Question

1. Calculate the   book inventory (round to two decimal places) , the  shortage or overage dollars (round all answers to two decimal places), and then the  shortage or overage percent (but leave off the % sign) given the following information:

               Opening inventory                                                  $   64,200

               Net purchases                                                             154,600

               Transfer in                                                                      3,400

               Transfer out                                                                   2,700

               Markdowns                                                                 11,300

               Markdown cancellations                                                   760

               Net sales                                                                     141,300

               Employee discounts                                                       1,920

               Closing physical inventory                                         63,760

Answer 1

The formula for Closing book inventory= Total merchandise handled-Total deductions

Total merchandise handled = Opening inventory + Net purchases + (transfers in- transfers out) + additional markup

Total deductions =  Net sales + (markdowns- markdown cancellations) + employee discounts

Shortage of dollars= Book inventory- physical inventory

Shortage percent = (book inventory- physical inventory)/ Net sales

Solution:

By substituting the given data

Step1:

Total merchandise handled = Opening inventory + Net purchases + (transfers in- transfers out) + additional markup

Total merchandise handled = 64,200 + 154,600 + (3400-2700) + 0(since additional markup is not given)

Total merchandise handled = 218,800 + 700

Total merchandise handled = 219,500

Step 2:

Total deductions =  Net sales + (markdowns- markdown cancellations) + employee discounts

Total deductions = 141,300 + (11,300-760) + 1,920

Total deductions = 143,220 + 10,540

Total deductions = 153,760

Step 3:

Closing book inventory= Total merchandise handled-Total deductions

Closing book inventory = 219,500-153,760

Closing book inventory = 65,740

Step 4:

Shortage = Book inventory- physical inventory

Shortage = 65,740- 63760

Shortage = $1980

Step 5:

Shortage percent = (book inventory- physical inventory)/ Net sales

Shortage percent = (65,740-63,760) / 141,300

Shortage percent = 0.0140 = 1.4%

Shortage percent = 1.4%

Answer:

Closing book inventory = 65,740

Shortage = $1980

Shortage percent = 1.4%