Question
In: Accounting
Harrison Company has a July 31 fiscal year end and uses a perpetual inventory system. The...
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Solutions
Expert Solution
(a) (Incorrect)
HARRISON COMPANY
Income Statement
Year Ended July 31
2021 2020 2019
Sales $350,000 $330,000 $310,000
Cost of goods sold 245,000 235,000 225,000
Gross profit 105,000 95,000 85,000
Operating expenses 76,000 76,000 76,000
Profit $ 29,000 $ 19,000 $ 9,000
(Corrected)
HARRISON COMPANY
Income Statement
Year Ended July 31
2021 2020 2019
Sales $350,000 $330,000 $310,000
Cost of goods sold 240,000 ** 240,000 * 225,000
Gross profit 110,000 90,000 85,000
Operating expenses 76,000 76,000 76,000
Profit $ 34,000 $ 14,000 $ 9,000
** $240,000 = $245,000 + $10,000 – $15,000
* $240,000 = $235,000 – $10,000 + $15,000
(b)
Inventory turnover = Cost of goods sold ÷ Weighted average inventory
Incorrect
2020: $235,000 ÷ [($45,000 + $35,000) ÷ 2] = 5.88
2021: $245,000 ÷ [($55,000 + $45,000) ÷ 2] = 4.90
Corrected
2020: $240,000 ÷ [($40,000 + $35,000) ÷ 2] = 6.40 times
2021: $240,000 ÷ [($55,000 + $40,000) ÷ 2] = 5.05 times
ekkarill92 answered 1 year agoRelated Solutions
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