Question
Give me the solution for this Reporting and Analyzing Inventory problem please: On December 1, 2024, Athabasca Building Supplies Ltd. (ABS) purchased Dunbar Doors Inc.
Give me the solution for this Reporting and Analyzing Inventory problem please:
On December 1, 2024, Athabasca Building Supplies Ltd. (ABS) purchased Dunbar Doors Inc. (DDI) from Kevin Osepchuk. When acquiring DDI, ABS also agreed to take over a DDI loan with the Royal Dominion Bank. The loan has a limit equal to 80% of the inventory account balance at year end pertaining to doors. The loan is currently at $205,000. The bank requires verification of the inventory balance at the end of every year. As part of the deal to acquire DDI, Kevin agreed to serve as the new manager of ABSs Door Division and to receive a bonus equal to 10% of the operating income of that division.
You are a student who is helping ABS prepare its year-end financial statements for 2024. At the inventory count on December 31, you noticed that the employees counting the inventory at that time found that there were 800 doors on hand. ABS uses the perpetual average cost formula.
In looking at the companys inventory records, you discover that ABS purchased 2,600 doors from DDI on December 1 at a cost of $270 each. Later in the month, 800 doors were purchased from a U.S. supplier at C$240 each and shortly after, 600 doors were purchased from China at C$190 each. Finally, on the last day of the year, 100 more doors were purchased at C$210 but these were in transit on December 31 with terms FOB destination. The only sale for the month occurred when ABS sold 3,200 doors at $360 each to a contractor developing a large condominium project in the area. All sales occurred after the purchase of the doors from China. Kevin supervised the count and determined the cost of the ending inventory. He calculated the ending inventory to be 900 doors at $270 each. He added 100 doors to the amount counted because of the doors in transit. Kevin earned a bonus of $16,500 in December. We found that, Cost of goods available for sale $1,008,000 and Cost of ending inventory $201,600.
Question> Based on the above, there should be an adjustment to Kevins bonus. How much Kevin bonus should be reduced by?
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