Part A
The accountant of Upton Inc. is concerned about the inventory in its bookstore. A physical count at May 31, 2018 showed that $10,000 inventory (at cost) was on hand. The following information for the year then ended is available
|
At retail |
At cost |
|
|
Sales |
$62,500 |
|
|
Sales returns and allowances |
2,500 |
|
|
Opening inventory |
14,000 |
$10,000 |
|
Purchases |
55,000 |
39,000 |
|
Purchases returns and allowances |
3,000 |
2,000 |
|
Transportation-in |
1,000 |
Required:
- Calculate the estimated ending inventory at retail.
- Calculate the cost percentage.
- Calculate the May 31, 2018 estimated ending inventory at cost, and gross profit.
- Why is the inventory calculated in question 3 different from the physical count at May 31?
Part B
The comptroller of Clooney Corp. is calculating the amount of inventory lost during the year ended May 31, 2018. A physical count was not made at May 31 due to circumstances beyond his control. The following information for the year then ended is available from the general ledger.
|
Sales |
$50,000 |
|
Sales returns and allowances |
5,000 |
|
Opening inventory |
6,000 |
|
Purchases |
35,000 |
|
Purchase returns and allowances |
3,000 |
|
Purchases discounts |
2,000 |
|
Transportation-in |
1,500 |
|
Delivery expense |
1,000 |
|
Utilities expense |
400 |
|
Insurance expense |
100 |
The following are partial income statements of Clooney Corp. for years 2015 to 2017 (amounts are in thousands of dollars):
Required: Using the gross profit method, calculate the May 31, 2018 estimated ending inventory at cost.
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