Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 3, Problem 59P
To determine
Calculate the missing amounts and prepare the T-accounts.
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Mary Potts arrived at her stored on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Accounting record showed that Potts had inventory costing $50,000 on January 1. From January 1 to January 29, Potts had made net sales of $70,000 and net purchase of $80,000. The gross profit during the past several years had consistently averaged 42 percent of net sales. Potts plan to file an insurance claim for the theft loss.
a. Using gross profit method, estimate the cost of inventory at the time of the theft
b. Does Potts use the periodic inventory method or does she account for inventory using the perpetual method? Please could defend your answer.
On 1 September 20X6, a business had inventory of $380,000. During the month, sales totalled
$650,000 and purchases $480,000. On 30 September 20X6 a fire destroyed some of the inventory.
The undamaged goods in inventory were valued at $220,000. The business operates with a standard
gross profit margin of 30%.
Based on this information, what is the cost of the inventory destroyed in the fire?
Quality Move Company made the following expenditures on one of its delivery trucks:
Mar. 20
Replaced the transmission at a cost of $1,720.
June 11
Paid $1,255 for installation of a hydraulic lift.
Nov. 30
Paid $55 to change the oil and air filter.
Prepare journal entries for each expenditure. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTSQuality Move CompanyGeneral Ledger
ASSETS
110
Cash
111
Petty Cash
112
Accounts Receivable
114
Interest Receivable
115
Notes Receivable
116
Merchandise Inventory
117
Supplies
119
Prepaid Insurance
120
Land
123
Delivery Truck
124
Accumulated Depreciation-Delivery Truck
125
Equipment
126
Accumulated Depreciation-Equipment
130
Mineral Rights
131
Accumulated Depletion
132
Goodwill
133
Patents
LIABILITIES
210
Accounts Payable
211
Salaries Payable
213
Sales Tax Payable
214
Interest Payable
215
Notes Payable
EQUITY
310
Owner's…
Chapter 3 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 3 - List and explain four purposes of product costing.Ch. 3 - Explain the difference between job-order and...Ch. 3 - How is the concept of product costing applied in...Ch. 3 - What are the purposes of the following documents:...Ch. 3 - Why is manufacturing overhead applied to products...Ch. 3 - Explain the benefits of using a predetermined...Ch. 3 - Describe one advantage and one disadvantage of...Ch. 3 - Describe an important cost-benefit issue involving...Ch. 3 - Explain the difference between actual and normal...Ch. 3 - When a single, volume-based cost driver (or...
Ch. 3 - Prob. 11RQCh. 3 - Describe the process of two-stage cost allocation...Ch. 3 - Define each of the following terms, and explain...Ch. 3 - Describe how job-order costing concepts are used...Ch. 3 - What is meant by the term cost driver? What is a...Ch. 3 - Describe the flow of costs through a...Ch. 3 - Give an example of how a hospital, such as the...Ch. 3 - Why are some manufacturing firms switching from...Ch. 3 - What is the cause of over applied or under applied...Ch. 3 - Briefly describe two ways of closing out over...Ch. 3 - Describe how a large retailer such as Lowes would...Ch. 3 - Prob. 22RQCh. 3 - For each of the following companies, indicate...Ch. 3 - The controller for Tender Bird Poultry, Inc....Ch. 3 - Finley Educational Products started and finished...Ch. 3 - Bodin Company manufactures finger splints for kids...Ch. 3 - McAllister, Inc. employs a normal costing system....Ch. 3 - Garrett Toy Company incurred the following costs...Ch. 3 - Crunchem Cereal Company incurred the following...Ch. 3 - Prob. 31ECh. 3 - Selected data concerning the past years operations...Ch. 3 - Sweet Tooth Confectionary incurred 157,000 of...Ch. 3 - The following information pertains to Trenton...Ch. 3 - The following data pertain to the Oneida...Ch. 3 - Refer to the data for the preceding exercise for...Ch. 3 - Design Arts Associates is an interior decorating...Ch. 3 - Suppose you are the controller for a company that...Ch. 3 - Laramie Leatherworks, which manufactures saddles...Ch. 3 - Refer to Exhibit 312, which portrays the three...Ch. 3 - Refer to the illustration of overhead application...Ch. 3 - The following data refer to Twisto Pretzel Company...Ch. 3 - Burlington Clock Works manufactures fine,...Ch. 3 - Perfecto Pizza Company produces microwavable...Ch. 3 - Stellar Sound, Inc. which uses a job-order costing...Ch. 3 - Finlon Upholstery, Inc. uses a job-order costing...Ch. 3 - JLR Enterprises provides consulting services...Ch. 3 - Garcia, Inc. uses a job-order costing system for...Ch. 3 - MarineCo, Inc. manufactures outboard motors and an...Ch. 3 - The following data refers to Huron Corporation for...Ch. 3 - Refer to the schedule of cost of goods...Ch. 3 - Marco Polo Map Companys cost of goods sold for...Ch. 3 - Midnight Sun Apparel Company uses normal costing,...Ch. 3 - Marc Jackson has recently been hired as a cost...Ch. 3 - Troy Electronics Company calculates its...Ch. 3 - Tiana Shar, the controller for Bondi Furniture...Ch. 3 - Scholastic Brass Corporation manufactures brass...Ch. 3 - Refer to the preceding problem regarding...Ch. 3 - Prob. 59PCh. 3 - TeleTech Corporation manufactures two different...Ch. 3 - CompuFurn, Inc. manufactures furniture for...Ch. 3 - FiberCom, Inc., a manufacturer of fiber optic...
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- When Mary Potts arrived at her store on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Accounting records showed that Potts had inventory costing $55,000 on January 1. From January 1 to January 28, Potts had made net sales of $77,000 and net purchases of $88,000. The gross profit during the past several years had consistently averaged 43 percent net sales. Potts plans to file an insurance claim for the theft loss. a. Using the gross profit method, estimate the cost of inventory at the time of the theft. Estimated ending inventoryarrow_forwardA fire wiped out Plymouth Paper Company's Inventory. The insurance company will accept an estimate using the retail method Last year's balance sheet stated that the ending inventory was $13,000 and it would usually sell for $38,000 Mr Pichai knows that the cost of purchases was $160,000 and the retail selling prices for the paper totalled $297,000. Credit card receipts indicate that there was $238,000 of sales since the beginning of the year Calculate the cost of the lost ending inventory for the insurance company. (Round the retail ratio to two decimal places and the final answer to the nearest dollar.) The lost ending inventory is $arrow_forwardOn April 15, a bad day in many ways, a fire destroyed the entire inventory of a local retail store, except for patially damaged inventory ($10,000 cost) which was sold as scrap for $5,000 cash. The accounting records indicate the following: Sales Income at selling prices, Jan. 1 to April 15, $360,000 Inventory at cost, Jan. 1, $50,000 Purchases at cost, Jan. 1 to April 15, $280,000 Gross profit is 25% of cost Estimate the dollar loss to be reported to insurance using the gross profit method.arrow_forward
- Cullumber Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $ 49,400. Purchases since January 1 were $ 93,600; freight-in, $ 4,420; purchase returns and allowances, $ 3,120. Sales are made at 33 /3% above cost and totaled $ 156,000 to March 9. Goods costing $ 14,170 were left undamaged by the fire; remaining goods were destroyed.arrow_forwardThe owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following is an excerpt from the final report: Net revenue $ 345,000 Cost of goods sold 304,000 Value of production materials on hand 42,500 Value of work-in-process inventory 49,000 Value of finished goods on hand 18,500 a. Compute the inventory turnover ratio (ITR). (Round your answer to 1 decimal place.) b. Compute the weeks of supply (WS). (Do not round intermediate calculations. Round your answer to 1 decimal place.)arrow_forwardRalph’s Mini-Mart store in Alpine experienced the following events during the current year: 1. Incurred $391,000 in selling costs. 2. Incurred $1,216,000 of administrative costs. 3. Purchased $381,000 of merchandise. 4. Paid $35,000 for transportation-in costs. 5. Took an inventory at year-end and learned that goods costing $202,000 were on hand. This compared with a beginning inventory of $311,000 on January 1. 6. Determined that sales revenue during the year was $2,972,000. 7. Debited all costs incurred to the appropriate account and credited to Accounts Payable. All sales were for cash. Required: Give the amounts for the following items in the Merchandise Inventory account: Beginning Balance = Transfers In = Transfers Out = Ending Balance =arrow_forward
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