Question

In: Accounting

Aunt Josie’s Toy Company has been in operation for several years. At the beginning of 2008,...

Aunt Josie’s Toy Company has been in operation for several years. At the beginning of 2008, there was $315,700 in beginning inventory. The following information about its inventory is available:

Ending Inventory

Year

Purchase

Sales

Cost

Net Realizable Value

2008

$1,890,000

$2,670,000

$290,000

$380,000

2009

1,750,000

2,240,000

350,000

340,000

2010

1,910,000

2,850,000

260,000

320,000

2011

2,040,000

2,930,000

320,000

370,000

a. Calculate the gross margin for each year, valuing the ending inventory at acquisition cost

(Hint: use the following relationship: Beginning inventory + Purchase – Ending inventory = Cost of Goods Sold).                                          

b. Calculate the gross margin for each year, valuing the ending inventory at the lower of cost and market value.

Solutions

Expert Solution

a) Calculate gross margin :

Beginning inventory Purchase Ending inventory Cost of goods sold Sales Gross margin
2008 315700 1890000 290000 1915700 2670000 754300
2009 290000 1750000 350000 1690000 2240000 550000
2010 350000 1910000 260000 2000000 2850000 850000
2011 260000 2040000 320000 1980000 2930000 950000

b) Calculate gross margin :

Beginning inventory Purchase Ending inventory Cost of goods sold Sales Gross margin
2008 315700 1890000 290000 1915700 2670000 754300
2009 290000 1750000 340000 1700000 2240000 540000
2010 340000 1910000 260000 1990000 2850000 860000
2011 260000 2040000 320000 1980000 2930000 950000

ekkarill92 answered 2 years ago
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