77) a) On March 10, Anthony Company received merchandise forresale from its norm

Question

77) a) On March 10, Anthony Company received merchandise forresale from its normal supplier. The price was $3,600 withterms of 2/10, n/30 for 100 units of Part #345. The invoice waspaid on March 17. Freight costs were $120 and the company paid$108 of interest on a loan to buy the inventory. What is theunit cost that should be recorded for each of the 100 unitsof Part # 345? b) On December 31, 2009, the end of the accounting period,Cruise Company has on hand 10,000 units of a resale item which cost$40 per unit when purchased on June 15, 2009. The selling price is$70 per unit. On December 30, 2009, the cost had dropped to $38 perunit. In view of the large quantity of units on hand, no purchasesare anticipated in the next six to nine months. At what inventoryamount should the 10,000 units be reported? c) Toys “R” Us had cost of goods sold in 2004 of$7,506 million and $7,646 million in 2003. Their merchandiseinventory in 2004 was $1,884 million and $2,094 million in2003. What was their inventory turnover in 2004? d) Toys “R” Us had cost of goods sold in 2004 of$7,506 million and $7,646 million in 2003. Their merchandiseinventory in 2004 was $1,884 million and $2,094 million in2003. How long were their average days to sell inventory in2004? 77) a) On March 10, Anthony Company received merchandise forresale from its normal supplier. The price was $3,600 withterms of 2/10, n/30 for 100 units of Part #345. The invoice waspaid on March 17. Freight costs were $120 and the company paid$108 of interest on a loan to buy the inventory. What is theunit cost that should be recorded for each of the 100 unitsof Part # 345? b) On December 31, 2009, the end of the accounting period,Cruise Company has on hand 10,000 units of a resale item which cost$40 per unit when purchased on June 15, 2009. The selling price is$70 per unit. On December 30, 2009, the cost had dropped to $38 perunit. In view of the large quantity of units on hand, no purchasesare anticipated in the next six to nine months. At what inventoryamount should the 10,000 units be reported? c) Toys “R” Us had cost of goods sold in 2004 of$7,506 million and $7,646 million in 2003. Their merchandiseinventory in 2004 was $1,884 million and $2,094 million in2003. What was their inventory turnover in 2004? d) Toys “R” Us had cost of goods sold in 2004 of$7,506 million and $7,646 million in 2003. Their merchandiseinventory in 2004 was $1,884 million and $2,094 million in2003. How long were their average days to sell inventory in2004?

Explanation / Answer

A.        Price             3,600 - Discount (2% of3,600)       72                                                     3,528 +Freight                             120 +Interestpaid                      108    Cost of 100units             3,756 Cost of each item = 3,756 /100                                   = $ 37.56 B. Inventory amount to be reported is 10,000 * 38 = $ 380,000( Lower of cost or Market ) C.Inventory Turnover ratio.           Cost ofgoodssold                                       Average inventory = Beg + end     = 2,094 + 1,884           Averageinventory                                                                            2                        2                                                                                                                                = 1,989      =     7,506             1,989           = 3.77      D.Average days to sell inventory        365 / inventory turnover 365 / 3.77 = 96.82 days

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