Chapter 5, Problem 5.10E

Ethics and Inventory An electronics store has a large number of computers that use outdated technology in its inventory. These computers are reported at their cost. Shortly after the December 31 year end, the store manager insists that the computers can be sold for well over their cost. But the stores accountant has been told by the sales staff that it will be difficult to sell these computers for more than half of their inventory cost. Required: What are the consequences for the business of failing to recognize the decline in value?

Assume that the ending inventory of a merchandising firm is overstated by $40,000. a. By how much and in what direction (overstated or understated) will the firms cost of goods be misstated? b. If this error is not corrected, what effect will it have on the subsequent period's operating income? c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?

Topic: SINGLE-ENTRY BOOKKEEPING SANAOL Company suspects that there is missing inventory in its warehouse at December 31, 2021. All sales and purchases were made on account. Also, the gross profit rate based on net sales is consistent every year. To aid in your investigation, you obtained the following: How much is the missing inventory during the year?

The inventory turnover ratio: OIs used to analyze profitability. O Is used to measure solvency. Reveals how many times a company sells its merchandise inventory during a period. O Reveals how many days a company can sell inventory if no new merchandise is purchased. O Calculation depends on the company's inventory valuation method.

Question: Considering the year-ending adjusting journal entries for the periodic inventory system. If I miscount my ending inventory, what is the effect on the balance sheet? What is the effect on the income statement? For example, at the year-end inventory count, there is a mistake and I count 30,000 units of inventory when 29,000 actually exist. I make the year-end journal entries with 30,000 as my number of units in inventory. What is the effect on the balance sheet and income statement for that year? Potential Extra Credit: What is true about the balance sheet in year 2 if my ending inventory count is correct in year 2 (after being miscounted in year 1)? What about the income statement in year 2?

Topic: SINGLE-ENTRY BOOKKEEPING HALSEY Company suspects that there is missing inventory in its warehouse at December 31, 2021. All sales and purchases were made on account. Also, the gross profit rate based on net sales is consistent every year. To aid in your investigation, you obtained the following:   How much is the net sales revenue for the year?

An analyst observes a decrease in a company’s inventory turnover. Which of the following would most likely explain this trend? B . Due to problems with obsolescent inventory last year, the company wrote off a large amount of its inventory at the beginning of the period.

Topic: SINGLE-ENTRY BOOKKEEPING   BARUMBUM Company suspects that there is missing inventory in its warehouse at December 31, 2021. All sales and purchases were made on account. Also, the gross profit rate based on net sales is consistent every year. To aid in your investigation, you obtained the following:   How much is the net purchases during the year?

The inventory turnover ratio: Multiple Choice Is used to measure solvency. Reveals how many days a company can sell inventory if no new merchandise is purchased. Calculation depends on the company's inventory valuation method. Tells how many times a company turns over (sells) its inventory in a period. Is used to analyze collectability.