1.
Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during the period which results in the goods available for sale. Then, the estimated cost of goods sold is deducted from the goods available for sale to estimate the ending inventory.
Inventory turnover ratio: This is a financial metric that is used to quantify the number of times the inventory is used or sold during an accounting period.
To state: the inventory method that T Corporation uses to value its inventories.
2.
To state: the additional expenditures that the company includes in the initial cost of merchandise.
3.
To Calculate: the gross profit ratio and the inventory turnover ratio for the fiscal year ended January 30, 2016, and also compare the ratios.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
- Chapter 8 Perform (ASAC LO 5 and BSAC LO 2) Kingbird Company began operations late in 2024 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2024 and no markdowns during 2024, the ending inventory for 2024 was $13,708 under both the conventional retail method and the LIFO retail method. At the end of 2025, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2025. The following data are available for computations. Cost Inventory, January 1, 2025 Sales revenue Net markups mu Net markdowns mo Purchases Freight-in Estimated theft (b) The LIFO retail method. Ending inventory at cost Ending inventory at retail Cost $ $13,708 $ 63,900 5,888 Retail Compute the cost of the 2025 ending inventory under both: (a) The conventional retail method. $20,200 77,000 mu 9,900 mD 1,800 ex Beg Ending inventory using the conventional retail method $ 87,500 2,200 27336 40800…arrow_forwardExercise 8-7 (Algo) Goods in transit; consignment [LO8-2] The December 31, 2021, year-end inventory balance of the Raymond Corporation is $234,000. You have been asked to review the following transactions to determine if they have been correctly recorded. 1. Goods shipped to Raymond f.o.b. destination on December 26, 2021, were received on January 2, 2022. The invoice cost of $42,000 is included in the preliminary inventory balance. 2. At year-end, Raymond held $26,000 of merchandise on consignment from the Harrison Company. This merchandise is included in the preliminary inventory balance. 3. On December 29, merchandise costing $7,200 was shipped to a customer f.o.b. shipping point and arrived at the customer's location on January 3, 2022. The merchandise is not included in the preliminary inventory balance. 4. At year-end, Raymond had merchandise costing $27,000 on consignment with the Joclyn Corporation. The merchandise is not included in the preliminary inventory balance. Required:…arrow_forwardС23 Jx А B C. D E F G H. K I also need your assistance in claulating the following economic order quantity (Qe) given new data for 2017. Our inventory generally follows Pareto's Law; therefore, I have emphasized controlling those items representing the majority of our inventory activity. One of those items in IV (intravenous) setups. Our current situation is as follows: 2016 Price $50 for each IV setup 50,000 $25 2017 Demand 2017 Operating Cost 2017 Interest 6.25% 2017 Holding Cost $0.50 The IV distributor would like to distribute a new model setup in 2017 at the same price, but he tells us that he is willing to reduce our carrying costs by making monthly deliveries. After discussing this proposal with Ms. Care, I discovered that training will be required for the new setup. Ms. Care believes, and the distributor agrees, that each registered nurse (RN) will be required to attend a 2 hour seminar. I'm not sure where we put this training cost in the total cost formula. Ms. Care tells me…arrow_forward
- Q7 What amount will Music, Inc. report as ending inventory on its December 31, 2021 balance sheet?arrow_forwardUnder U.S. GAAP, LIFO is an acceptable inventory method. Financial statement information for three companies that use LIFO follows. All table numbers are in millions of dollars. Assume these companies adopted IFRS, and thus were required to use FIFO, rather than LIFO. a. Prepare a table with the following columns: (1) Difference between FIFO and LIFO inventory valuation. (2) Revised IFRS net income using FIFO. (3) Difference between FIFO and LIFO inventory valuation as a percent of total current assets. (4) Revised IFRS net income as a percent of the reported net income. b. Complete the table for the three companies. c. For which company would a change to IFRS for inventory valuation have the largest percentage impact on total current assets (Col. 3)? d. For which company would a change to IFRS for inventory valuation have the largest percentage impact on net income (Col. 4)? e. Why might Kroger have a negative impact on net income from using LIFO, while the other two companies have a positive impact on net income from using LIFO?arrow_forwardExercise 8-26 (Algo) Dollar-value LIFO [LO8-8] On January 1, 2024, a Company adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was $670,000. The 2024 and 2025 ending inventory valued at year-end costs were $714,000 and $795,000, respectively. The appropriate cost indexes are 1.05 for 2024 and 1.06 for 2025. Required: Complete the below table to calculate the inventory value at the end of 2024 and 2025 using the dollar-value LIFO method. Note: Round "Year end cost index" to 2 decimal places. Round other final answer values to the nearest whole dollars. Date 01/01/2024 12/31/2024 12/31/2025 Inventory Layers Converted to Base Year Cost Inventory at Year-End Cost Year-End Cost Index = = = Inventory Layers at Base Year Cost Base Base 2024 Base 2024 2025 Inventory Layers Converted to Cost Inventory Layers at Base Year Cost Year-End Cost Index = = = = = Inventory Layers Converted to Cost Inventory DVL Cost S S S 0 0 0arrow_forward
- 8–6 Various inventory costing methods; gross profit ratio ● LO8–1, LO8–4, LO8–7 Topanga Group began operations early in 2024. Inventory purchase information for the quarter ended March 31, 2024, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system to report inventory and cost of goods sold. Date of Purchase Units Unit Cost Total Cost Jan. 7 5,000 $4.00 $20,000 Feb. 16 12,000 4.50 54,000 March 22 17,000 5.00 85,000 Total purchases 34,000 $159,000 Sales for the quarter, all at $7.00 per unit, totaled 20,000 units leaving 14,000 units on hand at the end of the quarter. Required: Calculate Topanga’s gross profit ratio for the first quarter using: FIFO LIFO Average cost Comment on the relative effect of each of the three inventory methods on the gross profit ratio.arrow_forwardPROBLEM 15 Examination of the records of Hopper Company for the year ended December 31, 2021 revealed the following: • Inventory at January 1, 2021 was overstated by P71,000. • Inventory at December 31, 2021 was understated by P96,000. • During 2021, Hopper received a P60,000 cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P60,000 was credited to sales revenue. • Profit (before adjustments) reported on the 2021 profit or loss was P658,000. Explain the right profit for 2021arrow_forwardE 8-5 Inventory transactions; missing data • LO8-1 A company has the following information in its records. Certain data have been intentionally omitted ($ in thousands). Beginning inventory Cost of goods sold 2024 2025 2026 $ 7 $ ? $225 Ending inventory སྐྱི་ 627 621 ? 225 216 Cost of goods available for 876 ? 800 sale Purchases (gross) 630 ? 585 Purchase discounts 18 15 ? Purchase returns 24 30 14 Freight-in 13 32 16 Required: Determine the missing numbers. Show computations where appropriate.arrow_forward
- Exercise 9-19 (Algo) Dollar-value LIFO retail [LO9-5] On January 1, 2024, the Brunswick Hat Company adopted the dollar-value LIFO retail method. The following data are available for 2024: Beginning inventory Net purchases Net markups Net markdowns Net sales Retail price index, 12/31/2024 Required: Calculate the estimated ending inventory and cost of goods sold for 2024 using the information provided. Note: Do not round intermediate calculations. Answer is complete but not entirely correct. Ending inventory at retail Ending inventory at cost Cost of goods sold Cost $ 82,600 119,500 $ $ $ 162,000 86,386 122,113 Retail $ 140,000 247,000 4,000 12,000 217,000 1.08arrow_forwardExercises L06-4 2924 5019 v2 gain This exercise stresses the relationships between the information recorded in a periodic inventory 1 EXERCISE 6.8 Relationships within Periodic Inventory Systems system and the basic elements of an income statement. Each of the five lines represents a separate set of information. You are to fill in the missing amounts. A net loss in the right-hand column is to be indicated by placing brackets around the amount, for example as in line e . 10 val2 Net Sales SAT u Isroish engewolley 10 as lodes bra naje od prols burdaud 15d bas dem oft moleivolal no obrint wo Ideas no sonsled osnoval 00442 5w 25an L06-5, L06-8 EXERCISE 6.9 Selecting an Inventory System instave promovni ofborne. H? niend nogal AbeBSTRUO. nisiqu Ending Inventory Phimb znotranca. Beginning Net Pur- Inventory chases UON DOS 2.210 95,200 264,000 to ? ? 35.200 104,000 76,000 a. 240,000 ai loreng salamat ainwalidw v10105 i taida! od 520) ? wif 72,000 272,000 b. 480,000 01040 Coloravitat 441,000…arrow_forwardd ing Enabled: Chapter 7 Required Homewor... i Albany International Corporation, originally the Albany Felt Company, is an industrial-goods company based in Rochester, New Hampshire. On June 30, Year 1, Albany International sold merchandise to its good customer ABC Inc. and accepted a noninterest- bearing note in exchange. The note requires payment of $35,000 on March 31, Year 2. The fair value of the merchandise exchanged is $33,950. Albany International views the financing component of this contract as significant. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required: 1. Please prepare journal entries for Albany International to record the sale of merchandise (please omit any entry that might be required for the cost of the goods sold), any December 31, Year 1 interest accrual, and the March 31, Year 2 collection. 2. What is the effective interest rate on the note? Prepare journal entries to record the sale of merchandise (omit any entry…arrow_forward
- Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCorporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage