Acct310 week five homework (a+++ work last updated on 18th february)

University of Maryland University College

Intermediate Accounting I

ACCT310

Week Five Homework

Exercises

1.  Andrea Sampri Sporting Goods Store purchases sporting goods merchandise on account from various vendors.

The terms of the purchase are 2/10, n/30. The delivery date and invoice date is May 15, 2015. The amount of the total amount of the invoice is $12,000.

Andrea uses the periodic inventory system and the gross method of recording.

Required:

1)  Record the invoice on May 15, 2015.

2)  Record the payment if payment is made on May 20, 2015.

3)  Record the payment is payment is made on May 30, 2015.

2.  Partial information follows about net sales, net purchases, cost of goods sold, gross profit, total expenses and net income for Jensen Company. Compute the missing values.

Net Sales

Sales                       $2,500,000

Sales discounts                 62,000

Sales returns & allowances           ?

Net sales                   $2,305,000

   Net Purchases

Purchases                      $1,500,000

Freight-in                         65,000

Purchase discounts                      ?

Purchase returns & allowances       8,000

Net purchases                  $1,475,000

  Cost of Goods Sold

Beginning inventory            $  256,300

Ending inventory                  223,600

Cost of goods sold                      ?

  Gross Profit

Gross profit                            ?

  Total Expenses

Rent                          $  108,100

Salaries                         437,200

Utilities                         37,000

Freight-out                            ?

Other                             72,500

Total expenses                $  726,900

  Net Income

Net income                             ?

ACCT310 Week Five Homework Continued: Page 2 of 3

3.  Jill Hansen owns Interior Designs, a furniture store. One of her most popular items is a leather recliner.

Following is the recliner inventory activity for August. The recliners on hand at August 1 had a unit cost of $280.

Required:

1)  If Interior Designs uses the first-in, first-out (FIFO) inventory method and periodic approach, what values would be assigned to ending inventory, cost of goods sold and gross profit?

2)  If Interior Designs uses the last-in, first-out (LIFO) inventory method and periodic approach, what values would be assigned to ending inventory, cost of goods sold and gross profit?

3)  If Interior Designs uses the weighted-average inventory method and periodic approach, what values would be assigned to ending inventory, cost of goods sold and gross profit?

4.  Maverick Equipment Rental was burglarized on 2/15/15. It is unclear how many items were stolen. Maverick and its insurance company are currently working to estimate the dollar value of the stolen goods in order to reach a financial settlement under the existing property insurance policy.

Maverick’s tax return prepared at the end of 2014 revealed that the ended 2014 with a total inventory of $600,000. Maverick uses the same inventory account methods for tax and accounting purposes.

The insurance company has contacted Maverick’s suppliers and confirmed Maverick’s claim that purchases for 2015, prior to the date of the burglary, were $1,200,000. All inventory was purchased, FOB destination.

2015 sales taxes collected by Maverick and remitted to the state, prior to the date of the theft, were $135,000. The sales tax rate is 7% of sales.

An inventory was taken immediately after the burglary and the cost of equipment in stock was $370,000.

Maverick consistently sells equipment at a gross profit margin of 30%.

Required: Use the gross profit method to estimate the dollar value of stolen property.

ACCT310 Week Five Homework Concluded: Page 3 of 3

5.  Determine the missing amounts assuming that this company uses the periodic inventory system.

6.  International Paper adopted the dollar-value LIFO method on January 1, 2015. It’s inventory on January 1, 2015 was $160,000. On December 31, 2015, the inventory at prices existing on that date amounted to $140,000. The price level at January 1, 2015 was 100 and the price level at December 31, 2015 was 112.

Required. Compute the amount of the inventory at December 31, 2015, under the dollar-value LIFO method.

END OF WEEK 5 HOMEWORK