Aunt Josie’s Toy Company has been in operation for several years. At the beginni
ID: 342241 • Letter: A
Question
Aunt Josie’s Toy Company has been in operation for several years. At the beginning of 2008, there was $315,700 in beginning inventory. The following information about its inventory is available:
Ending Inventory
Year
Purchase
Sales
Cost
Net Realizable Value
2008
$1,890,000
$2,670,000
$290,000
$380,000
2009
1,750,000
2,240,000
350,000
340,000
2010
1,910,000
2,850,000
260,000
320,000
2011
2,040,000
2,930,000
320,000
370,000
a. Calculate the gross margin for each year, valuing the ending inventory at acquisition cost
(Hint: use the following relationship: Beginning inventory + Purchase – Ending inventory = Cost of Goods Sold).
b. Calculate the gross margin for each year, valuing the ending inventory at the lower of cost and market value.
Ending Inventory
Year
Purchase
Sales
Cost
Net Realizable Value
2008
$1,890,000
$2,670,000
$290,000
$380,000
2009
1,750,000
2,240,000
350,000
340,000
2010
1,910,000
2,850,000
260,000
320,000
2011
2,040,000
2,930,000
320,000
370,000
Explanation / Answer
a) Calculate gross margin :
b) Calculate gross margin :
Beginning inventory Purchase Ending inventory Cost of goods sold Sales Gross margin 2008 315700 1890000 290000 1915700 2670000 754300 2009 290000 1750000 350000 1690000 2240000 550000 2010 350000 1910000 260000 2000000 2850000 850000 2011 260000 2040000 320000 1980000 2930000 950000Related Questions
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