Question

1. Balance Sheet

	2015	2016
Accounts Receivable	$300	$350
Inventory	$200	$400
PP&E	$400	$400

Income Statement - 2016

Net Sales		$,2000
Gross Profit		$1,200
Net Income		$500

What is Company X’s inventory turnover ratio for 2016?

		1.67
		2.00
		2.67
		6.67

2.

Company X purchased goods from Company Y at an initial price of $20,000. Additionally, Company Y gave Company X a trade discount of 10% due to the volume of the order. The goods were shipped f.o.b. shipping point for $1,000, and the costs to prepare the inventory were $500. Payment terms were 3/10, n/30, but Company X did not pay within the discount period. What is the cost of the goods on Company X’s books?

		$18,500
		$18,915 .
		$19,500
		$21,500

3.

Use the following information to answer questions below. Company X had the following transactions affecting inventory during January 2016. All sales are made for $25, and Company X uses a periodic inventory system. Jan. 1 Beginning Balance: 200 units @ $15 Jan. 6 Purchase: 400 units @ $18 Jan. 11 Sale: 300 units Jan. 17 Purchase: 200 units @ $20 Jan. 25 Sale: 100 units What is Company X’s ending inventory balance under the average cost inventory method?

Selected Answer: $6,800 Answers: $6,800 $7,100 $7,600 $8,300 I was given the answer to this, but I need to know how the solution was found. 4. Which of the following items would not be reported as other comprehensive income on a company’s financial statements? Selected Answer: d. Gains from foreign currency translations Answers: a. Gain on sale of machinery used for 10 years b. Net unrealized holding gains on investment c. Gains from post-retirement benefit plans d. Gains from foreign currency translations same drill for #3

Answer 1

1.INVENTORY T/O RATIO=COGS/AVERAGE INVENTORY

COGS=Sales-Gross Profit

=2000-1200

=800

Average Inventory=2015+2016 Inventory/2

=200+400/2

=600/2

=300

Inventory T/O Ratio=800/300

=2.67(Option C)

2. Cost of goods on co'x books:

Initial Cost =20000

Less:Trade Discount(10%) =(2000)

Actual Cost 18000

Add:Fob shipping point cost=1000

Add:Cost of preparing inv. =500

Cost to be recorded =19500(option c.)

Note:FOB shipping point will be included in the buyers book as the risk of goods is with the buyer. If instead of Fob shipping it was Fob destination it should not be included in buyers book as risk remain with seller.

Note:As the Co. X didn't pay within the discounted period means 3/10 net 30 means 3% of discount if payment made within 10 days instead of 30 days. It will not be included as payment was not made within 10 days

3. Average Inventory cost method:

Date Units Cost per Unit Total cost

Jan 1 200 (Beg.Inv) 15 3000

Jan 6 400 (Purchase) 18 7200

Balance 600   17(10200/600)   10200

Jan 11 (300) (sale) 17 (5100)

Balance 300 17(5100/300) 5100

Jan 17 200(purchase) 20 4000

Balance 500 18.2(9100/500) 9100

Jan 25 (100) (sale) 18.2 (1820)

Balance 400 18.2(7280/400) 7280

None of the answer is correct.The answer will be 7280. I have exactly done the solution according to the concept. Please check and verify. 6800 answer is incorrect.

4. d. Gain from foreign currency translations are included in current income as they are recorded at one rate and then result in transactions at a later date and chages in exchange rate or transaction rate gives rise to gain and losses.

a., b., c are would be reported as Other comprehensive Income as it includes revenues, expenses, gains or losses which are yet to be realized.

PLEASE UPVOTE IF YOU FIND THE SOLUTIONS HELPFUL.

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