Question : 25) At the end of its first year of business, : 1253258

 

25) At the end of its first year of business, Payless, Inc. had Sales of $800,000 and Cost of goods sold of $500,000 prior to a lower-of-cost-or-market write down. Payless reported its inventory at the lower market value of $90,000 instead of the cost of $100,000. The adjusting entry to record the write down included a decrease to Inventory and Cost of goods sold.

 

Required: Put an X in the appropriate box to show the effect of lower-of-cost-or-market write down:

 

 

 

Increase

Decrease

Remain the same

1.

Inventory turnover

 

 

 

2.

Gross profit ratio

 

 

 

3.

Current ratio

 

 

 

 

26) Using the following information, calculate the gross profit ratio, inventory turnover ratio, and the average days in inventory.

 

Sales

$1,000,000

Cost of goods sold

$700,000

Inventory at December 31, 2011

$80,000

Inventory at December 31, 2010

$60,000

Net income

$3,000

 

1. Gross profit ratio equals: ________

2. Inventory turnover ratio equals: ________

3. Average days in inventory equals: ________.

 

27) Divide the class into teams of three or four people. Each team member should work the following problem separately outside of class. Then give the students time in class to compare answers with their teammates and put together a final, correct copy of the problem. Each team should turn in only one copy of the problem for grading. All team members will receive the same grade.

 

Part A: Enter Tim’s Tams, Inc.’s May transactions and adjustments in the accounting equation.

1. May 1 Paid $600 cash for 3 months of insurance coverage beginning May 1.

2. May 2 Collected $8,000 from customers for sales made in April.

3. May 6 Paid $7,200 of accounts payable from April purchases.

4. May 6 Purchased 800 caps @ $6.10 each on account, FOB shipping point. Shipping cost $120 also on               account.

5. May 8 Paid $300 cash for supplies.

6. May 31 During May, Tim’s Tams sold 1,000 baseball caps @ $10 each on account. Tim’s uses a FIFO               perpetual inventory system. Beginning inventory consists of 500 caps at $6 each.

7. May 31 Tim’s Tams declared and paid a $400 cash dividend to its shareholder.

8. May 31 Adjusted for insurance used during the month. Recall that on May 1, Tim’s Tams paid $600               for 3 months of insurance coverage that began May 1.

9. May 31 Recorded one month’s straight-line depreciation on the $18,000 truck that has a 6-year               useful life and no salvage value.

10. May 31 Counted the office supplies and found that $100 of supplies have not been used.

 

 

Part B: Complete the financial statement.Part C: Complete the financial statement.

 

Part D: Complete the financial statement.

 

Part E: Complete the financial statement.

 

Part F: Using the Tim’s Tam financial satatements, answer the following:

 

 

 

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