1. Based upon the following data, estimate the cost of ending inventory using the gross profit method.

Sales	$882,000
Estimated gross profit rate	32%
Beginning inventory	$75,700
Purchases (net)	794,000
Merchandise available for sale	$869,700

2.

1. Multiple-Step Income Statement

   On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture store, are as follows:

   Accounts Receivable	$170,000		Inventory	$1,019,950
   Accumulated DepreciationBuilding	762,600		Notes Payable	273,300
   Administrative Expenses	559,700		Office Supplies	19,950
   Building	2,619,300		Retained Earnings	1,337,850
   Cash	166,750		Salaries Payable	7,900
   Common Stock	291,750		Sales	6,440,950
   Cost of Goods Sold	3,769,900		Selling Expenses	709,650
   Dividends	172,550		Store Supplies	93,100
   Interest Expense	10,150

   a. Prepare a multiple-step income statement for the fiscal year ended March 31, 20Y9.

   Royal Furnishings Company
   Income Statement
   For the Year Ended March 31, 20Y9
   		$
   Gross profit		$
   Expenses:
   	$
   Total expenses
   		$
   Other expense:
   		$

   b. What is a major advantage of the multiple-step income statement over the single-step income statement?

Assume that three identical units of merchandise were purchased during October, as follows:

			Units	Cost
October	5	Purchase	1	$5
	12	Purchase	1	13
	28	Purchase	1	15
		Total	3	$33

Assume one unit is sold on October 31 for $28. Determine cost of goods sold, gross profit, and ending inventory under the LIFO method.

	October 31
Sales	$
Cost of Goods Sold
Gross Profit	$
Ending Inventory	$

The following lots of Commodity D were available for sale during the year.

Beginning inventory	10 units at $60
First purchase	25 units at $65
Second purchase	30 units at $68
Third purchase	15 units at $75

The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year.

What is the ending inventory balance at the end of the year using the LIFO method?

Using the lower of cost or market, what should the total inventory value be for the following items:

Item	Inventory Quantity	Cost per Unit	Market Value per Unit	Total Cost Price	Total Market Price	Lower of Cost or Market
A	188	$10	$14	$1,880	$2,632	$
B	102	$18	$14	$1,836	$1,428	$
C	57	$23	$25	$1,311	$1,425	$
						$

Freight Terms

Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. If required, round the answers to the nearest dollar.

	Merchandise (Invoice Amount)		Freight Paid by Seller		Freight Terms		Returns and Allowances (Invoice Amount)
a.	$8,400		$700			FOB destination, 1/10, n/30	$1,400
b.	2,550		500			FOB shipping point, 2/10, n/30	950

a.	$
b.	$

Beginning inventory, purchases, and sales for an inventory item are as follows:

Sep. 1	Beginning Inventory	24	units	@	$21
5	Sale	14	units
17	Purchase	26	units	@	$23
30	Sale	27	units

Assuming a perpetual inventory system and the first-in, first-out method:

a. Determine the cost of the goods sold for the September 30 sale. $

b. Determine the inventory on September 30. $

Control of Inventories

Hardcase Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:

1. Because the shop carries mostly high-quality, designer luggage, all inventory items are tagged with a control device that activates an alarm if a tagged item is removed from the store.
2. Because the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a customer selects a piece of luggage, the salesclerk gets the appropriate piece from the stores stockroom. Because all salesclerks need access to the stockroom, it is not locked. The stockroom is adjacent to the break room used by all mall employees.
3. Whenever Hardcase receives a shipment of new inventory, the items are taken directly to the stockroom. Hardcases accountant uses the vendors invoice to record the amount of inventory received.

Determine whether each of these procedures is appropriate or inappropriate and select the response below.

	Appropriate/Inappropriate
a.
b.
c.

Using the following information:

1. The bank statement balance is $4,628.
2. The cash account balance is $5,102.
3. Outstanding checks amounted to $732.
4. Deposits in transit are $1,172.
5. The bank service charge is $25.
6. A check for $38 for supplies was recorded as $29 in the ledger.

Prepare a bank reconciliation for Candace Co. for May 31.

Candace Co. Bank Reconciliation May 31
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total adjustments
Adjusted balance		$