1460T_c09.qxd01:09:200609:04 AM Page456 EQA 456.Chapter 9 Inventories:Additional Valuation Issues (L0 5)E9-16 (Gross Profit Method)Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18,a fire destroyed the office,lumber shed,and a considerable portion of the lumber stacked in the yard.To file a report of loss for insurance purposes,the company must know what the inventories were immediately preceding the fire.No detail or perpetual inventory records of any kind were main- tained.The only pertinent information you are able to obtain are the following facts from the general ledger,which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware Inventory,Jan.1,2008 $250,000 $90,000 $45,000 Purchases to Aug.18,2008 1,500.000 375,000 160.000 Sales to Aug.18,2008 2,080.000 533,000 210.000 Instructions Submit your estimate of the inventory amounts immediately preceding the fire. (L0 5)E9-17 (Gross Profit Method) Presented below is information related to Warren Moon Corporation for the current year. Beginning inventory $600,000 Purchases 1,500,000 Total goods available for sale $2,100,000 Sales 2,500,000 Instructions Compute the ending inventory,assuming that (a)gross profit is 45%of sales;(b)gross profit is 60%of cost;(c)gross profit is 35%of sales;and (d)gross profit is 25%of cost. (L0 6)E9-18 (Retail Inventory Method)Presented below is information related to Bobby Engram Company. ⊕ Cost Retail Beginning inventory $58,000 $100,000 Purchases (net) 122.000 200,000 Net markups 10,345 Net markdowns 26,135 Sales 186,000 Instructions (a)Compute the ending inventory at retail. (b)Compute a cost-to-retail percentage(round to two decimals)under the following conditions. (1)Excluding both markups and markdowns. (2) Excluding markups but including markdowns. (3)Excluding markdowns but including markups (4)Including both markdowns and markups. (c)Which of the methods in (b)above (1,2,3,or 4)does the following? (1)Provides the most conservative estimate of ending inventory. (2)Provides an approximation of lower-of-cost-or-market. (3)Is used in the conventional retail method. (d)Compute ending inventory at lower-of-cost-or-market(round to nearest dollar). (e)Compute cost of goods sold based on (d). (f)Compute gross margin based on(d). (L0 6)E9-19 (Retail Inventory Method)Presented below is information related to Ricky Henderson Company. Cost Retail Beginning inventory $200,000 $280.000 Purchases 1.375.000 2,140.000 Markups 95.000 Markup cancellations 15.000 Markdowns 35,000 Markdown cancellations 5,000 Sales 2.200.000E9-16 (Gross Profit Method) Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were main￾tained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware Inventory, Jan. 1, 2008 $ 250,000 $ 90,000 $ 45,000 Purchases to Aug. 18, 2008 1,500,000 375,000 160,000 Sales to Aug. 18, 2008 2,080,000 533,000 210,000 Instructions Submit your estimate of the inventory amounts immediately preceding the fire. E9-17 (Gross Profit Method) Presented below is information related to Warren Moon Corporation for the current year. Beginning inventory $ 600,000 Purchases 1,500,000 Total goods available for sale $2,100,000 Sales 2,500,000 Instructions Compute the ending inventory, assuming that (a) gross profit is 45% of sales; (b) gross profit is 60% of cost; (c) gross profit is 35% of sales; and (d) gross profit is 25% of cost. E9-18 (Retail Inventory Method) Presented below is information related to Bobby Engram Company. Cost Retail Beginning inventory $ 58,000 $100,000 Purchases (net) 122,000 200,000 Net markups 10,345 Net markdowns 26,135 Sales 186,000 Instructions (a) Compute the ending inventory at retail. (b) Compute a cost-to-retail percentage (round to two decimals) under the following conditions. (1) Excluding both markups and markdowns. (2) Excluding markups but including markdowns. (3) Excluding markdowns but including markups. (4) Including both markdowns and markups. (c) Which of the methods in (b) above (1, 2, 3, or 4) does the following? (1) Provides the most conservative estimate of ending inventory. (2) Provides an approximation of lower-of-cost-or-market. (3) Is used in the conventional retail method. (d) Compute ending inventory at lower-of-cost-or-market (round to nearest dollar). (e) Compute cost of goods sold based on (d). (f) Compute gross margin based on (d). E9-19 (Retail Inventory Method) Presented below is information related to Ricky Henderson Company. Cost Retail Beginning inventory $ 200,000 $ 280,000 Purchases 1,375,000 2,140,000 Markups 95,000 Markup cancellations 15,000 Markdowns 35,000 Markdown cancellations 5,000 Sales 2,200,000 456 • Chapter 9 Inventories: Additional Valuation Issues (L0 5) (L0 5) (L0 6) (L0 6) 1460T_c09.qxd 01:09:2006 09:04 AM Page 456