The following data are available from the records of a department store for the year ended December 31, Year 1:Using the retail method to approximate valuation at lower of average cost or net realizable value, the department store's merchandise inventory at December 3-1, Year 1 is
Answer(s): D
The version of the retail method that approximates a lower-of-average-cost-or-NRV valuation includes markups but not markdowns in the cost-to-retail ratio_ Thus, the cost of the inventory at December 31. Year 1 is US $5, 600.
An internal auditor performs an analytical procedure to compare the gross margins of various divisional operations with those of other divisions and with the individual division's performance in previous years. The internal auditor notes a significant increase in the gross margin at one division_ The internal auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. The most likely cause of the increase in gross margin is
Answer(s): C
An overstatement of year-end inventory results in an increase in the gross marginsales - cost of sales). Overstating ending inventory understates cost of sales. Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140, 000.The long-term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.
On the year-end financial statements, the company will report cost of goods sold of
Answer(s): A
Cost of goods sold equals begin rag inventory. plus purchases. m us ending inventory. Hence cost of goods sold is US $440, 000$ 140.000 + $530.000 - $230, 000).
ABC Manufacturing Company ships merchandise U s $40.000 on consignment to XYZ Stores. ABC pays US $3, 000 of freight costs to a transport company, and XYZ pays US $2, 000 for local advertising costs that are reimbursable from ABC. By the end of the period the three, fourths of the consigned merchandise has been sold for US $50, 000 cash. XYZ notifies ABC of the sales, retains a 10% commission and the paid advertising costs and remits the cash due ABC. Select the journal entry that appropriately records the notification of sale and the receipt of cash by ABC.
Answer(s): B
ABC debits the cash received US $43, 000 [$50, 000 sales - $2, 000 advertising -$50, 000 $ _10) sales commission]. The advertising and commission expenses are debited for $2, 000 and $5, 000, respectively. Finally, US $50, 000 of gross revenue is credited.
The following facts are presented for an entity that uses the retail inventory method_What is the forgone sales revenue from inventory shrinkage?
The retail inventory method converts ending inventory at retail to cost by applying a cost- retail ratio. The advantage is that a physical inventory can be taken at retail without the necessity of counting individual items at cost. Because this method requires detailed inventory records to be kept at retail, lost sales revenueat retail) caused by inventory shrinkage can be calculated using the following retail data:
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