BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Retail method; gross profit method

Selected data on merchandise inventory, purchases, and sales for Jaffe Co. and Coronado Co. are as follows:

  Cost Retail
Jaffe Co.    
Merchandise Inventory, February 1 $ 400,000 $ 615,000
Transactions during February:    
Purchases(net) 4,055,000 5,325,000
Sales   5,100,000
Coronado Co    
Merchandise Inventory, May 1 $ 400,000  
Transactions during May through October:    
Purchases(net) 3,150,000  
Sales 4,750,000  
Estimated gross profit rate 35%  

Instructions

1.    Determine the estimated cost of the merchandise inventory of Jaffe Co. on February 28 by the retail method, presenting details of the computations.

2. a.    Estimate the cost of the merchandise inventory of Coronado Co. on October 31 by the gross profit method, presenting de tails of the computations.

b.    Assume that Coronado Co. took a physical inventory on October 31 and discovered that $366,500 of merchandise was on hand. What was the estimated loss of inventory due to theft or damage during May through October?

1.

To determine

Retail method

This method of estimating cost of inventory requires cost and retail prices to be maintained for goods available for sale. The ending inventory cost is estimated by converting ending inventory at retail using ratio of cost to retail price.

Gross profit method

This method is use the estimated gross profit for the period to evaluate and ascertain the ending inventory for the period. The gross profit for the period is calculated from the preceding year, which is adjusted for any current period changes in the sales and cost price of the inventory.

To estimate: the cost of merchandise inventory at February 28 of J company.

Explanation

Firstly, the total merchandise available for sale at cost and retail prices is determined. Then ratio of cost to retail ratio is determined by dividing merchandise availabl...

(2.a)

To determine

To estimate: the cost of merchandise inventory as on October 31 of C Company.

(2.b)

To determine

To estimate: the loss of inventory due to theft or damage during May through October.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Describe Enterprise Risk Management (ERM).

Accounting Information Systems

How does an increase in productivity affect business?

Foundations of Business (MindTap Course List)

What does the HTTP do?

Accounting Information Systems

Classify consumer products

MKTG 12:STUDENT ED.-TEXT

INCOME STATEMENT Little Books Inc. recently reported 3 million of net income. Its EBIT was 6 million, and its t...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

(a) What kind of an account is Purchases Discounts Lost? (b) How is this item reported on the income statement?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Explain why the long-run aggregate-supply curve is vertical.

Principles of Macroeconomics (MindTap Course List)