Chapter 6, Problem 6E

Inferring Missing Amounts Based on Income Statement Relationships

Supply the missing dollar amounts for each of the following independent cases:

To determine

The missing information for the following independent cases.

Explanation of Solution

Inventory:

It refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market.

Beginning inventory

The balance of stock of goods in hand during the beginning of the accounting period is stated as beginning inventory.

Ending inventory:

The balance of stock of goods in hand during the end of the accounting period is stated as ending inventory.

Cost of goods sold:

Cost of goods sold indicates the costs involved for the inventory sold by the business in a specific period of time.

Following is the table for missing information:

	Case
Particulars	(Amount in Dollars)
	A	B	C	D
Sales revenue	$800	$900	$600(9)	$800
Less: Cost of Goods sold:
Beginning inventory	$100	$200	$100	$150(13)
Add: Purchases	$700	$700	$300(10)	$600
Total available for sale	$800(1)	$900(5)	$400(11)	$750(14)
Less: Ending inventory	$500	$150(6)	$200	$300
Total cost of goods sold	$300(2)	$750(7)	$200	$450(15)
Gross profit	$500(3)	$150(8)	$400	$350(16)
Less: Operating expenses	$200	$150	$150	$250
Income from operations	$300(4)	$0	$250(12)	$100

Table (1)

Working notes:

Calculate the total value available for sale of case A.

$\begin{array}{c}\text{Total}\text{value}\text{available}\text{for}\text{sales=Beginning}\text{inventory+Value}\text{of}\text{purchases}\\ \text{=\$100+\$700}\\ \text{=\$800}\end{array}$ (1)

Calculate the value of total cost of goods sold of case A.

$\begin{array}{c}\text{Total}\text{value}\text{of}\text{cost}\text{of}\text{goods}\text{sold=}\left(\text{Begining}\text{inventory+Purchases}\right)\text{-Ending}\text{inventory}\\ \text{=}\left(\text{\$100+\$700}\right)\text{-\$500}\\ \text{=\$300}\end{array}$ (2)

Calculate the value of gross profit of case A.

$\begin{array}{c}\text{Value}\text{of}\text{gross}\text{profit=}\left(\begin{array}{l}\text{Sales}\text{revenue-}\\ \text{Total}\text{cost}\text{of}\text{goods}\text{sold}\end{array}\right)\\ \text{=\$800-\$300}\\ \text{=\$500}\end{array}$ (3)

Calculate the value of income from operations of case A.

$\begin{array}{c}\text{Value}\text{of}\text{income}\text{from}\text{operations=Value}\text{of}\text{gross}\text{profit-Operating}\text{expenses}\\ \text{=\$500(3)-\$200}\\ \text{=\$300}\end{array}$ (4)

Calculate the total value available for sale of case B.

$\begin{array}{c}\text{Total}\text{value}\text{available}\text{for}\text{sales=Beginning}\text{inventory+Value}\text{of}\text{purchases}\\ \text{=\$200+\$700}\\ \text{=\$900}\end{array}$ (5)

Calculate the value of ending inventory of case B.

$\begin{array}{c}\text{Value}\text{of}\text{ending}\text{inventory=}\left(\begin{array}{l}\text{Total}\text{value}\text{available}\text{for}\text{sales-}\\ \text{Total}\text{cost}\text{of}\text{goods}\text{sold(7)}\end{array}\right)\\ \text{=\$900(5)-\$750}\\ \text{=\$150}\end{array}$ (6)

Calculate the value of total cost of goods sold of case B.

$\begin{array}{c}\text{Total}\text{value}\text{of}\text{cost}\text{of}\text{goods}\text{sold=}\left(\text{Beginning}\text{inventory+Purchases}\right)\text{-Ending}\text{inventory}\\ \text{=}\left(\text{\$200+\$700}\right)\text{-\$150(6)}\\ \text{=\$750}\end{array}$ (7)

Calculate the value of gross profit of case B.

$\begin{array}{c}\text{Value}\text{of}\text{gross}\text{profit=}\left(\begin{array}{l}\text{Sales}\text{revenue-}\\ \text{Total}\text{cost}\text{of}\text{goods}\text{sold}\end{array}\right)\\ \text{=\$900-\$150(7)}\\ \text{=\$750}\end{array}$ (8)

Calculate the sales revenue of case C.

$\begin{array}{c}\text{Sales}\text{revenue=}\left(\text{Total}\text{cost}\text{of}\text{goods}\text{sold+Gross}\text{profit}\right)\\ \text{=\$200+\$400}\\ \text{=\$600}\end{array}$ (9)

Calculate the value of purchases of case C.

$\begin{array}{c}\text{Value}\text{of}\text{purchases=}\left(\text{Total}\text{value}\text{available}\text{for}\text{sales-Begining}\text{inventory}\right)\\ \text{=\$400(11)-\$100}\\ \text{=\$300}\end{array}$ (10)

Calculate the total value available for sale of case C.

$\begin{array}{c}\text{Total}\text{value}\text{available}\text{for}\text{sales=Beginning}\text{inventory+Value}\text{of}\text{purchases}\\ \text{=\$100+\$300(10)}\\ \text{=\$400}\end{array}$ (11)

Calculate the value of income from operations of case C.

$\begin{array}{c}\text{Value}\text{of}\text{income}\text{from}\text{operations=Value}\text{of}\text{gross}\text{profit-Operating}\text{expenses}\\ \text{=\$400-\$150}\\ \text{=\$250}\end{array}$ (12)

Calculate the value of beginning inventory of case D.

$\begin{array}{c}\text{Beginning}\text{inventory=}\left(\text{Ending}\text{inventory+Total}\text{cost}\text{of}\text{goods}\text{sold}\right)\text{-Purchases}\\ \text{=}\left(\text{\$300+\$450(15)}\right)\text{-\$600}\\ \text{=\$150}\end{array}$ (13)

Calculate the total value available for sale of case D.

$\begin{array}{c}\text{Total}\text{value}\text{available}\text{for}\text{sales=Beginning}\text{inventory+Value}\text{of}\text{purchases}\\ \text{=\$150(13)+\$300}\\ \text{=\$900}\end{array}$ (14)

Calculate the value of total cost of goods sold of case D.

$\begin{array}{c}\text{Total}\text{value}\text{of}\text{cost}\text{of}\text{goods}\text{sold=}\left(\text{Begining}\text{inventory+Purchases}\right)\text{-Ending}\text{inventory}\\ \text{=}\left(\text{\$150(13)+\$600}\right)\text{-\$300}\\ \text{=\$450}\end{array}$ (15)

Calculate the value of gross profit of case D.

$\begin{array}{c}\text{Value}\text{of}\text{gross}\text{profit=}\left(\begin{array}{l}\text{Sales}\text{revenue-}\\ \text{Total}\text{cost}\text{of}\text{goods}\text{sold}\end{array}\right)\\ \text{=\$800-\$450(15)}\\ \text{=\$350}\end{array}$ (16)