Computation of Inventory from Balance Sheet and Transaction Data
A portion of the Stark Company’s balance sheet appears as follows:
|
|
December 31, 2008 |
December 31, 2007 |
|
Assets: |
|
|
|
Cash |
$353,300 |
$100,000 |
|
Notes receivable |
0 |
25,000 |
|
Inventory |
? |
199,875 |
|
Liabilities: |
|
|
|
Accounts payable |
? |
75,000 |
Stark Company pays for all operating expenses with cash and purchases all inventory on credit. During 2008, cash totaling $471,700 was paid on accounts payable. Operating expenses for 2008 totaled $220,000. All sales are cash sales. The inventory was restocked by purchasing 1,500 units per month and valued by using periodic FIFO. The unit cost of inventory was $32.60 during January 2008 and increased $0.10 per month during the year. Stark sells only one product. All sales are made for $50 per unit. The ending inventory for 2007 was valued at $32.50 per unit.
Instructions:
1. Compute the number of units sold during 2008.
2. Compute the December 31, 2008, accounts payable balance.
3. Compute the beginning inventory quantity.
4. Compute the ending inventory quantity and value.
5. Prepare an income statement for 2008 (including a detailed Cost of Goods Sold section and ignoring income taxes).