Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Question
Chapter 9, Problem 9.5P
1.
To determine
Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during the period which results in the goods available for sale. Then, the estimated cost of goods sold is deducted from the goods available for sale to estimate the ending inventory.
To Calculate: The estimated cost of each of the toppings lost in the fire using the gross profit method.
2.
To determine
To Mention: The factors that cause the estimates to be overstated or understated.
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Exercise 9-9 (Algo) Gross profit method [LO9-2]
On November 21, 2021, a fire at Hodge Company's warehouse caused severe damage to its entire inventory of Product Tex. Hodge
estimates that all usable damaged goods can be sold for $27,000. The following information was available from the records of
Hodge's periodic inventory system:
Inventory, November 1
Net purchases from November 1, to the date of the fire
Net sales from November 1, to the date of the fire
$175,000
155,000
235,000
Based on recent history, Hodge's gross profit ratio on Product Tex is 40% of net sales.
Required:
Calculate the estimated loss on the inventory from the fire, using the gross profit method.
X Answer is complete but not entirely correct.
Estimated loss from fire
20,000 X
PROBLEM 16: On May 6, 2023, a flashflood caused damage to the merchandise stored in the
warehouse of Rome Company. You were asked to submit an estimate of the merchandise
destroyed in the warehouse. The following data were established:
A. Net sales for 2022 were P800,000 matched against cost of P560,000.
B. Merchandise inventory, January 1, 2023 was P200,000, 90% of which was in the
warehouse and 10% in the downtown showrooms.
C. For January 1, 2023 to date of flood, you ascertained that the invoice value of
purchases, all of which were stored in the warehouse, P100,000; freight inward, P4,000;
purchases retumed, P6,000.
D. Cost of merchandise transferred from the warehouse to showrooms was P8,000 and
net sales from January 1 to May 6. 2023, all of which were warehouse stock, were
P320,000.
E. There was no change in the gross profit rate adopted by the company in 2023.
21. What is the estimated merchandise destroyed by the flood?
PROBLEM 17: The following information relates to NNN ,…
Chapter 9 Solutions
Intermediate Accounting
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - It is discovered in 2018 that ending inventory in...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Dollar-value LIFO retail LO95 This exercise is a...Ch. 9 - Change i n inventory costing methods LO96 In...Ch. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Inventory error LO97 In 2018, Winslow...Ch. 9 - Inventory error LO97 Refer to the situation...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or net realizable value LO91 Tatum...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Gross profit method LO92 Royal Gorge Company uses...Ch. 9 - Prob. 9.12ECh. 9 - Retail inventory method; average cost LO93 San...Ch. 9 - Prob. 9.14ECh. 9 - Retail inventory method; LIFO LO93 Crosby Company...Ch. 9 - Prob. 9.16ECh. 9 - Conventional retail method; employee discounts ...Ch. 9 - Retail inventory method; solving for unknowns ...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Prob. 9.20ECh. 9 - Dollar-value LIFO retail LO95 Lance-Hefner...Ch. 9 - Prob. 9.22ECh. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Prob. 9.24ECh. 9 - Error correction; inventory error LO97 During...Ch. 9 - Prob. 9.26ECh. 9 - Inventory error LO97 In 2018, the internal...Ch. 9 - Inventory errors LO97 In 2018, the controller of...Ch. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.30ECh. 9 - Prob. 9.31ECh. 9 - Lower of cost or net realizable value LO91 Decker...Ch. 9 - Prob. 9.2PCh. 9 - Lower of cost or market LO91 Forester Company has...Ch. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Retail inventory method; conventional and LIFO ...Ch. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Dollar-value LIFO retail method LO95 [This is a...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Prob. 9.14PCh. 9 - Inventory errors LO97 You have been hired as the...Ch. 9 - Inventory errors LO97 The December 31, 2018,...Ch. 9 - Integrating problem; Chapters 8 and 9; inventory...Ch. 9 - Purchase commitments Appendix In November 2018,...Ch. 9 - Judgment Case 91 Inventoriable costs; lower of...Ch. 9 - Integrating Case 93 FIFO and lower of cost or net...Ch. 9 - Prob. 9.4BYPCh. 9 - Prob. 9.5BYPCh. 9 - Prob. 9.6BYPCh. 9 - Prob. 9.7BYPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9BYPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Ethics Case 911 Overstatement of ending inventory ...Ch. 9 - Analysis Case 912 Purchase commitments Appendix...Ch. 9 - Continuing Cases Target Case LO93, LO94, LO95...Ch. 9 - Prob. 1CCIFRS
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Similar questions
- PROBLEM 16: On May 6, 2023, a flashflood caused damage to the merchandise stored in the warehouse of Rome Company. You were asked to submit an estimate of the merchandise destroyed in the warehouse. The following data were established: A. Net sales for 2022 were P800,000 matched against cost of P560,000. B. Merchandise inventory, January 1, 2023 was P200,000, 90% of which was in the warehouse and 10% in the downtown showrooms. C. For January 1, 2023 to date of flood, you ascertained that the invoice value of purchases, all of which were stored in the warehouse, P100,000; freight inward, P4,000; purchases returned, P6,000. D. Cost of merchandise transferred from the warehouse to showrooms was P8,000 and net sales from January 1 to May 6, 2023, all of which were warehouse stock, were P320,000. E. There was no change in the gross profit rate adopted by the company in 2023. 21. What is the estimated merchandise destroyed by the flood?arrow_forwardPlease do not give solution in image format thankuarrow_forwardPlease Solve Correct solution with Explanation and Do not Give Image formatarrow_forward
- Please do not give solution in image format thankuarrow_forward11:41 .l 89 A 9 gross profit rate in 2021 to be the same as in the previous year, compute the estimated merchandise destroyed by the flood. E 3-2 - Gross profit method (With entity policy on GPR) The Thomas Corporation was organized on Jan. 1, 2020. On Dec. 31, 2021, the corporation lost most of its inventory in a warehouse fire just before the year-end count of inventory was to take place. from the records disclosed the following: Data 2020 4,069,400 3,940,000 80,000 21% 2021 4,157,000 4,180,000 100,000 Goods available for sale Sales Sales returns and allowances Gross profit rate On Jan. 1, 2021, the Corporation's pricing policy was changed so that the gross profit rate would be three percentage points higher than the one earned in 2020.arrow_forwardVishnuarrow_forward
- Please do not give solution in image format thankuarrow_forwardLO S Gross Profit Method E9A. David Patel was at home when he received a call from the fire department telling him his store had burned. His business was a total loss. The insurance company asked him to prove his inventory loss. For the year, until the date of the fire, Patel's company had sales of $450,000 and purchases of $280,000. Freight-in amounted to $13,700, and beginning inventory was $45,000. Patel always priced his goods to achieve a gross margin of 40 percent. Compute Patel's estimated inventory loss.arrow_forwardCalculate the estimated lossarrow_forward
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