CC7-1 Accounting for Changing Inventory Costs [LO7-3, LO7-5] In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory. On December 31, NGS purchased 10 units at a total cost of $7.00 per unit. NGS purchased 30 more units at $9.00 in February, but returned 5 defective units to the supplier. In March, NGS purchased 15 units at $11.00 per unit. In May, 50 units were purchased at $11.00 per unit; however, NGS took advantage of a 2.00/10, n/30 discount from the supplier. In June, NGS sold 50 units at a selling price of $12.20 per unit and 35 units at $10.20 per unit. Required: 1. State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed. Inventory cost Immediately expensed 2. Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate calculations. Round final answers to the nearest dollar amount.) Cost of goods available for sale Cost of goods sold Cost of ending inventory 3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31 as the beginning inventory. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Inventory turnover ratio times
CC7-1 Accounting for Changing Inventory Costs [LO7-3, LO7-5] In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory. On December 31, NGS purchased 10 units at a total cost of $7.00 per unit. NGS purchased 30 more units at $9.00 in February, but returned 5 defective units to the supplier. In March, NGS purchased 15 units at $11.00 per unit. In May, 50 units were purchased at $11.00 per unit; however, NGS took advantage of a 2.00/10, n/30 discount from the supplier. In June, NGS sold 50 units at a selling price of $12.20 per unit and 35 units at $10.20 per unit. Required: 1. State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed. Inventory cost Immediately expensed 2. Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate calculations. Round final answers to the nearest dollar amount.) Cost of goods available for sale Cost of goods sold Cost of ending inventory 3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31 as the beginning inventory. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Inventory turnover ratio times
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
Do not answer in image format
![CC7-1 Accounting for Changing Inventory Costs [LO7-3, LO7-5]
In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of
cosmetic items. The trouble of ordering and tracking each product line had exceeded
the profits earned. In December, a supplier asked her to sell a prepackaged spa kit.
Feeling she could manage a single product line, Nicole agreed. NGS would make
monthly purchases from the supplier at a cost that included production costs and a
transportation charge. The spa would use a perpetual inventory system to keep track of
its new inventory.
On December 31, NGS purchased 10 units at a total cost of $7.00 per unit. NGS
purchased 30 more units at $9.00 in February, but returned 5 defective units to the
supplier. In March, NGS purchased 15 units at $11.00 per unit. In May, 50 units were
purchased at $11.00 per unit; however, NGS took advantage of a 2.00/10, n/30 discount
from the supplier. In June, NGS sold 50 units at a selling price of $12.20 per unit and 35
units at $10.20 per unit.
Required:
1. State whether the transportation cost included in each purchase should be recorded
as a cost of the inventory or immediately expensed.
Inventory cost
O Immediately expensed
2. Compute the cost of Goods Available for Sale, Cost of Goods Sold, and Cost of
Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate
calculations. Round final answers to the nearest dollar amount.)
Cost of goods available for sale
Cost of goods sold
Cost of ending inventory
3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31
as the beginning inventory. (Do not round intermediate calculations. Round your
answer to 1 decimal place.)
Inventory turnover ratio
times](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F84959b5f-8ced-4685-94c7-d39c53ed90a5%2F5586f4f4-7d44-4d1b-b487-3439390a4de5%2F6eshkng_processed.jpeg&w=3840&q=75)
Transcribed Image Text:CC7-1 Accounting for Changing Inventory Costs [LO7-3, LO7-5]
In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of
cosmetic items. The trouble of ordering and tracking each product line had exceeded
the profits earned. In December, a supplier asked her to sell a prepackaged spa kit.
Feeling she could manage a single product line, Nicole agreed. NGS would make
monthly purchases from the supplier at a cost that included production costs and a
transportation charge. The spa would use a perpetual inventory system to keep track of
its new inventory.
On December 31, NGS purchased 10 units at a total cost of $7.00 per unit. NGS
purchased 30 more units at $9.00 in February, but returned 5 defective units to the
supplier. In March, NGS purchased 15 units at $11.00 per unit. In May, 50 units were
purchased at $11.00 per unit; however, NGS took advantage of a 2.00/10, n/30 discount
from the supplier. In June, NGS sold 50 units at a selling price of $12.20 per unit and 35
units at $10.20 per unit.
Required:
1. State whether the transportation cost included in each purchase should be recorded
as a cost of the inventory or immediately expensed.
Inventory cost
O Immediately expensed
2. Compute the cost of Goods Available for Sale, Cost of Goods Sold, and Cost of
Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate
calculations. Round final answers to the nearest dollar amount.)
Cost of goods available for sale
Cost of goods sold
Cost of ending inventory
3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31
as the beginning inventory. (Do not round intermediate calculations. Round your
answer to 1 decimal place.)
Inventory turnover ratio
times
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education