INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 9.11E
Gross profit method
• LO9–2
Royal Gorge Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of October was $58,500. The following information for the month of November was available from company records:
| Purchases | $110,000 |
| Freight-in | 3,000 |
| Sales | 180,000 |
| Sales returns | 5,000 |
| Purchases returns | 4,000 |
In addition, the controller is aware of $8,000 of inventory that was stolen during November from one of the company’s warehouses.
Required:
1. Calculate the estimated inventory at the end of November, assuming a gross profit ratio of 40%.
2. Calculate the estimated inventory at the end of November, assuming a markup on cost of 100%.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Problem 14-16 (PHILCPA Adapted)
Calapan Company provided the following data:
January 1 December 31
1,200,000
1,600,000
5,500,000
Inventory
Cost of goods sold
Accounts receivable
Accounts payable
1,200,000
1,350,000
1,500,000
1,850,000
During the current year, accounts written off amounted to
P100,000. Sales returns with credit memo totaled P250,000.
Cash refund to customers for returned goods of P50,000 was
debited to accounts receivable.
Cash receipts from customers after P500,000 sales discounts
amounted to P8,000,000.
Cash payments to trade creditors totaled P5,000,000 after
purchase discounts of P200,000. Purchase returns with debit
memo amounted to P400,000.
1. Under accrual basis, what amount should be reported
as gross sales?
a. 8,900,000
b. 8,950,000
c. 8,250,000
d. 8,850,000
2. Under accrual basis, what amount should be reported
as gross purchases?
a. 5,250,000
b. 5,950,000
c. 5,750,000
d. 5,650,000
3. What amount should be reported as cost of goods sold
under accrual basis?…
QUESTION 6
Use the following information to calculate Bead It, Inc.'s Cost of Goods Sold for the year. Note: All purchases of inventory are on
account.
January 1 Inventory
$8,000
December 31 Inventory
15,000
Sales during the year
68,000
December 31 Accounts Payable
18,000
Purchases of Inventory on Account during the year
36,000
Cost of Goods Sold for the year = $_
1
Decrease in inventory $375Decrease in accounts payable 190Increase in notes payable 210Increase in accounts receivable 10510. Calculating Average Payables Period [LO2] Tortoise, Inc., had a cost of goodssold of $28,834. At the end of the year, the accounts payable balance was $6,105.How long on average did it take the company to pay off its suppliers during theyear? What might a large value for this ratio imply?
Chapter 9 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - It is discovered in 2018 that ending inventory in...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Dollar-value LIFO retail LO95 This exercise is a...Ch. 9 - Change i n inventory costing methods LO96 In...Ch. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Inventory error LO97 In 2018, Winslow...Ch. 9 - Inventory error LO97 Refer to the situation...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or net realizable value LO91 Tatum...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Gross profit method LO92 Royal Gorge Company uses...Ch. 9 - Prob. 9.12ECh. 9 - Retail inventory method; average cost LO93 San...Ch. 9 - Prob. 9.14ECh. 9 - Retail inventory method; LIFO LO93 Crosby Company...Ch. 9 - Prob. 9.16ECh. 9 - Conventional retail method; employee discounts ...Ch. 9 - Retail inventory method; solving for unknowns ...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Prob. 9.20ECh. 9 - Dollar-value LIFO retail LO95 Lance-Hefner...Ch. 9 - Prob. 9.22ECh. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Prob. 9.24ECh. 9 - Error correction; inventory error LO97 During...Ch. 9 - Prob. 9.26ECh. 9 - Inventory error LO97 In 2018, the internal...Ch. 9 - Inventory errors LO97 In 2018, the controller of...Ch. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.30ECh. 9 - Prob. 9.31ECh. 9 - Lower of cost or net realizable value LO91 Decker...Ch. 9 - Prob. 9.2PCh. 9 - Lower of cost or market LO91 Forester Company has...Ch. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Retail inventory method; conventional and LIFO ...Ch. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Dollar-value LIFO retail method LO95 [This is a...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Prob. 9.14PCh. 9 - Inventory errors LO97 You have been hired as the...Ch. 9 - Inventory errors LO97 The December 31, 2018,...Ch. 9 - Integrating problem; Chapters 8 and 9; inventory...Ch. 9 - Purchase commitments Appendix In November 2018,...Ch. 9 - Judgment Case 91 Inventoriable costs; lower of...Ch. 9 - Integrating Case 93 FIFO and lower of cost or net...Ch. 9 - Prob. 9.4BYPCh. 9 - Prob. 9.5BYPCh. 9 - Prob. 9.6BYPCh. 9 - Prob. 9.7BYPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9BYPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Ethics Case 911 Overstatement of ending inventory ...Ch. 9 - Analysis Case 912 Purchase commitments Appendix...Ch. 9 - Continuing Cases Target Case LO93, LO94, LO95...Ch. 9 - Prob. 1CCIFRS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Account Company X Company Y Company Z Cost of goods sold $4,270,000 $8,972,500 $6,778, 000 Inventory $ 504,000 $ 747,000 $ 633,600 What is the average number of days to sell inventory for Company Y? Note: Do not round your intermediate calculations. Use 365 days in a year. Multiple Choice 43.1 30.4 34.1 12.0arrow_forwardProblem 10-6 (IAA) / Autumn Company provided the following transactions for the current year, the first year of operations. 1. Purchase of merchandise at an invoice price of P4,750,000 excluding freight. Terms are 2/10; n /30. 2. Freight paid, P250,000. The freight is allocated to each purchase. 3. Cash payment on purchases, P3,717,000, of which P1,617,000 was paid within the discount period. 4. It is expected that all discounts on unpaid accounts payable will be lost. 5. On December 31, one fifth of the merchandise remains on hand. Required: a. Prepare journal entries to record the transactions using gross method and net method. b. Compute inventory and cost of sales under each method.arrow_forwardProblem 13-7 (AICPA Adapted) Fearless Company began operations at the beginning of current year. The following information is available for the current year: Total merchandise purchases Ending inventory Collections from customers 7,000,000 1,400,000 4,000,000 All merchandise is marked to sell at 40% above cost. All sales are credit sales and all accounts are collectible. What is the balance of accounts receivable at year-end? a. 1,600,000 b. 2,440,000 c. 3,000,000 d. 3,840,000arrow_forward
- ADJUSTMENTS a.-b. Merchandise inventory on December 31, 20X1, is $13,321 c. During 20X1, the firm had net credit sales of $45,000; the firm estimates that 0.5 percent of these sales will result in uncollectible accounts. d. On December 31, 20X1, an inventory of the supplies showed that items costing $325 were on hand. e. On October 1, 20X1, the firm signed a six-month advertising contract for $1,080 with a local newspaper and paid the full amount in advance. f. On January 2, 20X0, the firm purchased store equipment for $8,700. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $700. g. On January 2, 20X0, the firm purchased office equipment for $2,200. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $300. h. On December 31, 20X1, the firm owed salaries of $1,930 that will not be paid until 20X2 i. On December 31, 20X1, the firm owed the employer's social security tax (assume 6.2…arrow_forwardProblem 13 Four Company, which maintains it inventory using the perpetual system, had the followingbalances at the end of the year: Cost of Goods Sold 4,500,000Net Sales 6,000,000Inventory 1,200,000Accounts Payable 3,000,000Accounts Receivable 4,000,000 Compute the adjusted balances of the above items after considering the following information:-Four consigned to Ellie, at the beginning of December 2020, goods costing P100,000 andpaid freight of P5,000. The relevant commission is 5% of the selling price of P200,000. Bythe end of the year, Ellie has not remitted yet any of the sales but reported on January 5,2021 that by December 31, 2020, all of the goods were sold. The said inventory wasincluded in the physical count of the company.- The company sold on FOB shipping point goods costing P200,000 at selling price which is150% of cost on December 29, 2020, sale was recognized on the said date, and goodswere excluded from the inventory count. It was later found out that said goods were…arrow_forwardE6-21 Analyzing Gross Profit Percentage on the Basis of a Multi-step Income Statement [LO6-5] The following summarized data were provided by the records of Mystery Incorporated for the year ended December 31: Administrative Expense $ 19,000 Cost of Goods Sold 165,000 Income Tax Expense 17,600 Sales Returns and Allowances 7,000 Selling Expense 40,200 Sales of merchandise for cash 240,000 Sales of merchandise on credit 42,000 Required:1. Based on these data, prepare a multi-step income statement for internal reporting purposes. 2-a. What was the amount of gross profit? 2-b. What was the gross profit percentage? 2-c. Which of the following(s) is true? (Select all that apply.) E6-21 Analyzing Gross Profit Percentage on the Basis of a Multi-step Income Statement [LO6-5] The following summarized data were provided by the records of Mystery Incorporated for the year ended December 31:…arrow_forward
- Question 4 The New EV Truck Company has an operating cycle of 48 days, an accounts receivable period of 30 days and an accounts payable period of 17 days. The inventory period is [Select] ✓ days and the cash cycle is [Select] V [Select] days. Given a Cost of Goods sold expense of $227, 500 and Credit sales of $ 650,000, the average Accounts Payable balance is $ [Select] and the average inventory balance is $ 16 pts The New EV Truck Company has an operating cycle of 48 days, an accounts receivable period of 30 days and an accounts payable period of 17 days. The inventory period is days and the cash cycle is days. Given a Cost of Goods sold expense of \(\$ 227, 500 \) and Credit sales of \( \$ 650,000 \), the average Accounts Payable balance is \S and the average inventory balance is \(\$ \)arrow_forward3 6 02:20:34 ipped Book Hint Print erences Consider the following financial statement information for the Newk Corporation: Item Beginning $ 10,500 Inventory Accounts receivable 5,500 7,700 Accounts payable Credit sales Cost of goods sold $ 85,000 65,000 Operating cycle Cash cycle Calculate the operating and cash cycles. (Use 365 days a year. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Ending $ 11,500 5,800 8,100 days daysarrow_forwardRequired information E6-17 Analyzing Gross Profit Percentage on the Basis of a Multistep Income Statement [LO 6-6] [The following information applies to the questions displayed below.] The following data were provided by Mystery Incorporated for the year ended December 31: Cost of Goods Sold $ 175,000 Income Tax Expense 20,700 Merchandise Sales (gross revenue) for Cash 260,000 Merchandise Sales (gross revenue) on Credit 46,000 Office Expenses 20,000 Sales Returns and Allowances 7,650 Salaries and Wages Expense 44,200 E6-17 Part 1 Required: Prepare a multistep income statement.arrow_forward
- 20.13 A sole trader who does not keep full accounting records wishes to calculate her sales revenue for the year. The information available is: Opening inventory Closing inventory $17,000 $24,000 $91,000 1 2 3 Purchases 4 Standard gross profit percentage on sales revenue 40% Which of the following is the sales figure for the year calculated from these figures?arrow_forwardProblem C- Use the following information to answer questions below: Account Name Debit Credit Sales 750,000 Sales Returns and Allowances 15,000 Sales Discounts 10,000 Purchases 170,000 Purchases Returns and Allowances 20,000 Freight In 30,000 Operating Expenses 350,000 In Addition, beginning merchandise inventory was P55,000 and ending merchandise inventory was P35,000. 1. Cost of goods sold for the period was а. Р235,000 с. Р200,000 b. P160,000 d. P170,000 2. Profit for the period was a. P525,000 C. P250,000 b. P450,000 d. P175,000arrow_forwardChapter 9 - Merchandising Business: End of Period Adjustments and Completion of the Accounting Cycle E9-8 Sales Gross Profit Beginning Inventory Net Purchases Cost of goods sold Sales ret & allow Ending inventory Net sales E9-9 1 Required: Solve for the missing items in the partial income statements given below: 3 Sales 2 126,000 356 2009 100,000 5,000 6,000 80,000 70,000 80,000 90,000 70,000 6,000 Sales Net returns 2010 120,000 65,000 117,000 264,800 2011 150,000 44,000 Required: Determine the missing amounts. 120,000 85,000 144,000 2012 160,000 39,000 85,000 100,000 Beg Net Ending Sales Inventory Purchases Inventory 80,000 24,000 130,000 150,000 48,000 145,000 46,500 38,000 2013 167,000 62,800 186,200 18,000 75,000 165,000 135,000 Gross Cost of Goods Profit Sold (Loss) 18,000 ||arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
The ACCOUNTING EQUATION For BEGINNERS; Author: Accounting Stuff;https://www.youtube.com/watch?v=56xscQ4viWE;License: Standard Youtube License