1. A fire destroys all of the merchandise of Assante Company on February 10, 2020. Presented belo is information compiled up to the date of the fire. Inventory, January 1, 2020 Sales revenue to February 10, 2020 Purchases to February 10, 2020 Freight-in to February 10, 2020 Rate of gross profit on selling price What is the approximate inventory on February 10, 2020? $400,000 1,950,000 1,140,000 60,000 40% 2. Dover Company began operations in 2020 and determined its ending inventory at cost and at LCNRV at December 31, 2020, and December 31, 2021. This information is presented below. 12/31/20 12/31/21 Cost $346,000 410,000 Net Realizable Value $322,000 390,000 Instructions a) Prepare the journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. b) Prepare journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. c) Which of the two methods above provides the higher net income in each year? 3. Each of the following gross profit percentages is expressed in terms of cost. 1.20%. 2.25%. 3.33%. 4.50%. Instructions- Indicate the gross profit percentage in terms of sales for each of the above. 4. Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts Instructions $ 160,000 640,000 30,000 1,000,000 70,000 12,000 a. Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. b. Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost. 5. Tim Legler requires an estimate of the cost of goods lost by fire on March 9, Merchandise on hand on January I was $38,000. Purchases since January I were $72,000; freight-in, $3,400; purchase returns Compiled by Nesredin Y. Page 1

1. A fire destroys all of the merchandise of Assante Company on February 10, 2020. Presented belo is information compiled up to the date of the fire. Inventory, January 1, 2020 Sales revenue to February 10, 2020 Purchases to February 10, 2020 Freight-in to February 10, 2020 Rate of gross profit on selling price What is the approximate inventory on February 10, 2020? $400,000 1,950,000 1,140,000 60,000 40% 2. Dover Company began operations in 2020 and determined its ending inventory at cost and at LCNRV at December 31, 2020, and December 31, 2021. This information is presented below. 12/31/20 12/31/21 Cost $346,000 410,000 Net Realizable Value $322,000 390,000 Instructions a) Prepare the journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. b) Prepare journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. c) Which of the two methods above provides the higher net income in each year? 3. Each of the following gross profit percentages is expressed in terms of cost. 1.20%. 2.25%. 3.33%. 4.50%. Instructions- Indicate the gross profit percentage in terms of sales for each of the above. 4. Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 Purchases (gross) Freight-in Sales revenue Sales returns Purchase discounts Instructions $ 160,000 640,000 30,000 1,000,000 70,000 12,000 a. Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. b. Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost. 5. Tim Legler requires an estimate of the cost of goods lost by fire on March 9, Merchandise on hand on January I was $38,000. Purchases since January I were $72,000; freight-in, $3,400; purchase returns Compiled by Nesredin Y. Page 1

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 10E: Gross Profit Method: Estimation of Theft Loss You are requested by a client on September 28 to...

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