a. Joel Company reported annual net income as follows:
2007…. USD 27,200
2008…. USD 28,400
2009…. USD 24,000
Analysis of the inventories shows that certain clerical errors were made with the following results:
|
Incorrect inventory amount |
Correct inventory amount |
|
|
2007 December 31 |
$4,800 |
$5,680 |
|
2008 December 31 |
5,600 |
4,680 |
What is the corrected net income for 2007, 2008, and 2009?
b. The records of Little Corporation show the following account balances on the day a fire destroyed the company”s inventory:
Merchandise inventory, January 1 USD 40,000
Net cost of purchases (to date) USD 200,000
Sales (to date) USD 300,000
Average rate of gross margin for the past five years 30 per cent of net sales.
Compute an estimated value of the ending inventory using the gross margin method.
c. The records of Draper Company show the following account balances at year-end:
|
Cost |
Retail |
|
|
Merchandise inventory, January 1 |
.$17,600 |
$25,000 |
|
Purchases |
68,000 |
100,000 |
|
Transportation-in |
1,900 |
|
|
Sales |
101,000 |
Compute the estimated ending inventory at cost using the retail inventory method.