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Chapter 5: Q. 5-9PSB-2 (page 271)

The records of Macklin Co. provide the following information for the year ended December 31.

At cost

At Retail

January 1, Beginning Inventory

\(90,022

\)115,610

Cost of Goods Purchased

502,250

761,830

Sales

782,300

Sales Return

3,460

Required

A year-end physical inventory at retail prices yields a total inventory of $80,450. Prepare a calculation showing the company’s loss from shrinkage at cost and at retail.

Short Answer

Expert verified

Loss from shrinkage totals$12,251.25.

Step by step solution

01

Definition of Retail Price

The price of goods on which it will sell to customers by the retail store is known as the retail price. Such a price is higher than the wholesale price.

02

Loss from Shrinkage

Particular

Amount $

Estimated Inventory at retail

$66,555

Less: Physical inventory

(54,303.75)

Loss from shrinkage

$12,251.25

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Most popular questions from this chapter

When preparing interim financial statements, what two methods can companies utilize to estimate cost of goods sold and ending inventory?

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.)

Date

Activities

Units acquired at cost

Units sold at retail

Jan 1

Beginning inventory

600 units @ \(45.00 per unit

Feb 10

Purchases

400 units @ \)42.00 per unit

March 13

Purchases

200 units @ \(27.00 per unit

March 15

Sales

800 units @ \)75.00 per unit

Aug 21

Purchases

100 units @ \(50.00 per unit

Sep 5

Purchases

500 units @ \)46.00 per unit

Sep 10

Sales

600 units @ $75.00 per unit

Total

1,800 units

1,400 units

Required

Analysis Component

5. If the company’s manager earns a bonus based on a percent of gross profit, which method of inventory costing will the manager likely prefer?

Walberg Associates, antique dealers, purchased the contents of an estate for \(75,000. Terms of the purchase were FOB shipping point, and the cost of transporting the goods to Walberg Associates’s warehouse was \)2,400. Walberg Associates insured the shipment at a cost of \(300. Prior to putting the goods up for sale, they cleaned and refurbished them at a cost of \)980. Determine the cost of the inventory acquired from the estate.

Laker Company reported the following January purchases and sales data for its only product.

Date

Activities

Units acquired at cost

Units sold at retail

Jan 1

Beginning Inventory

140 units @ \(6 = \)840

Jan 10

Sales

100 units @ \(15

Jan 20

Purchases

60 units @ \)5 = 300

Jan 25

Sales

80 units @ \(15

Jan 30

Purchases

180 units @ \)4.50 = 810

Total

380 units for $1,950

180 units

Required

The company uses a perpetual inventory system. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO. (Round per unit costs and inventory amounts to cents.) For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

What guidance does the accounting constraint of conservatism offer?
See all solutions

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