Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Chapter 5, Problem 2C
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Explain the concept of materiality, state the reason for which the inventory loss concern management more that it does the auditors and explain whether the amount of inventory loss is considered to be material.
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Lily Company needs to determine the amount of inventory in its warehouse at the time that an earthquake destroyed
it. Lily's gross profit percentage averaged 27% over the last three years. Lily began the current year with inventory of
$840,000. Its net purchases were $4,387,000 and net sales were $3,970,000 during the year before the earthquake
occurred. Use the gross profit method to estimate the inventory on hand on the date of the earthquake.
Identify the appropriate formula and then calculate Lily's estimated ending inventory.
Estimated ending inventory
!!
HAKDOG Company suspects that there is missing inventory in its warehouse at December 31, 2021. All sales and purchases were made on account. Also, the gross profit rate based on net sales is consistent every year. To aid in your investigation, you obtained the following:
How much is the net purchases during the year?
Adams Corporation estimates that it lost $187,200 in inventory from a recent flood. The following information is available from the records of the company's periodic inventory system: beginning inventory, $330,000; purchases and net sales from the beginning of the year through the date of the flood, $570,000 and $880,000, respectively. a. What is the company's gross profit ratio? b. What is the gross profit ratio?
Chapter 5 Solutions
Principles of Accounting
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 1SECh. 5 - Prob. 2SECh. 5 - Tell whether each of the following accounts is a...
Ch. 5 - Prob. 4SECh. 5 - Prob. 5SECh. 5 - Prob. 6SECh. 5 - Prob. 7SECh. 5 - The lettered items that follow represent a...Ch. 5 - Each of the statements that follow violates one or...Ch. 5 - The lettered items that follow represent a...Ch. 5 - Prob. 4EACh. 5 - Prob. 5EACh. 5 - Prob. 6EACh. 5 - Prob. 7EACh. 5 - Prob. 8EACh. 5 - Prob. 1PCh. 5 - The information that follows is from Jasons...Ch. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5APCh. 5 - The information that follows is from Matts...Ch. 5 - Prob. 7APCh. 5 - The information that follows is from Rodriguezs...Ch. 5 - Prob. 1CCh. 5 - Prob. 2CCh. 5 - Prob. 3CCh. 5 - Prob. 4CCh. 5 - Prob. 5C
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- CJ Company suspects that there is missing inventory in its warehouse at December 31, 2021. All sales and purchases were made on account. Also, the gross profit rate based on net sales is consistent every year. To aid in your investigation, you obtained the following: How much is the missing inventory during the year?arrow_forwardThe financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as follows. 1. The beginning merchandise inventory was $92,000 and decreased 20% during the current year. 2. Sales discounts amount to $17,000. 3. 20,000 shares of common stock were outstanding for the entire year. 4. Interest expense was $20,000. 5. The income tax rate is 30%. 6. Cost of goods sold amounts to $500,000. 7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. 8. Four-fifths of the operating expenses relate to sales activities. Instructions From the foregoing information prepare an income statement for the year 2020 in single-step form.arrow_forwardThe financial records of Dream Inc. were destroyed by fire at the end of 2020. Selected information gathered are the following: Inventory on January 1 was P92,000 and decreased by 20% during the year. Sales discount amounted to P17,000. Interest expense is P20,000. Cost of sales is P500,000. Administrative expenses amounted to 20% of cost of sales but only 8% of gross sales. Two thirds of operating expenses relate to sales activities. The company is subject to 30% income tax. How much is the net income (net loss) during 2020?arrow_forward
- Gecelle Company reported during the current year beginning inventory P500,000, net purchasesP2,500,000 and net sales P3,200,000. A physical count at year-end resulted in an inventory of P575,000.The gross profit on sales had remained constant at 25%. The entity suspected that sme inventory mayhave been taken by a new employee.What is the estimated cost of missing inventory at year-end?arrow_forwardTristan, Inc., uses the LIFO cost-flow assumption to value inventory. It began the current year with 2,000 units of inventory carried at LIFO cost of $20 per unit. During the first quarter, it purchased 8,000 units at an average cost of $40 per unit and sold 9,500 units at $60 per unit.Assume the company does not expect to replace the units of beginning inventory sold; it plans to reduce inventory by year-end to 500 units. What amount of cost of goods sold should be recorded for the quarter ended March 31?a. $335,000b. $350,000c. $380,000d. $387,500arrow_forwardMarshall Tool and Die Company has been experiencing significant foreign competition and a declining market. Annual net losses from operations have averaged $250,000 over the last three years. The company’s balance sheet as of December 31, 2015, is as attached:After analyzing accounts receivable and inventory, it has been determined that the allowance for uncollectibles should be increased by $75,000 and the inventory should be written down by $20,000. Based on recent appraisals, it is estimated that the plant and equipment have a market value of $1,285,000. The goodwill is traceable to the purchase of a small tooling company in 2011. Based on an analysis of cash flows associated with that acquisition, it is estimated that the goodwill has an impaired value of $0. Other assets represent a note receivable from officers of the corporation. The note calls for five annual payments of $8,309 including interest at the rate of 6%.In response to the current situation, the company has decided to…arrow_forward
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