Merchandising Physical Count, Purchase and Sale DiscountsQ1. Ranns Supply uses a perpetual inventory system. On January 1, its inventoryaccount had a beginning balance of $6,450,000. Ranns engaged in the followingtransactions during the year:1. Purchased merchandise inventory for $9,500,000.2. Generated net sales of $26,000,000.3. Recorded inventory shrinkage of $10,000 after taking a physical inventory at year-end.4. Reported gross profit for the year of $15,000,000 in its income statement.Requirementsa. At what amount was Cost of Goods Sold reported in the company's year-end incomestatement?b. At what amount was Merchandise Inventory reported in the company's year-endbalance sheet?c. Immediately prior to recording inventory shrinkage at the end of the year, what wasthe balance of the Cost of Goods Sold account? What was the balance of theMerchandise Inventory?

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Description: Merchandising Physical Count, Purchase and Sale DiscountsQ1. Ranns Supply uses a perpetual inventory system. On January 1, its inventoryaccount had a beginning balance of $6,450,000. Ranns engaged in the followingtransactions during the year:1. Purc

A perpetual inventory system is an inventory recording method in which the inventory transaction is…

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Requirements a. At what amount was Cost of Goods Sold reported in the company's year-end income statement? b. At what amount was Merchandise Inventory reported in the company's year-end balance sheet? c. Immediately prior to recording inventory shrinkage at the end of the year, what was the balance of the Cost of Goods Sold account? What was the balance of the Merchandise Inventory?

Requirements a. At what amount was Cost of Goods Sold reported in the company's year-end income statement? b. At what amount was Merchandise Inventory reported in the company's year-end balance sheet? c. Immediately prior to recording inventory shrinkage at the end of the year, what was the balance of the Cost of Goods Sold account? What was the balance of the Merchandise Inventory?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

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Question

Merchandising Physical Count, Purchase and Sale Discounts
Q1. Ranns Supply uses a perpetual inventory system. On January 1, its inventory
account had a beginning balance of $6,450,000. Ranns engaged in the following
transactions during the year:
1. Purchased merchandise inventory for $9,500,000.
2. Generated net sales of $26,000,000.
3. Recorded inventory shrinkage of $10,000 after taking a physical inventory at year-
end.
4. Reported gross profit for the year of $15,000,000 in its income statement.
Requirements
a. At what amount was Cost of Goods Sold reported in the company's year-end income
statement?
b. At what amount was Merchandise Inventory reported in the company's year-end
balance sheet?
c. Immediately prior to recording inventory shrinkage at the end of the year, what was
the balance of the Cost of Goods Sold account? What was the balance of the
Merchandise Inventory?

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