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Chapter 5: Q22QS (page 262)

Confucius Bookstore’s inventory is destroyed by a fire on September 5, 2017. The following data for year 2017 are available from the accounting records. Estimate the cost of the inventory destroyed.

Jan 1 Inventory

\(190,000

Jan 1 through Sept 5 purchases (net)

\)352,000

Jan 1 through Sep 5 sales (net)

$685,000

Year 2017 estimated gross profit rate

44%

Short Answer

Expert verified

Inventory of$158,400 was destroyed in the fire.

Step by step solution

01

Step-By-Step SolutionStep 1: Definition of Inventory Destroyed

The value of inventory that was damaged due to any natural disaster or human act is known as destroyed inventory. It is measured as theloss for the business.

02

Calculation of inventory destroyed

Particular

Amount $

Jan 1 Inventory

$190,000

Jan to Sep 5 Purchases

352,000

$542,000

Less: Cost of goods sold

(383,600)

Inventory destroyed

$158,400

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Most popular questions from this chapter

Refer to the information in QS 5-10 and assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the LIFO method. (Round per unit costs and inventory amounts to cents.)

Refer to the information in QS 5-10 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round per unit costs and inventory amounts to cents.)

Use the data and results from Exercise 5-5 to prepare comparative income statements for the month of January for the company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round amounts to cents.)

2. Does net income using weighted average fall above, between, or below that using FIFO and LIFO?

Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes.

2017

2016

LIFO Inventory

\(160

\)110

LIFO Cost of goods sold

740

680

FIFO Inventory

240

110

FIFO Cost of goods sold

660

645

Current assets (Using LIFO)

220

180

Current liabilities

200

170

1. Compute its current ratio, inventory turnover, and days’ sales in inventory for 2017 using (a) LIFO numbers and (b) FIFO numbers. (Round answers to one decimal.)

Question: Comparative figures for Apple and Microsoft follow

\( million
Apple
Microsoft
Current year
One year Prior
Two years prior
Current year
One year Prior
Two years prior

Inventory

\)2,349

\(2,111

\)1,764

\(2,902

\)2,660

$1,938

Cost of Sales

140,089

112,258

106,606

33,038

27,078

20,385

Required

Comment on and interpret your findings from parts 1 and 2. Assume an industry average for inventory turnover of 15.
See all solutions

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