purchases - January to July 21 o Cost of purchases - P1,560,300 o Freight-in -P39,700 o Purchase returns P80,000 o Purchase discounts - P20,000 • Sales - January to July 21 o Sales - P2,000,000 o Sales discounts P500,000 o Sales discounts forfeited - P20,000 • The gross profit is 20% for the last five years. The company also provided information: o Goods out on consignment, at cost - P30,000 o Goods purchased still in transit, FOB destination P25,000 o Cost of undamaged goods at selling price - P100,000 How much is the estimated cost of goods sold?

Problem 4 On July 21, 2021, there was a fire that destroyed PIRENA Company's warehouse and inventory records. The following information about sales and salvaged documents revealed the following: • Inventory, Jan. 1 - P485,000 • Purchases - January to July 21 o Cost of purchases - P1,560,300 o Freight-in -P39,700 o Purchase returns P80,000 o Purchase discounts - P20,000 • Sales - January to July 21 o Sales - P2,000,000 o Sales discounts P500,000 o Sales discounts forfeited - P20,000 • The gross profit is 20% for the last five years. The company also provided information: o Goods out on consignment, at cost - P30,000 o Goods purchased still in transit, FOB destination P25,000 o Cost of undamaged goods at selling price - P100,000 How much is the estimated cost of goods sold?

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 16P: (Appendix 8.1) Inventory Write-Down Frost Companys inventory records tor the years 2019 and 2020...

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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?
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?
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?
Longmire Sons nude sales un credit to Alderman Sports totaling 500,000 on April 18. The cost of the goods sold is 400,000. Longmire estimates 3% of its sales to Alderman may be returned. On May 22, 9,000 worth of goods (with a cost of 7,200) are returned by Alderman. Longmire uses a periodic inventory system. Prepare the related journal entries for Longmire Sons.
(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?
Purchase-related transactions The following selected transactions were completed by Epic Co. during August of the curr ent year: Aug. 3. Purchased merchandise on account for $33400, terms FOB destination. 2/10. n/30. 9. Issued debit memorandum for $2500 ($2450 net of 2% discount) for merchandise from the August 3 purchase that was damaged in shipment. 10. Purchased merchandise on account, $25,000, terms FOB shipping point, n/com. Paid $600 cash to the freight company for delivery of the merchandise. 13. Paid for invoice of August 3, less debit memorandum of August 9 31. Paid for invoice of August 10. Instructions Illustrate the effects of each of the preceding transactions on the accounts and financial statements of Epic Co. Identify each transaction by date.
Question 3: On 20 June 2019 , the warehouse and attached business premises of Fashion Wear Cloth Mill SAOC were affected by fire. The following information is available from the salvaged books of account. Amount (OMR) Stock of goods @ 10% lower than cost as on January 1, 2019 216,000 Purchases less returns (January 1, 2019, to June 20, 2019) 280000 Sales less returns (January 1, 2019, to June 20, 2019) 620000 Additional Information : Sales up to June 20, 2019, include OMR 80,000 worth of goods which had not been dispatched. Purchases up to June 20, 2019, did not include OMR 40,000 worth of goods for which purchase invoices had not been received from the suppliers, but the goods had been received in stored in the warehouse. Past records show the gross profit rate of 25 % Value of goods salvaged OMR 31,000 Fashion Wear had insured their stock for OMR 85,000. You are required to compute the amount of claim to be lodged with the insurer justifying the…
PROBLEM 19: San Juan Manufacturing began operations 5 years ago. On August 13, 2021, a fire broke out in the warehouse destroying all inventory and many records relating to the inventory. The information available is presented below (all sales and purchases are on account): 1/1/2021 8/13/2021 Inventory P 143,850 Accounts receivable 130,590 P 128,890 Accounts payable Collections on accounts 88,140 122,850 receivable, 1/1 to 8/13 753,800 Payments to suppliers, 1/1 to 8/13 487,500 Goods out on consignment at 8/13 at cost 52,900 Summary on previous years’ sales follows: 2018 2019 2020 Sales P 626,000P P705,000 P 680,000 Gross profit 187,800 225,600 231,200 24. What is the inventory loss suffered as a result of the fire if the average gross profit rate is used? 25. What is the inventory loss suffered as a result of the fire if the trend in gross profit rate continues?
PROBLEM 17: The following information relates to NNN , Inc. which accidentally met a fire on the night of January 19, 2023: Inventory, July 1, 2022 P 51,600 Purchases, July 1, 2022 to January 19, 2023 368,000 Sales, July 1, 2022 to January 19, 2023 583,000 Purchase returns 11,200 Purchase discounts taken 5,800 Freight in 3,800 Sales returns 8,600 The fire destroyed the entire inventory except for purchases in transit, FOB shipping point of P2,000 and goods having selling price of P4,900 that were salvaged from the fire. The average gross profit rate on net sales is 40%. 22. Compute for the cost of inventory lost in the fire.
PROBLEM 6: XXX Company is preparing its 2021 financial statements. Prior to any adjustments, inventory is valued at P1,605,000. The following information has been found relating to certaininventory transactions from your cut-off test: A. Goods valued at P110,000 are on consignment with a customer. These goods werenot included in the ending inventory figure. B.Goods costing P87,000 were received from a vendor on January 5, 2022. The relatedinvoice was received and recorded on January 12, 2022. The goods were shippedonDecember 31, 2021, terms FOB shipping point. C. Goods costing P85,000, sold for P102,000, were shipped on December 31, 2021, andwere delivered to the customer on January 2, 2022. The terms of the invoice wereFOBshipping point. The goods were included in the ending inventory for 2021 and thesalewas recorded in 2022. D. A P35,000 shipment of goods to a customer on December 31, terms FOB destinationwas not included in the year-end inventory. The goods cost P26,000…
PROBLEM 18: San Jose Corporation was organized on January 1, 2020. On December 31, 2021, the corporation lost most of its inventory in a warehouse fire just before the year end count of inventory was to take place. Data records disclosed the following: 2020 2021 Beginning inventory P 0 P 1,020,000 Purchases 4,300,000 3,460,000 Purchase returns and allowances 230,600 323,000 Sales 3,940,00 4,180,000 Sales returns and allowances 80,000 100,000 On January 1, 2021, the corporation’s pricing policy was changed so that the gross profit rate would be 3% points higher than the one earned in 2020. Salvaged undamaged merchandise was marked to sell at P120,000 while damaged merchandise marked to sell at P80,000 had an estimated realizable value of P18,000. 23. How much is the inventory loss due to fire?
PROBLEM 16: On May 6, 2023, a flashflood caused damage to the merchandise stored in the warehouse of Rome Company. You were asked to submit an estimate of the merchandise destroyed in the warehouse. The following data were established: A. Net sales for 2022 were P800,000 matched against cost of P560,000. B. Merchandise inventory, January 1, 2023 was P200,000, 90% of which was in the warehouse and 10% in the downtown showrooms. C. For January 1, 2023 to date of flood, you ascertained that the invoice value of purchases, all of which were stored in the warehouse, P100,000; freight inward, P4,000; purchases returned, P6,000. D. Cost of merchandise transferred from the warehouse to showrooms was P8,000 and net sales from January 1 to May 6, 2023, all of which were warehouse stock, were P320,000. E. There was no change in the gross profit rate adopted by the company in 2023. 21. What is the estimated merchandise destroyed by the flood?