Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2022. All watches are sold for $500 each.

Jul. 17 Purchased 50 watches for $7,500 ($150 per watch) on account.

Jul. 31 Sold 40 watches for $20,000 cash.

Aug. 12 Purchased 40 watches for $6,400 ($160 per watch) cash.

Aug. 22 Sold 30 watches for $15,000 on account.

Sep. 19 Paid for watches purchased on July 17.

Sep. 27 Receive cash of $9,000 for watches sold on account on August 22.

Oct. 27 Purchased 80 watches for $13,600 ($170 per watch) cash.

Nov. 20 Sold 90 watches for $45,000 cash.

Dec. 4 Purchased 100 watches for $18,000 ($180 per watch) on account.

Dec. 8 Sold 40 watches for $20,000 on account.

Required:

1. (a) Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2022, assuming Suzie uses FIFO to account for inventory.

(b) Prepare the gross profit section of a partial income statement for transactions related to MU watches.

2. Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the Internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated net realizable value of MU watches is only $100 per watch.

(a) Record any necessary adjustment on December 31, 2022, related to this information.

(b) For what amount would MU inventory be reported in the December 31, 2022, balance sheet?

(c) Prepare an updated gross profit section of a partial income statement accounting for this additional information. Compare your answer to requirement 1(b).

The Great Adventures continuing problem also can be assigned using the General Ledger software in Connect. Students will be given an existing trial balance and asked to prepare

(1) The journal entries above,

(2) Financial statements,

(3) Closing entries.