Nature Foods Grocery reported the following comparative income statements for the years ended June 30, 2019 and 2018:
|NATURE FOODS GROCERY|
|Years Ended June 30, 2019 and 2018|
Net Sales Revenue
Cost of Goods Sold:
Beginning Merchandise Inventory
Net Cost of Purchases
Cost of Goods Available for Sale
Less: Ending Merchandise Inventory
Cost of Goods Sold
During 2019, Nature Foods Grocery discovered that ending 2018 merchandise inventory was overstated by $5,500.
2. State whether each year’s net income—before your corrections—is understated or overstated, and indicate the amount of the understatement or overstatement.
Overstated amount before correction for 2018: $5,500
Understated amount before correction for 2019: $5,500
Net income for 2018 before correction is $34,000.
But after the correction, the net income amounts to $28,500.
So the net income before the correction was overstated.
Net income for 2019 before correction is $31,000.
But after the correction, the net income amounts to $36,500.
So the net income before the correction was understated.
Right Now Electronic Center began October with 100 units of merchandise inventory that cost $70 each. During October, the store made the following purchases:
Oct. 3 35 units @ $ 82 each
12 45 units @ $ 84 each
18 75 units @ $ 90 each
Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.
3. Which method will result in the lowest income taxes for Right Now? Why? Whichmethod will result in the highest net income for Right Now? Why?
Steel It began January with 55 units of iron inventory that cost $35 each. During January, the company completed the following inventory transactions:
Units Unit Cost Unit Sales Price
Jan. 3 Sale 45 $ 83
8 Purchase 75 $ 52
21 Sale 70 85
30 Purchase 10 55
3. Prepare a perpetual inventory record for the merchandise inventory using theweighted-average inventory costing method.
Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of $4,290. During the month, Fit Gym purchased and sold merchandise on account as follows:
Jan. 5 Purchase 156 crates @ $ 64 each
13 Sale 180 crates @ $ 100 each
18 Purchase 114 crates @ $ 75 each
26 Sale 150 crates @ $ 116 each
2. Prepare a perpetual inventory record, using the LIFO inventory costing method, and determine the company’s cost of goods sold, ending merchandise inventory, and gross profit.
Question: Assume that Toys Galore store bought and sold a line of dolls during December as follows:
Dec. 1 Beginning merchandise inventory 13 units @ $ 9 each
8 Sale 8 units @ $ 22 each
14 Purchase 16 units @ $ 14 each
21 Sale 14 units @ $ 22 each
1. Compute the cost of goods sold, cost of ending merchandise inventory, and grossprofit using the FIFO inventory costing method.
Question: Boston Cycles started October with 12 bicycles that cost $42 each. On October 16, Boston bought 40 bicycles at $68 each. On October 31, Boston sold 34 bicycles for$100 each.
Preparing a perpetual inventory record and journal entries—FIFO
1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theFIFO inventory costing method.
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