Question

In: Accounting

During 2020, Skysong Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs...

During 2020, Skysong Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Skysong for a lump sum of $77,805 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

520 $90

Armchairs

390 80

Straight chairs

910 50


During 2020, Skysong sells 260 lounge chairs, 130 armchairs, and 156 straight chairs.

What is the amount of gross profit realized during 2020? What is the amount of inventory of unsold straight chairs on December 31, 2020? (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 2020

$enter a dollar amount

Amount of inventory of unsold straight chairs

$enter a dollar amount

Solutions

Expert Solution

Lumpsum consideration paid = $77,805
Allocation of Consideration
Type Units Selling price Est. Sales % of Total Consideration Allocated Consideration
Lounge chairs 520 90 46800 37.89% 77805 29484
Armchairs 390 80 31200 25.26% 77805 19656
Straight chairs 910 50 45500 36.84% 77805 28665
Total 123500 100.00% 77805 77805
Cost per unit
Type Allocated Consideration Units Cost per unit
Lounge chairs 29484 520 56.7
Armchairs 19656 390 50.4
Straight chairs 28665 910 31.5
Total 77805
Ending inventory units
Type Total Units Sales units Ending units
Lounge chairs 520 260 260
Armchairs 390 130 260
Straight chairs 910 156 754
Total
Gross Profit per unit
Type Selling price Cost per unit Gross Profit
Lounge chairs 90 56.7 33.3
Armchairs 80 50.4 29.6
Straight chairs 50 31.5 18.5
Gross Profit realized:
Type Sales units Gross Profit per unit Total Gross Profit
Lounge chairs 260 33.3 8658
Armchairs 130 29.6 3848
Straight chairs 156 18.5 2886
Total Gross Profit realized 15392
Ending inventory cost:
Type Ending units Cost per unit Ending Inventory cost
Lounge chairs 260 56.7 14742
Armchairs 260 50.4 13104
Straight chairs 754 31.5 23751
Total ending inventory 51597
Final Answer: <

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