Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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Textbook Question
Chapter 8, Problem 1R
On September 30, 2013, the general ledger of Leonʼs Golf Shop, which uses the calendar year as its accounting period, showed the following year-to-date account balances:
The merchandise inventory account had a $48,000 balance on January 1, 2013. The historical gross profit percentage is 40%.
Leon prepares quarterly financial statements and takes physical inventory once a year–at the end of the accounting period. In order to prepare the financial statements for the third quarter, the store needs to have an estimate of ending inventory. You have been asked to use the gross profit method to estimate the ending inventory. Review the worksheet called GP. Study it carefully because it may have a solution format somewhat different from the one shown in your textbook.
Expert Solution & Answer
To determine
Compute the ending inventory using the gross profit method.
Explanation of Solution
Compute the ending inventory using the gross profit method:
Table (1)
The formulae used in the table are given below:
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Students have asked these similar questions
The following is sample list of the Speiran Company's transactions completed during 2019. The company's fiscal year
ends on December 31.
Jan. 8 Purchased merchandise for resale on account. The invoice amount was $14,720; assume a perpetual
inventory system.
17 Paid January 8 invoice.
Apr. 1 Borrowed $72,000 from Lowell Bank for general use; signed a 12-month, 8% annual interest-bearing note
for the money.
May 1 Rented office space in one of Speiran Company's buildings to another company and collected six months'
rent in advance amounting to $27,000.
Required:
1. Prepare journal entries for each of these transactions. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field.)
Vigeland Company completed the following transactions during Year 1. Vigeland’s fiscal year ends on December 31.
January 15
Purchased and paid for merchandise. The invoice amount was $15,200; assume a perpetual inventory system.
April 1
Borrowed $774,000 from Summit Bank for general use; signed a 10-month, 9% annual interest-bearing note for the money.
June 14
Received a $24,000 customer deposit for services to be performed in the future.
July 15
Performed $3,450 of the services paid for on June 14.
December 12
Received electric bill for $26,160. Vigeland plans to pay the bill in early January.
December 31
Determined wages of $15,000 were earned but not yet paid on December 31 (disregard payroll taxes).
Required:
Prepare journal entries for each of these transactions.
Prepare the adjusting entries required on December 31.
Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2024, the following transactions related to receivables occurred:
Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold.
February 28
Sold merchandise to Lennox, Incorporated, for $30,000 and accepted a 6%, 7-month note. 6% is an appropriate rate for this type of note.
March 31
Sold merchandise to Maddox Company that had a fair value of $23,500, and accepted a noninterest-bearing note for which $25,000 payment is due on March 31, 2025.
April 3
Sold merchandise to Carr Company for $22,000 with terms 3/10, n/30. Evergreen uses the gross method to account for cash discounts.
April 11
Collected the entire amount due from Carr Company
April 17
A customer returned merchandise costing $4,200. Evergreen reduced the customer’s receivable balance…
Chapter 8 Solutions
Excel Applications for Accounting Principles
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