Question

During 2017, Flint Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Flint for a lump sum of $54,900 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below.

Type
No. of Chairs
Estimated Selling
Price Each
Lounge chairs 300 $90
Armchairs 300 80
Straight chairs 800 50

During 2017, Flint sells 150 lounge chairs, 120 armchairs, and 110 straight chairs.

What is the amount of gross profit realized during 2017? What is the amount of inventory of unsold straight chairs on December 31, 2017?(Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to 0 decimal places, e.g. 5,845.)

Gross profit realized during 2017
$
[Entry field with incorrect answer now contains modified data]
Amount of inventory of unsold straight chairs
$
[Entry field with incorrect answer now contains modified data]

Answer 1

We can find out the cost for each category of chair by applying the net realisable value proportion to the lum amount of $54900
Calculation net realisable value & proportion
Type of chair	No.of chairs	Selling price per chair	Net Realisable value	proportion
Lounge Chairs	300	$90	$27,000	0.30
Arm chairs	300	$80	$24,000	0.26
Straight chairs	800	$50	$40,000	0.44
			$91,000	1.00

Breakup of lumsum amount of $54900 in above proportion
Type of chair	No.of chairs	Total Cost	Cost per chair
Lounge Chairs	300	$16,289.01	$54.30
Arm chairs	300	$14,479.12	$48.26
Straight chairs	800	$24,131.87	$30.16
		$54,900.00

Calculation of Gross profit realised during 2017
Type of chair	No.of chairs sold	Sale value	Cost	Gross profit
Lounge Chairs	150	$13,500	$8,145	$5,355
Arm chairs	120	$9,600	$5,792	$3,808
Straight chairs	110	$5,500	$3,318	$2,182
		$28,600	$17,254	$11,346
Gross profit for 2017 = $11346

Calculation of Amount of inventory of unsold straight chairs
Purchase Qty		800
Less : sold Qty		110
Unsold chairs		690
Cost per chair		$30.16
Amount of Inventory		$20,810