Scribd
Upload
83 views

Basic Inventory Calculations

Here is a multiple-step income statement for Byrne Industries for the year ended December 31, 2002: Net Sales $600,000 Less: Sales Returns and Allowances 30,000 Net Sales $570,000 Add: Interest Revenue 2,700 Total Revenues $572,700 Cost of Goods Sold $275,000 Gross Profit $297,700 Operating Expenses: Wages Expense $67,500 Selling Expense 60,000 Amortization Expense - Store Equipment 16,000 Freight Out 6,000 Total Operating Expenses $

Uploaded by

Longtan Jing
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
83 views

Basic Inventory Calculations

Here is a multiple-step income statement for Byrne Industries for the year ended December 31, 2002: Net Sales $600,000 Less: Sales Returns and Allowances 30,000 Net Sales $570,000 Add: Interest Revenue 2,700 Total Revenues $572,700 Cost of Goods Sold $275,000 Gross Profit $297,700 Operating Expenses: Wages Expense $67,500 Selling Expense 60,000 Amortization Expense - Store Equipment 16,000 Freight Out 6,000 Total Operating Expenses $

Uploaded by

Longtan Jing
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

PART I— BASIC INVENTORY CALCULATIONS (10 points)

Ruxton Company, which uses a periodic inventory system, had a beginning inventory on May 1,
of 400 units of Product A at a cost of $14 per unit. During May, the following purchases and
sales were made.

Purchases Sales
May 6 375 units at $18 May 4 275 units
14 250 units at $20 8 350 units
21 300 units at $22 17 400 units
28 425 units at $26 24 225 units
1,350 1,250

Instructions: Calculate the May 31 ending inventory and May cost of goods sold under (a)
Average Cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting calculations.

(a) Average – Ending Inventory = $_________; Cost of Goods Sold = $_________.

(b) FIFO – Ending Inventory = $_________; Cost of Goods Sold = $_________.

(c) LIFO – Ending Inventory = $_________; Cost of Goods Sold = $_________.


PART II — CLOSING ENTRIES (10 points)
Below is a partial listing of accounts in the general ledger of Carey Co. Carey uses a periodic
inventory system.

Instructions: Place an X in the appropriate column to designate whether the account should
be closed at year end and, if so, whether the appropriate closing entry would require a debit or
credit to the account.
——————————————————————————————————————————
—
Not Closed
Account Closed Debit Credit
——————————————————————————————————————————
—
1. Purchase Returns and Allowances................................... _____ _____ _____

2. Freight In........................................................................... _____ _____ _____

3. Sales................................................................................. _____ _____ _____

4. Merchandise Inventory (Ending)....................................... _____ _____ _____

5. Sales Returns and Allowances.......................................... _____ _____ _____

6. H. Carey, Drawings........................................................... _____ _____ _____

7. Freight Out........................................................................ _____ _____ _____

8. H. Carey, Capital .............................................................. _____ _____ _____

9. Merchandise Inventory (Beginning).................................. _____ _____ _____

10. Cash................................................................................. _____ _____ _____

INVENTORY: SHORT PROBLEMS (15 points)


Instructions: Complete the requirements specified for each of the following independent
situations.

A. A major portion of Gwynn Furniture Sales was destroyed by fire. Accounting records
provide the following information:

Sales $200,000 Purchases $140,000


Sales Returns and Allowances 25,000 Purchases Returns and Allowances 6,000
Beginning Inventory 30,000 Freight In 19,000

Assuming a gross profit rate of 40% on net sales and that undamaged inventory is
appropriately valued at $25,000, calculate the cost of the merchandise destroyed by the
fire.
B. Karros Co. uses the retail inventory method. Given the following information, calculate the
ending inventory at cost.
Cost Retail
Beginning Inventory $25,000 $ 35,000
Purchases 95,000 125,000
Sales 110,000
Sales Returns and Allowances 10,000

C. Witt Company uses the lower of cost and market (LCM) basis for its inventory. The
following information relates to its December 31, 2001 inventory. Prepare the journal entry
to record the inventory at LCM, assuming the company applies LCM to total inventory.

December 31, 2001


Product Units Unit Cost Market
A 240 $15 14
B 250 24 21
C 300 16 18
D 125 30 28
E 150 12 14
MULTIPLE-STEP INCOME STATEMENT (14 Points)

Instructions: Use the following Income Statement to prepare a correct multiple-step income
statement.

BYRNE INDUSTRIES
Income Statement
For the Year Ended December 31, 2002

Revenues
Net sales (sales returns and allowances — $30,000) $600,000
Interest revenue 2,700

Cost of goods sold 275,000

Wages expense 67,500


Selling expense 60,000
Amortization expense — store equipment 16,000
Freight out 6,000
Interest expense 12,300
Loss on sale of equipment 4,800
Net income $161,100

You might also like