PART 1

Haymitch Global Industries is a world leading producer of loudspeakers and other electronics products, which are sold under brand names like JRH, Excelsior, and Haymitch/Krug. The company reported the following amounts in its financial statements (in millions):

2016 2015

Net Sales $4,800 $4,860

Cost of Goods Sold 3,700 3,610

Beginning Inventory 470 430

Ending Inventory 580 470

Required:

1. Determine the inventory turnover ratio and average days to sell inventory for 2016 and 2015.(Use 365 days in a year. Round your intermediate and finalanswers to 1 decimal place.)

2016 2015

Inventory Turnover Ratio ___ times per year ___ times per year

Days to Sell ___ days ___ days

PART 2

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the time of each sale, as if it uses a perpetual inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions Units Unit Cost

Beginning inventory, January 1 1,750 $50

Transactions during the year:

a.Purchase, January 30 2,450 62

b.Sale, March 14 ($100 each) (1,440)

c.Purchase, May 1 1,190 80

d.Sale, August 31 ($100 each) (1,850)

1. Calculate the cost of goods sold and ending inventory for Gladstone Company assuming it applies the LIFO cost method perpetually at the time of each sale.

Cost of Goods Sold ______

Ending Inventory ______

PART 3

Partial income statements for Sherwood Company summarized for a four-year period show the following:

2015201620172018Net Sales$1,300,000$1,700,000$1,800,000$2,300,000Cost of Goods Sold1,001,0001,292,0001,404,0001,771,000Gross Profit$299,000$408,000$396,000$529,000

An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $13,000. The inventory balance on December 31, 2017, was accurately stated. The company uses a periodic inventory system.

Required:

1. 1.Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.
2. 2-a.Compute the gross profit percentage for each year (a) before the correction and (b) after the correction.
3. 2-b.Does the pattern of gross profit percentages lend confidence to your corrected amounts?

REQUIRED 1

SHERWOOD COMPANY

Income Statements (Corrected)

2015 2016 2017 2018

Net Sales ______ _____ _____ ______

Cost of Goods _______ ______ ______ _______

Sold ______ _____ _____ _____

Gross Profit ______ ______ ______ _____

REQUIRED 2A

2015 2016 2017 2018

Before Correction ____% ______% ______% _____%

After Correction _____% ______% ______% _____%

REQUIRED 2B

Does the pattern of gross profit percentages lend confidence to your corrected amounts?

Yes or No?