Question
Devin Corp operates both a retail and wholesale division selling a line of submersible pumps. Both operations have significant inventory. For the retail division, Devin
Devin Corp operates both a retail and wholesale division selling a line of submersible pumps. Both operations have significant inventory. For the retail division, Devin uses the retail LIFO inventory method and makes sure to apply it in a way that approximates lower of cost or market. In 2021, Devin has the following results in the retail division:
Purchases at invoice cost $680,000 and at suggested retail value $1,296,000
Purchase returns were $11,000 at cost and at suggested retail value $20,900
Freight in on purchases $16,400.
Beginning inventory at retail is $107,500 and the inventory reported on the 2020 balance sheet was 54,600.
Mark ups were $4,000 and mark downs were $46,000.
Net sales for the year were $1,284,000.
For the wholesale division, Devin uses the dollar value LIFO method of inventory. The base year established for LIFO is 2017. The inventory at the end of 2017 was calculated as $1,040,500. For the next 3 years you have the following information:
| Ending inventory counted at cost | Price level increase from 2017 | Net Purchases | Net Sales |
2018 | 1,085,000 | 3% |
|
|
2019 | 1,091,000 | 5% | $2,935,000 | $5,456,000 |
2020 | 1,398,000 | 10 % |
|
|
Required for the wholesale division:
Calculate the ending inventory to be reported on the balance sheet for each of the three years.
Calculate the cost of goods sold and the gross margin for 2019.
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