Question
In: Finance
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2. For the sake of simplicity, you are the only shareholder who owns this corporation. You also decide to take on $10,000 liabilities with 20% annual interest rate. You spend $6,000 cash to buy books as the inventory. Throughout the year, you sell half of books to students in exchange for $9,000 cash, that is, your revenue is $9,000 and COGS is $3,000. Also, $2,000 cash dividend is paid at the end of the year. Tax rate is 40%.
All entries of balance sheet are zero at the beginning of the year (Jan. 1).
What is the book value of inventory (books) at the end of the year?
Solutions
Expert Solution
Since the values at the beginning of the year was zero and after that you purchased books as inventory worth $6000. You sold books worth $3000 during the year.
Therefore cost of Inventory left is $6000-$3000 = $3000.
And as per Inventory valuation method, Inventory is valued at cost or Net Realizable value (NRV) whichever is lower. We do not have any information regarding the NRV, hence we should recored Inventory at cost only, i.e. $3000.
Therefore, book value of Inventory at the year end is $3000.
jeff jeffy answered 2 years agoRelated Solutions
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
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shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
You invest $8,000 in an on-line bookstore in the form of a corporation on Jan. 2....
You invest $8,000 in an on-line bookstore in the form of a
corporation on Jan. 2. For the sake of simplicity, you are the only
shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
your revenue is $9,000 and COGS is $3,000. Also, $2,000...
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shareholder who owns this corporation. You also decide to take on
$10,000 liabilities with 20% annual interest rate. You spend $6,000
cash to buy books as the inventory. Throughout the year, you sell
half of books to students in exchange for $9,000 cash, that is,
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