### QUESTION 4**Honest Tea, Inc.** is a merchandiser. Use the following information to determine its Inventory balance on its December 31 year-end balance sheet. **Note:** All purchases of inventory are on account.- **Cost of Goods Sold during the year:** $31,000- **January 1 Inventory:** $10,000- **Sales during the year:** $75,000- **December 31 Accounts Receivable:** $24,000- **Purchases of Inventory on Account during the year:** $36,000**December 31 Inventory** = $______**Explanation:** To calculate the December 31 Inventory, use the formula:\[ \text{Ending Inventory} = \text{Beginning Inventory} + \text{Purchases} - \text{Cost of Goods Sold} \]Where:- Beginning Inventory (January 1 Inventory) = $10,000- Purchases of Inventory on Account during the year = $36,000- Cost of Goods Sold during the year = $31,000Therefore:\[ \text{Ending Inventory} = 10,000 + 36,000 - 31,000 \]\[ \text{Ending Inventory} = 15,000 \]The December 31 Inventory is **$15,000**.

The cost of goods sold(COGS) comprises all the direct expenses such as direct material, direct…

Honest Tea, Inc. is a merchandiser. Use the following information to its Inventory balance on its December 31 year-end balance sheet. Note: All purchases of inventory are on account. Cost of Goods Sold during the year $31,000 January 1 Inventory 10,000 Sales during the year 75,000 December 31 Accounts Receivable 24,000 Purchases of Inventory on Account during the year 36,000 December 31 Inventory = $_

Honest Tea, Inc. is a merchandiser. Use the following information to its Inventory balance on its December 31 year-end balance sheet. Note: All purchases of inventory are on account. Cost of Goods Sold during the year $31,000 January 1 Inventory 10,000 Sales during the year 75,000 December 31 Accounts Receivable 24,000 Purchases of Inventory on Account during the year 36,000 December 31 Inventory = $_

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 58E: Analyzing Inventory The recent financial statements of McLelland Clothing Inc. include the following...

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Analyzing Inventory The recent financial statements of McLelland Clothing Inc. include the following data: Required: 1. Calculate McLellands gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the FIFO inventory costing method. Be sure to explain what each ratio means. 2. Calculate McLellands gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the LIFO inventory costing method. Be sure to explain what each ratio means. 3. CONCEPTUAL CONNECTION Which ratios-the ones computed using FIFO or LIFO inventory values-provide the better indicator of how successful McLelland was at managing and controlling its inventory?
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