The outdoor Store began 2014 with 80000 units of inventory that cost $48000. During 2014, The Outdoor Store purchased merchandise on account for $434000:

	Purchase 1:	150,000 units costing	$135,000
	Purchase 2:	270,000 units costing	243,000
	Purchase 3:	140,000 units costing	56,000

Cash payments on account totaled $390000 during the year (ignore purchase discounts). The Outdoor Stores sales during 2014 consisted of 580000 units of inventory for $1160000, all on account. The company uses the FIFO inventory method. Cash collections from customers were $565000. Operating expenses totaled $250700, of which the Outdoor Store paid $163000 in cash. The Outdoor Store credited Accrued Liabilities for the remainder. At December 31, The Outdoor Store accrued income tax expense at the rate of 40% of income before tax.

Requirement 1: Show how the Outdoor Store would compute cost of goods sold for 2014.

	Units	Total Cost
Units sold from beginning inventory	______	______
Units sold from Purchase 1	______	______
Units sold from Purchase 2	______	______
Units sold from Purchase 3	______	______
Cost of goods sold	580,000	______

Requirement 2: Prepare the Outdoor Stores income statement for 2014. Show totals for the gross profit and income before tax.

The Outdoor Store

Income Statement

Year Ended December 31, 2014

Net Income:

(Account Names: Accounts Payable, Accounts Receivable, Advertising Expense, Cost of Goods Sold, Gross Profit, income before tax, income tax expense, inventory, operating expense, purchases, salary expense, sales revenue)

Requirement 3: Make summary journal entries to record the Outdoor Stores transactions for the year, assuming the company uses a perpetual inventory system. Explanations are not required.

Begin with the single entry to record debit purchases.

Account	Debit	Credit

Next, record the cash payments on account.

Account	Debit	Credit

Now record the sales made on account. (Do not yet record cash collections for customers or the cost related to the sales. We will do this in the following journal entries.)

Account	Debit	Credit

Record the inventory transaction associated with the sale of merchandise.

Account	Debit	Credit

Record the collection of cash from customers.

Account	Debit	Credit

Record the operating expenses.

Account	Debit	Credit

Finally, record the entry to accrue income tax.

Account	Debit	Credit

Requirement 4: Determine the FIFO cost of the Outdoor Stores ending inventory at December 31, 2014, two ways:

Use a T account (Beginning Balance, Ending Balance, COGS, Purchases)

Multiply the number of unites on hand by the cost.

Number of units in ending inventory ______

Unit cost of ending inventory at FIFO _____

FIFO cost of ending inventory _____

Requirement 5) Determine the Outdoor Stores gross profit percentage, rate of inventory turnover, and net income as a percentage of sales for the year. In the Outdoor Stores industry, a gross profit percentage of 40%, an inventory turnover of 6 times per year, and a net income percentage of 7% are considered excellent. How well does the Outdoor Store compare to these industry averages? (round to on decimal place, X.X)

	Industry			"Better" or "Worse"
	Average	The Outdoor Store		than average?
Gross profit percentage:	40%	___________	%	_______________
Inventory turnover:	6 times	___________	times	_______________
Net income as a percent of sales:	7%	___________	%	_______________