Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 9, Problem 9.6BE
Gross profit method; solving for unknown
• LO9–2
Adams Corporation estimates that it lost $75,000 in inventory from a recent flood. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $150,000; purchases and net sales from the beginning of the year through the date of the flood, $450,000 and $700,000, respectively. What is the company’s gross profit ratio?
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1. What is the company’s gross profit rate beginning January 1, 2021?*
17%
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24%
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2. How much is the inventory fire loss?*
146,920
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254,000
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Q5
21
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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- 5arrow_forwardCalculating Inventory Turnover [LO2] The Blue Moon Corporation has endinginventory of $407,534, and cost of goods sold for the year just ended was$4,105,612. What is the inventory turnover? The days’ sales in inventory? Howlong on average did a unit of inventory sit on the shelf before it was sold?arrow_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_forward
- Case 5. Hanggang Dito Na Lang Company reported the following information for the current year: 575,000 240,000 70,000 Sales Cost of sales Administrative expenses Loss on sale of equipment Sales commission Interest revenue Freight out Loss on early retirement of long-term debt Uncollectible accounts expense 10,000 50,000 25,000 15,000 20,000 15,000 The finished goods inventory was P400,000 on January 1 and P360,000 on December 31, 2020. The tax rate is 30%. 10. What amount should be reported as income from continuing operations?arrow_forwardE6-21 Analyzing Gross Profit Percentage on the Basis of a Multi-step Income Statement [LO6-5] The following summarized data were provided by the records of Mystery Incorporated for the year ended December 31: Administrative Expense $ 19,000 Cost of Goods Sold 165,000 Income Tax Expense 17,600 Sales Returns and Allowances 7,000 Selling Expense 40,200 Sales of merchandise for cash 240,000 Sales of merchandise on credit 42,000 Required:1. Based on these data, prepare a multi-step income statement for internal reporting purposes. 2-a. What was the amount of gross profit? 2-b. What was the gross profit percentage? 2-c. Which of the following(s) is true? (Select all that apply.) E6-21 Analyzing Gross Profit Percentage on the Basis of a Multi-step Income Statement [LO6-5] The following summarized data were provided by the records of Mystery Incorporated for the year ended December 31:…arrow_forwardDecrease in inventory $375Decrease in accounts payable 190Increase in notes payable 210Increase in accounts receivable 10510. Calculating Average Payables Period [LO2] Tortoise, Inc., had a cost of goodssold of $28,834. At the end of the year, the accounts payable balance was $6,105.How long on average did it take the company to pay off its suppliers during theyear? What might a large value for this ratio imply?arrow_forward
- A 105.arrow_forwardNonearrow_forward(40) A company purchased inventory on account for $7,000. The inventory inspector at the company did not approve of the quality of the inventory and so returned it. What is the impact on the company's financial statements of the return of this inventory? Increase accounts payable by $7,000 O Decrease cost of goods sold by $7,000 Decrease inventory by $7,000 O Increase cost of goods sold by $7,000arrow_forward
- Nonearrow_forwardSh4arrow_forwardGross profit method 2. Northstar Sales Corp. was organized on January 1, 2001. On December 31, 2002, the company lost most of its inventory in a warehouse fire just before the year-end count of inventory was to take place. Data from the records disclosed the following: 2002 PO P173,120 692,000 64,600 2001 Inventory, January 1 Purchases during year Purchase returns and allowances during year Sales during year Sales returns and allowances during year 860,000 46,120 788,000 16,000 836,000 20,000 On January 1, 2002, Northstar's pricing policy was changed so that the gross profit rate would be 3 percentage points higher than the one earned in 2001. Salvaged undamaged merchandise was marked to sell at P24,000, while damaged merchandise marked to sell at P16,000 had an estimated net realizable value of P3,600. Requirement: Determine the company's inventory loss due to the fire that occurred on December 31, 2002. (Adapted)arrow_forward
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