Merchandising Activities Chapter 6 277 e normal amount of inventory shrinkage. Following the taking of a physical inventory at year-end, made an adjusting entry to record a statements shown below. Organize your answer in tabular form, using the column headings shown Indicate the effects of each of these transactions on the elements of the company's financial code letters I for increase, D for decrease, and NE for no effect. below. (Notice that the cost of goods sold is shown separately from all other expenses.) Use the Net Income Statement Cost of All Other Goods Sold - Expenses - Profit Statement of Financial Position Transaction Sales Assets = Liabilities + Equity EXERCISE 6.3 PC Connection is a leading mail order retailer of personal computers. A recent financial report issued by the company revealed the following information: Understanding Inventory Co Flows LO2, LOS, LOS Inventory (beginning of the year) Inventory (end of the year) Net sales for the year.. Gross profit margin $69 million $57 million $1.2 billion 11% a. Compute the company's cost of goods sold for the year. b. Approximately how much inventory did PC Connection purchase during the year? What factors might contribute to the company's low gross profit margin? Discuss reasons why PC Connection uses a perpetual inventory system. c. d. Perpetual Inventory Systen LO3, LOS EXERCISE 6.4 Hang Supply uses a perpetual inventory system. On 1 January, its inventory account had a beginning balance of $6,450,000. Hang engaged in the following transactions during the year: 1. Purch ed goods inventory for $9,500,000. 2. Generated net sales of $26,000,000. 3. Recorded inventory shrinkage of $10,000 after taking a physical inventory at year-end. 4. Reported gross profit for the year of $15,000,000 in its income statement. At what amount was Cost of Goods Sold reported in the company's year-end income statement? b. At what amount was Inventory reported in the company's year-end statement of financial position? Immediately prior to recording inventory shrinkage at the end of the year, what was the balance of the Cost of Goods Sold account? What was the balance of the Inventory account? a. c. These selected statistics are from recent annual reports of two well-known EXERCISE 6.5 retailers: Evaluating Performance LOG, LOS Walmart Target 1% Percentage increase (decrease) in net sales Percentage increase (decrease) in gross profit rate....... Percentage increase (decrease) in comparable store net sales.... 1% 2.4% -0.8% 2.6% -2.5% a. Explain the significance of each of these three measures. b. Evaluate briefly the performance of each company based upon these three measures