Question

Toyland wishes to produce quarterly financial statements, but it takes a physical count of inventory only at year-end. The following historical data were taken from the 2016 and 2017 accounting records:

	2016			2017
Net sales	$	152,000		$	185,000
Cost of goods sold		67,900			80,380

At the end of the first quarter of 2018, Toyland’s ledger had the following account balances:

Sales	$	240,000
Purchases		159,000
Beginning inventory 1/1/2018		63,300
Ending inventory 3/31/2018		96,700

Based on purchases and sales, the Toyland accountant thinks inventory is low.

Required

Using the information provided, estimate the following for the first quarter of 2018:

a.	Cost of goods sold. (Use average cost of goods sold percentage.) (Round your intermediate percentage values to 2 decimal places and final answers to nearest whole dollar amount.)

       

b.	Ending inventory at March 31 based on the historical cost of goods sold percentage.

     

c.	Inventory shortage

Answer 1

		2016	2017	Total
	Net Sales	1,52,000	1,85,000	3,37,000
	Less: COGS	67,900	80,380	1,48,280
	Gross Profit	84,100	1,04,620	1,88,720
	COGS as % of Sales	44.67%	43.45%	44.00%
		(COGS/Sales)	(COGS/Sales)	(COGS/Sales)
	Results of Q1 2018:
	Sales	2,40,000
	Purchases	1,59,000
	Beginning inventory 1/1/2018	63,300
	Ending inventory 3/31/2018	96,700
	Calculation of COGS for Q1:
	Beginning inventory 1/1/2018	63,300
	Add: Purchases	1,59,000
	Total Available Goods	2,22,300
	Less: Ending inventory 3/31/2018	96,700
	Cost of Goods Sold	1,25,600
	Sales	2,40,000
	Cost of Goods Sold	1,25,600
	Gross Profit	1,14,400
A	Estimated COGS for Q1:
	Sales	2,40,000
	COGS as % of Sales	44.00%
	Estimated COGS	1,05,600
B	Actual COGS	1,25,600
	Estimated COGS	1,05,600
	Excess COGS than Estimated	20,000
	Ending inventory 3/31/2018	96,700
	Add: Excess COGS Used	20,000
	Ending inventory 3/31/2018-Estim	1,16,700
C	Ending inventory 3/31/2018-Actual	96,700
	Ending inventory 3/31/2018-Estim	1,16,700
	Inventory Shortage	20,000