Required information PA6-3 (Algo) Recording Sales with Discounts and Estimated and Actual Returns, and Analyzing Gross Profit Percentage [LO 6-4, LO 6-5) [The following information applies to the questions displayed below] Kelly Creations is a wholesaler of hair supplies. Kelly Creations uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash (cost of merchandise $33,477). b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $350). c. Sold merchandise (costing $8,455) to a customer on account with terms n/60. d. Collected half of the balance owed by the customer in (c). e. Granted a partial allowance relating to credit sales the customer in (c) had not yet paid. f. Anticipate further returns of merchandise (costing $270) after year-end from sales made during the year. PA6-3 (Algo) Part 1 Required: 1. Compute Net Sales and Gross Profit for Kelly Creations. Net Sales Gross Profit $ 59,520 380 17,800 8,900 186 390

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.