Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Chapter 6, Problem 6.41BE
To determine
The estimated cost of inventory destroyed by fire.
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(Learning Objective 5: Use the COGS model to make management decisions)Sokol Antiques, Inc., began June with inventory of $48,400. The business made net purchasesof $51,300 and had net sales of $104,000 before a fire destroyed the company’s inventory. Forthe past several years, Sokol’s gross profit percentage has been 35%. Estimate the cost of theinventory destroyed by the fire. Identify another reason that owners and managers use the grossprofit method to estimate inventory.
On 1 September 20X6, a business had inventory of $380,000. During the month, sales totalled
$650,000 and purchases $480,000. On 30 September 20X6 a fire destroyed some of the inventory.
The undamaged goods in inventory were valued at $220,000. The business operates with a standard
gross profit margin of 30%.
Based on this information, what is the cost of the inventory destroyed in the fire?
(Learning Objective 2: Compare gross profit—FIFO vs. LIFO—falling prices)Suppose a Walmart store in Fillmore, Missouri, ended January 2018 with 900,000 units ofmerchandise that cost $5 each. Suppose the store then sold 50,000 units for $510,000 duringFebruary. Further, assume the store made two large purchases during February as follows:Feb 10 10,000 units @ $3.10 = $31,00021 25,000 units @ $2.20 = $55,000Requirements1. Calculate the store’s gross profit under both FIFO and LIFO at February 28.2. What caused the FIFO and LIFO gross profit figures to differ?
Chapter 6 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 6 - Ravenna Candles recently purchased candleholders...Ch. 6 - Which inventory system maintains a running record...Ch. 6 - How is cost of goods sold classified in the...Ch. 6 - Snyders total cost of goods available for sale...Ch. 6 - Snyders cost of goods sold using the average-cost...Ch. 6 - Snyders ending inventory using the FIFO method...Ch. 6 - Snyders cost of goods sold using the LIFO method...Ch. 6 - Which U.S. GAAP principle or rule would apply if...Ch. 6 - Corrigan Corporation had beginning inventory of...Ch. 6 - Corrigans gross profit for the period is a.79,000....
Ch. 6 - What is Corrigans gross profit percentage (rounded...Ch. 6 - Prob. 12QCCh. 6 - A companys beginning inventory is 150,000, its net...Ch. 6 - An understatement of ending inventory by 2 million...Ch. 6 - Prob. 6.1ECCh. 6 - LO 1 (Learning Objective 1: Show how to account...Ch. 6 - LO 1 (Learning Objective 1: Show how to account...Ch. 6 - LO 1 (Learning Objective 1: Show how to account...Ch. 6 - (Learning Objective 2: Apply the average-cost,...Ch. 6 - (Learning Objective 2: Compare income tax effects...Ch. 6 - LO 2 (Learning Objective 2: Apply the average-cost...Ch. 6 - (Learning Objective 2: Apply the FIFO method)...Ch. 6 - (Learning Objective 2: Apply the LIFO method)...Ch. 6 - (Learning Objective 2: Compare income, tax, and...Ch. 6 - LO 3 (Learning Objective 3: Apply the...Ch. 6 - (Learning Objective 4: Compute ratio data to...Ch. 6 - (Learning Objective 5: Estimate ending inventory...Ch. 6 - (Learning Objective 6: Analyze the effect of an...Ch. 6 - Prob. 6.14SCh. 6 - LO 1,2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO 1,2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO 2 (Learning Objective 2: Compare ending...Ch. 6 - (Learning Objective 2: Compare the tax advantage...Ch. 6 - Prob. 6.19AECh. 6 - LO 2 (Learning Objective 2: Compare ending...Ch. 6 - LO 2 (Learning Objective 2: Compare gross...Ch. 6 - Prob. 6.22AECh. 6 - LO 5 (Learning Objective 5: Compute cost of goods...Ch. 6 - Prob. 6.24AECh. 6 - LO 4 (Learning Objective 4: Compute and evaluate...Ch. 6 - LO 5 (Learning Objective 5: Use the COGS model to...Ch. 6 - LO 5 (Learning Objective 5: Use the COGS model to...Ch. 6 - LO 6 (Learning Objective 6: Analyze the effect of...Ch. 6 - LO 1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO 1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - Prob. 6.32BECh. 6 - LO 2 (Learning Objective 2: Apply the average,...Ch. 6 - Prob. 6.34BECh. 6 - Prob. 6.35BECh. 6 - Prob. 6.36BECh. 6 - Prob. 6.37BECh. 6 - Prob. 6.38BECh. 6 - Prob. 6.39BECh. 6 - Prob. 6.40BECh. 6 - Prob. 6.41BECh. 6 - Prob. 6.42BECh. 6 - Prob. 6.43QCh. 6 - Prob. 6.44QCh. 6 - Prob. 6.45QCh. 6 - The word market as used in the lower of cost or...Ch. 6 - Prob. 6.47QCh. 6 - Prob. 6.48QCh. 6 - Prob. 6.49QCh. 6 - In a period of rising prices, a.cost of goods sold...Ch. 6 - Prob. 6.51QCh. 6 - The following data come from the inventory records...Ch. 6 - Prob. 6.53QCh. 6 - Prob. 6.54QCh. 6 - Prob. 6.55QCh. 6 - Prob. 6.56QCh. 6 - Prob. 6.57QCh. 6 - Prob. 6.58QCh. 6 - Prob. 6.59QCh. 6 - LO 1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - Prob. 6.61APCh. 6 - LO 2 (Learning Objective 2: Compare inventory by...Ch. 6 - LO 2 (Learning Objective 2: Compare various...Ch. 6 - Prob. 6.64APCh. 6 - (Learning Objective 4: Compute and evaluate gross...Ch. 6 - LO 4, 5 (Learning Objectives 4, 5: Compute gross...Ch. 6 - Prob. 6.67APCh. 6 - Prob. 6.68APCh. 6 - Prob. 6.69BPCh. 6 - LO 2 (Learning Objective 2: Apply various...Ch. 6 - Prob. 6.71BPCh. 6 - LO 2 (Learning Objective 2: Compare various...Ch. 6 - LO 3 (Learning Objective 3: Explain GAAP and apply...Ch. 6 - Prob. 6.74BPCh. 6 - Prob. 6.75BPCh. 6 - LO 5 (Learning Objective 5: Use the COGS model to...Ch. 6 - Prob. 6.77BPCh. 6 - Prob. 6.78CEPCh. 6 - Prob. 6.79CEPCh. 6 - Prob. 6.80CEPCh. 6 - Prob. 6.81CEPCh. 6 - Prob. 6.82SCCh. 6 - Prob. 6.83DCCh. 6 - Prob. 6.85EICCh. 6 - Prob. 1FFCh. 6 - Prob. 1FA
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- On 1st Nov 2020, a business had inventory of $380,000. During the month, sales totalled $650,000 and purchases $480,000. On 30th Nov 2020 a flood destroyed some of the inventory. The undamaged goods in inventory were valued at $220,000. The business operates with a standard gross profit margin of 25%.Based on this information, what is the cost of the inventory destroyed in the flood?arrow_forward(Learning Objective 2: Compare gross profit—FIFO vs. LIFO—falling prices)Suppose a Target store in Chicago, Illinois, ended November 2018 with 500,000 units of merchandise that cost $8.00 each. Suppose the store then sold 110,000 units for $960,000 duringDecember. Further, assume the store made two large purchases during December as follows:Dec 8 35,000 units @ $6.10 = $213,50028 50,000 units @ $5.20 = $260,000Requirements1. Calculate the store’s gross profit under FIFO and LIFO at December 31.2. What caused the FIFO and LIFO gross profit figures to differ?arrow_forwardE-LEARNING COST ACCOUNTING ASSIGNMENT Answer all the THREE Questions. 1 Mr Gardens, the financial controller of Sugarland Ltd, accidentally tossed the company's cost records into a wastebasket which had been light .On realising that mistake, he rushed to the roaring blaze and managed to retrieve only a few of the records. From the salvaged records, he managed to determine the following facts about the current year 2020: (i) Sales totaled sh 1,000,000 during 2020. (ii) The beginning inventories for the year were: work in progress sh 120,000; Finished goods sh 60,000. (iii) There were no closing inventories of raw materials. (iv) Direct labor is equal to 25% of conversion cost; direct, labor is also equal to 40% of prime cost. (v) The work in progress inventory decreased by sh 20,000 during the year. (vi)Gross margin during the year was 55% of sales. (vii) Manufacturing overheads amounted to sh 240,000 in the year. (iv) Administrative expenses for 2014 were twice as great as net income…arrow_forward
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- Having gone through the principles II class, imagine you are an intern at Floro agro florists and its end year. The Warehouse Manager is overwhelmed with work and realizes that you can just be the perfect person to help him with inventory-related issues after he realizes a glitch in some year's records. The information for the years in question has been provided as follows; 2018 2019 2020 Current Assets = 1,000 1,250 1,750 Non-Current Assets = 5,000 6,250 8,750 Total Assets = 6,000 7,500 10,500 Long term Liabilities = 2,000 2,500 3,500 Revenue = 1,000 1,250 1,750 Cost of Sales 40% on cost for all the Years Assume that ending Inventory was overstated by K1, 500 in 2018 and Understated by K10, 000 ends of 2019. Required a. Calculate the Cost of goods sold for the years 2018, 2019, and 2020 b. Calculate the Owners Equity value for the…arrow_forwardSheffield, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $550 and originally retailed for $940. At the statement date, each computer has a current replacement cost of $350. How much loss should Sheffield, Inc., record for the year? $4400. $1600. $2800. $2200.arrow_forwardOn October 31, 2010, a flood at Pamela Company’s only warehouse caused severe damage to its entire inventory. Based on the recent history, Pamela has a gross profit of 25 percent of sales. The following information is available from Pamela’s records for ten months ended October 31, 2010: Inventory, January 1 520,000 Purchases 4,120,000 Purchase returns 60,000 Sales 5,600,000 Sales returns 400,000 Sales allowances 100,000 Using the gross profit method, what is the estimated cost of goods sold for the ten months ended October 31, 2010?arrow_forward
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