Financial Accounting, Student Value Edition (5th Edition)
5th Edition
ISBN: 9780134728520
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Chapter 5, Problem 13SE
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Describe the manner in which the inventory affect the cost of goods sold and gross profit for the year ended December 31, 2019, if the error were not corrected in 2018.
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(Learning Objectives 1, 2: Show how to account for inventory transactions; applythe FIFO cost method) Accounting records for Jubilee Corporation yield the following datafor the year ended June 30, 2018 (assume sales returns are non-existent):Inventory, June 30, 2017.......................................................................... $ 7,000Purchases of inventory (on account)......................................................... 61,000Sales of inventory—77% on account; 23% for cash (cost $49,000).........Inventory at FIFO, June 30, 2018 ............................................................100,00019,000Requirements1. Journalize Jubilee’s inventory transactions for the year under the perpetual system.2. Report ending inventory, sales, cost of goods sold, and gross profit on the appropriatefinancial statement.
Assume that in Year 1, the ending merchandise inventory is overstated by $40,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated, overstated, or correctly stated, for Years 1 and 2.
Year 1 Year 2
Ending merchandise inventory __________ __________
Beginning merchandise inventory ___________ _________
Cost of goods sold __________ __________
Gross profit __________ __________
Net income __________ _________
Chapter 5 Solutions
Financial Accounting, Student Value Edition (5th Edition)
Ch. 5 - Prob. 1DQCh. 5 - How are the financial statements of a manufacturer...Ch. 5 - What is a cost-flow assumption? Why is a cost-flow...Ch. 5 - If a company had two units that cost 1 each in its...Ch. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - During April, Bargain Hardware made sales of...Ch. 5 - Prob. 2SCCh. 5 - Prob. 3SCCh. 5 - Prob. 4SCCh. 5 - Prob. 5SCCh. 5 - Prob. 6SCCh. 5 - Prob. 7SCCh. 5 - Prob. 8SCCh. 5 - Prob. 9SCCh. 5 - Prob. 10SCCh. 5 - Prob. 11SCCh. 5 - Prob. 12SCCh. 5 - Prob. 1SECh. 5 - Prob. 2SECh. 5 - Prob. 3SECh. 5 - Prob. 4SECh. 5 - Prob. 5SECh. 5 - Prob. 6SECh. 5 - Prob. 7SECh. 5 - Prob. 8SECh. 5 - Lower-of-cost-or-market rule (Learning Objective...Ch. 5 - Prob. 10SECh. 5 - Inventory principles and terminology (Learning...Ch. 5 - Prob. 12SECh. 5 - Prob. 13SECh. 5 - Prob. 14SECh. 5 - Prob. 15SECh. 5 - Prob. 16AECh. 5 - Prob. 17AECh. 5 - Prob. 18AECh. 5 - Prob. 19AECh. 5 - Prob. 20AECh. 5 - Prob. 21AECh. 5 - Prob. 22AECh. 5 - Prob. 23AECh. 5 - Prob. 24AECh. 5 - Prob. 25AECh. 5 - Prob. 26AECh. 5 - Prob. 27AECh. 5 - FIFO (Learning Objective 2) 10-15 min. Tee Time,...Ch. 5 - LIFO (Learning Objective 2) 10-15 min. Refer to...Ch. 5 - Prob. 30BECh. 5 - Prob. 31BECh. 5 - Prob. 32BECh. 5 - Prob. 33BECh. 5 - Prob. 34BECh. 5 - Prob. 35BECh. 5 - Prob. 36BECh. 5 - Prob. 37BECh. 5 - Prob. 38BECh. 5 - Prob. 39BECh. 5 - Computing LIFO and journalizing inventory...Ch. 5 - Prob. 41APCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 43APCh. 5 - Prob. 44APCh. 5 - Prob. 45APCh. 5 - Estimating ending inventory (Learning Objective 7)...Ch. 5 - Prob. 47APCh. 5 - Prob. 48BPCh. 5 - Prob. 49BPCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 51BPCh. 5 - Prob. 52BPCh. 5 - Prob. 53BPCh. 5 - Prob. 54BPCh. 5 - Prob. 55BPCh. 5 - Continuing Exercise This exercise continues the...Ch. 5 - Prob. 1CPCh. 5 - Prob. 1CFSAPCh. 5 - Prob. 1EIACh. 5 - Prob. 2EIACh. 5 - Prob. 1FACh. 5 - Prob. 1IACh. 5 - Prob. 1SBACh. 5 - Prob. 1WCCh. 5 - Comprehensive Problem The Accounting Cycle for a...
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- Salt Lake Pool Supplies' merchandise inventory data for the year ended December 31, 2026, follow: View the inventory data. Read the requirements. Requirement 1. Assume that the ending merchandise inventory was accidentally overstated by $2,400. What are the correct amounts for cost of goods sold and gross profit for year ended December 31, 2026? Cost of goods sold in 2026 would be Requirements 1. Assume that the ending merchandise inventory was accidentally overstated by $2,400. What are the correct amounts for cost of goods sold and gross profit for year ended December 31, 2026? 2. How would the inventory error affect Salt Lake Pool Supplies' cost of goods sold and gross profit for the year ended December 31, 2027, if the error is not corrected in 2026? Print Done Inventory data Salt Lake Pool Supplies Income Statement (Partial) Year Ended December 31, 2026 Net Sales Revenue 60,000 Cost of Goods Sold: Beginning Merchandise Inventory 4,200 26,600 Plus: Net Cost of Inventory Purchased…arrow_forwardFill in the blanks. The inventory records of Machiatto Company in January 2020 show the following informations eachers Balance on January 1, 2020 Units Unit cost Purchases 3,000 P15.00 Students 01.06.2020 01.23.2020 10,200 17.00 Classes 2,600 Sales 18.50 01.07.2020 2,800 01.31.2020 7.500 ermediate Founting 10 Compute the ending and cost of goods sold under the following cost formulas A1C Living Ending Inventory Cost of Geeds Seld the IT Ere ona Sem SY 020-2021 a FIFO b Weighted average - Periodic (Round to bwo decimals the unit cost) NCEPTUAL AMEWORK AND COUNTING b Weighted average - Perpetual (always round to two decimals the unit cost) ANDARDS BSA 1C ONOMIC ( Previous ELOPMENT BSA1 C P Type here to searcharrow_forwardPartial income statements for Sherwood Company summarized for a four-year period show the following: 2018 2019 2020 2021 $ 2,300,000 1,472,000 $ 2,700,000 1,701,000 $ 2,800,000 1,820,000 $ 3,300,000 2,112,000 Net Sales Cost of Goods Sold Gross Profit $ 828,000 $ 999,000 $ 980,000 $ 1,188,000 An audit revealed that in determining these amounts, the ending inventory for 2019 was overstated by $21,200. The inventory balance on December 31, 2020, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. 2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. 2-b. Do the results lend confidence to your corrected amounts?arrow_forward
- ( Appendices 6A and 6B) Inventory Costing Methods Edwards Company began operations in February 2019. Edwards accounting records provide the following data for the remainder of 2019 for one of the items the company sells: Â Edwards uses a periodic inventory system. All purchases and sales were for cash. Required: 1. Compute cost of goods sold and the cost of ending inventory using FIFO. 2. Compute cost of goods sold and the cost of ending inventory using LIFO. 3. Compute cost of goods sold and the cost of ending inventory using the average cost method. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) 4. Prepare the journal entries to record these transactions assuming Edwards chooses to use the FIFO method. 5. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes? 6. CONCEPTUAL CONNECTION Refer to Problem 6-67B and compare your results. What are the differences? Be sure to explain why the differences occurred.arrow_forwardEffects of an Error in Ending Inventory Waymire Company prepared the partial income statements presented below for 2019 and 2018. During 2020, Waymires accountant discovered that ending inventory for 2018 had been understated by $6,500. Required: 1. Prepare corrected income statements for 2019 and 2018. 2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).arrow_forwardCompany 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?arrow_forward
- Company Elmira 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 32,000. 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?arrow_forward( Appendix 6B) Inventory Costing Methods Grencia Company uses a periodic inventory system. For 2018 and 2019, Grencia has the following data (assume all purchases and sales are for cash): Required: 1. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using FIFO. 2. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using LIFO. 3. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using the average cost method. ( Note: Use four decimal places for per unit calculations and round all other numbers to the nearest dollar.) 4. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes? 5. CONCEPTUAL CONNECTION Which method produces the most realistic amount for income? For inventory? Explain your answer. 6. CONCEPTUAL CONNECTION What is the effect of purchases made later in the year on the gross margin when LIFO is employed? When FIFO is employed? Be sure to explain why any differences occur. 7. CONCEPTUAL CONNECTION If you worked Problem 6-68B, compare your answers. What are the differences? Be sure to explain why any differences occurred.arrow_forward( Appendix 6B) Inventory Costing Methods Jet Black Products uses a periodic inventory system. For 2018 and 2019, Jet Black has the following data: All purchases and sales are for cash. Required: 1. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using FIFO. 2. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using LIFO. 3. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using the average cost method. ( Note: Use four decimal places for per unit calculations and round all other numbers to the nearest dollar.) 4. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes? 5. CONCEPTUAL CONNECTION Which method produces the most realistic amount for income? For inventory? Explain your answer. 6. CONCEPTUAL CONNECTION What is the effect of purchases made later in the year on the gross margin when LIFO is employed? When FIFO is employed? Be sure to explain why any differences occur. 7. CONCEPTUAL CONNECTION If you worked Problem 6-68A, compare your answers. What are the differences? Be sure to explain why any differences occurred.arrow_forward
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