The following accounting information pertains to Boardwalk Taffy and Beach Sweets. The only difference between the two companies is that Boardwalk Taffy uses FIFO, while Beach Sweets uses LIFO. Boardwalk Taffy $ 90,000 310,000 235,000 240,000 1,010,500 450,000 2,100,000 Beach Sweets $ 90,000 310,000 206,000 240,000 1,380,200 450,000 2,100,000 Cash Accounts receivable Merchandise inventory Accounts payable Cost of goods sold Building Sales Required a-1. Compute the gross margin percentage for each company. a-2. Identify the company that appears to be charging the higher prices in relation to its cost. b-1. For each company, compute the inventory turnover ratio and the average days to sell inventory. b-2. Identify the company that appears to be incurring the higher financing cost.
The following accounting information pertains to Boardwalk Taffy and Beach Sweets. The only difference between the two companies is that Boardwalk Taffy uses FIFO, while Beach Sweets uses LIFO. Boardwalk Taffy $ 90,000 310,000 235,000 240,000 1,010,500 450,000 2,100,000 Beach Sweets $ 90,000 310,000 206,000 240,000 1,380,200 450,000 2,100,000 Cash Accounts receivable Merchandise inventory Accounts payable Cost of goods sold Building Sales Required a-1. Compute the gross margin percentage for each company. a-2. Identify the company that appears to be charging the higher prices in relation to its cost. b-1. For each company, compute the inventory turnover ratio and the average days to sell inventory. b-2. Identify the company that appears to be incurring the higher financing cost.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![### Accounting Analysis for Boardwalk Taffy and Beach Sweets
The following accounting information pertains to two companies: **Boardwalk Taffy** and **Beach Sweets**. The distinction between the two is that Boardwalk Taffy uses the FIFO (First-In, First-Out) method, while Beach Sweets employs LIFO (Last-In, First-Out).
**Financial Data:**
| | Boardwalk Taffy | Beach Sweets |
|--------------------|-----------------|--------------|
| Cash | $90,000 | $90,000 |
| Accounts Receivable| $310,000 | $310,000 |
| Merchandise Inventory | $235,000 | $206,000 |
| Accounts Payable | $240,000 | $240,000 |
| Cost of Goods Sold | $1,010,500 | $1,380,200 |
| Building | $450,000 | $450,000 |
| Sales | $2,100,000 | $2,100,000 |
### Required Analysis:
1. **Compute the Gross Margin Percentage for Each Company (a-1):**
- Use the formula:
\[
\text{Gross Margin Percentage} = \left( \frac{\text{Sales} - \text{Cost of Goods Sold}}{\text{Sales}} \right) \times 100
\]
- Round your answers to one decimal place.
2. **Price Analysis (a-2):**
- Identify which company appears to be charging higher prices relative to its cost.
3. **Inventory Turnover (b-1):**
- For each company, compute the inventory turnover ratio and determine the average days to sell the inventory.
- Use the formulas:
\[
\text{Inventory Turnover Ratio} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}
\]
\[
\text{Average Days to Sell Inventory} = \frac{365}{\text{Inventory Turnover Ratio}}
\]
4. **Financing Cost Analysis (b-2):**
- Identify which company appears to incur the higher financing costs.
**Instructions:**
Complete this analysis by entering your answers in the provided tabs. The sections are labeled as Required A1, Required A2, Required B1, and Required](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb034729f-db63-4235-9b33-79c3c77be50a%2Fe21411c0-ed7d-43fc-b2d0-2313116962cc%2F5kljcc_processed.png&w=3840&q=75)
Transcribed Image Text:### Accounting Analysis for Boardwalk Taffy and Beach Sweets
The following accounting information pertains to two companies: **Boardwalk Taffy** and **Beach Sweets**. The distinction between the two is that Boardwalk Taffy uses the FIFO (First-In, First-Out) method, while Beach Sweets employs LIFO (Last-In, First-Out).
**Financial Data:**
| | Boardwalk Taffy | Beach Sweets |
|--------------------|-----------------|--------------|
| Cash | $90,000 | $90,000 |
| Accounts Receivable| $310,000 | $310,000 |
| Merchandise Inventory | $235,000 | $206,000 |
| Accounts Payable | $240,000 | $240,000 |
| Cost of Goods Sold | $1,010,500 | $1,380,200 |
| Building | $450,000 | $450,000 |
| Sales | $2,100,000 | $2,100,000 |
### Required Analysis:
1. **Compute the Gross Margin Percentage for Each Company (a-1):**
- Use the formula:
\[
\text{Gross Margin Percentage} = \left( \frac{\text{Sales} - \text{Cost of Goods Sold}}{\text{Sales}} \right) \times 100
\]
- Round your answers to one decimal place.
2. **Price Analysis (a-2):**
- Identify which company appears to be charging higher prices relative to its cost.
3. **Inventory Turnover (b-1):**
- For each company, compute the inventory turnover ratio and determine the average days to sell the inventory.
- Use the formulas:
\[
\text{Inventory Turnover Ratio} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}
\]
\[
\text{Average Days to Sell Inventory} = \frac{365}{\text{Inventory Turnover Ratio}}
\]
4. **Financing Cost Analysis (b-2):**
- Identify which company appears to incur the higher financing costs.
**Instructions:**
Complete this analysis by entering your answers in the provided tabs. The sections are labeled as Required A1, Required A2, Required B1, and Required
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 5 steps
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