ACC 100 Lecture Notes - Lecture 5: Accounts Payable, Gross Margin

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pucecattle426

14 Oct 2016

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Mark-up: the difference between the cost of inventory and the price it is sold for is called a mark-up. It is the amount that is added to the cost of inventory in order to make a profit. Selling price (sp) = cost + (cost x markup %) Gross profit margin: the difference, in dollars, between the selling price of inventory and the cost the retailer paid to buy the inventory. Gross profit margin (gpm) = selling price (sp) - cost. Product costs: all the costs that are incurred to purchase inventory (ex. cost of the actual inventory purchased, shipping costs, etc. ) Period costs: all those costs that a business incurs in the normal course of the business that are. Rent for store location, salaries to employees, advertising costs) Perpetual inventory system: records every purchase and sale of inventory when it happens.

Related Questions

WoodwardIndustries is a retailer. Assume that there are no credittransactions; all amounts are settled in cash. The followinginformation for the month of January 2017.
					Unit Cost or
	Date	Description		Quantity	Selling Price
	Dec. 31	Ending inventory		172	$22
	Jan. 2	Purchase		103	24
	Jan. 6	Sale		179	41
	Jan. 9	Purchase		68	26
	Jan. 10	Sale		48	46
	Jan. 23	Purchase		110	27
	Jan. 30	Sale		132	49

a)	Please calculate (fill in the blanks) GOCS andEnding Inventory using various inventory methods, under theperpetual costing system:
	Please put your final answers in the designatedcells below. You can you the next tab (worksheet) for calculationpurposes.

				COGS		Ending Inventory	Gross Profit
	Perpetual		FIFO
			LIFO
			Weighted Average
							Note: Gross Profit = Revenue - COGS

amethystbear981

Mercer Inc. is a retailer operating in British Columbia. Merceruses the perpetual inventory method. All sales returns fromcustomers result in the goods being returned to inventory; theinventory is not damaged. Assume that there are no credittransactions; all amounts are settled in cash. You are providedwith the following information for Mercer Inc. for the month ofJanuary 2014

Date		Description	Quantity	Unit Cost or Selling Price
January	1	Beginning inventory	200	$12
January	5	Purchase	280	15
January	8	Sale	220	24
January	10	Sale return	20	24
January	15	Purchase	110	16
January	16	Purchase return	10	16
January	20	Sale	180	29
January	25	Purchase	40	19

Calculate the Moving-average cost per unit at January 1, 5, 8,15, 20, & 25.

For each of the following cost flow assumptions, calculate costof goods sold, ending inventory, and gross profit. (1) LIFO. (2)FIFO. (3) Moving-average cost.

roselocust224

1. How should the balances of Progress Billings and Constructionin Progress be shown at reporting dates prior to completion of along-term contract

a. Progress billings as income, construciton in progress asinventory

b. Net , as income from construction if credit balance, and lossfrom construction if debit balance

c. Progress Billings as deferred income, Construction inProgress as a current asset

d. Net, as a current asset if debit balance and currentliability if credit balance

3. the competed-contract method of accounting for long-termconstruction-type contracts is preferable when

a. a contractor is involved in numerous projects

b. the contracts are of a relatively long duration

c. estimates of costs to complete and extent of progress towardcompletion are reasonably dependable

d. there are inherent uncertainties in the contract beyondnormal business risks

4. C & J Construction has consistently used the percentageof completion method of recognizing income. Last year C & Jstarted work on a $4,500,000 constuction contract, which wascompleted this year, the accounting records desclosed the followingdata for the last year

Progress billings - $1,650,000

Costs incurred - 1,350,000

Collections - 1,050,000

Estimated cost to complete - 2,700,000

How much income should C & J have recognized on thiscontract last year?

a. 105,000

b. 150,000

c. 300,000

d. 350,000

6. The use of the gross profit assumes

a. the amount of gross profit is the same as in prior years

b. sales and cost of goods sold have not changed from previousyears

c. inventory values have not increased from previous years

d. the relationship between selling price and cost of goods soldis similar to prior years

7. the gross profit method of inventory valuation is not validwhen

a. there is substantial increase in the quantity of inventoryduring the year

b. there is substantial increase in the cost of inventory duringthe year

c. the gross margin percentage changes significantly during theyear

d. all ending inventory is destroyed by dire before it can becounted

8. When the current year's ending inventory amount isoverstated,

a. the current year's cost of goods sold is overstated

b. the current year's total assets are understated

c. the current year's net income is overstated

d. the next year's income is overstated

9. If the ending inventory balance is understated, net income ofthe same period

a. will be overstated

b. will be understated

c. will be unaffected

d. cannot be determined from the above information

10. An overstatement of ending inventory in Period 1 wouldresult in income of Period 2 being

a. overstated

b. understated

c. correctly stated

d. the answer cannot be determined from the informationgiven

11. what is the maximum amount at which inventory can be valuedwhen the goods have experienced a permanent decline in value

a. historical cost

b. sales price

c. net realizable value

d. net realizable value reduced by a normal profit margin

12. Net realizable value can be defined as

a. selling price

b. selling price less costs to complete and sell

c. selling price plus costs to complete and sell

d. acquisition cost plus costs to complete and sell

13. Miller company needs an estimate of its ending inventorybalance. The following information is available

Cost Retail

sales revenue - 180,000

beginning inventory - 35,000 62,000

net purchases - 100,000 135,000

gross margin percentage - 30%

Given this information, when using the gross margin estimationmethod, ending inventory is approx

a. 1,000

b. 9,000

c. 19,000

d. 11,650

14. Which of the following would not be reported asinventory?

a. land acquired for resale by a real estate firm

b. stocks and bonds held for resale by a brokerage firm

c. partially completed goods held by a manufacturing company

d. machinery acquired by a manufacturing company for use in theproduction process

15. Cost of goods sold is equal to

a. the cost of inventory on hand at the end of a period plus netpurchases minus the cost of inventory on hand at the beginning

b. the cost of inventory on hand at the beginning of a periodminus net purchases plus the cost of inventory on hand at the endof a period

c. the cost of inventory on hand at the beginning of a periodplus net sales minus the cost of inventory on hand at the end of aperiod

d. the cost of inventory on hand at the beginning of a periodplus net purchases minus the cost of inventory on hand at the endof a period

17. In a period of falling prices, the use of which of thefolliwng inventory cost flow methods would typically result inhighest cost of goods sold?

a. FIFO

b. LIFO

c. Weighted average cost

d. Specific identification

18. In a period of rising prices, the inventory cost allocationmethod that tends to result in the lowest reported net incomeis

a. LIFO

b. FIFO

c. Moving average

d. Weighted average

19. The LIFO inventory cost flow method may be applied to whichof the following inventory systems?

Periodic Perpetual

a. no no

b. no yes

c. yes yes

d. yes no

tanrabbit20

ACC 100 Lecture Notes - Lecture 5: Accounts Payable, Gross Margin

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