Question

In: Accounting

Windward Corporation uses the Specific Identification inventory method. The Company has the following inventory items and...

Windward Corporation uses the Specific Identification inventory method.

The Company has the following inventory items and costs for the Period.

Beginning inventory of 3 units purchased for $4,100 each.
January 20, purchase 2 units for $4,200 each.
February 3, purchase 3 units for $4,500 each.
February 14, sold 5 units for $5,800 each (3 units from the beginning Inventory and 2 units from the February 3rd purchase)
1. What is the total cost of the units in inventory at March 31? $
2. What is the total Sales for the quarter ending March 31? $
3. What is the Cost of Goods Sold for the quarter ending March 31? $
4.What is Gross Margin for the quarter ending March 31? $

2. CDM Corporation erroneously included $24,600 of goods on consignment from another company in ending inventory.

What effect does this have on the following items? (determine the amount and use a positive number to designate an overstated amount and a negative number to designate an understated amount).

a. Ending Inventory $ ???
b. Cost of Goods Sold $ ????
c. Gross Margin $ ???
d. Net Income$ ???

Expert Solution

1. Opening Inventory Value = 3*4100 = 12300

Purchase as on Jan 20 and Feb 3 = 2*4200+3*4500= 21900

Total Value of Inventory as on 13 Feb =12300+21900= 34200

Inventory sold on 14 Feb COsting to 3*4100+2*4500= 21300.

Total COst of Inventory remaining = 34200-21300= $12900

2. Total Sale = 5800*5= $29000

3. Cost of Goods Sold = Opening Stock+purchases-Closing Stock= 12300+21900-12900= $21300

4. Gross Margin = Sales-COGS= 29000-21300= $7700

Part 2.

Closing Inventory: Value of closing inventory will increase by $24600 as we are including others inventory in our inventory

COGS: Cogs of good sold will decline due to an increase in the closing stock because we remove closing stock from the cost and if we remove excess closing stock then cost will also decline.

Gross margin: Since we will show less cost, gross margin will increase.

Net Income: Net Income will increase as we are showing an excess gross profit.

Hope my answer is satisfactory, in case of any doubt please give me a comment and in case you are happy give thumbs up.

ekkarill92 answered 1 year ago

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