36 GROSS PROFIT METHOD Problem 30-1 (AICPA. Adapted) 30, 2014, all of the inventory was destroyed by fire. The ff i pertain to the © operations for the six X months ended Netsles | 1 ; ‘ 8 oe ee Net purchases . . Witnteesinadtotbederoeinenn? a, 4,800,000 » 2,800,000 - ; “1,600,000 ° ae * 800,000 : Lin Company sells merchandise at a gross profit of meal esProblem 30-2 (AICPA Adapted) Ohvia Company prov ide: she following information for the year Wecember 31, 2014: ended Inventory, January 1 ' 650,000 Purchases 2,300,000 Purchase returns 80,000 Freight in 60,000 Sales 3,400,000 Sales discounts 20,000 Sales returns - 30,000 On December 31, 2014, a physical inventory revealed that the ending inventory was only P420,000. The gross profit on sales has remained constant at 30% in recent years. The entity suspects that some inventory may have been pilfered by one of the entity’s employees. On December 31, 2014, what is the estimated cost of missing inventory? * ‘ a. 151,000 _ b. 165,000 c.” 420,000 d. 585,000Problem 30-3 (AICPA Adapted) On October 31, 2014, Pamela Company reported that a flood caused severe damage to the entire inventory. Based on recent history, the entity has a gross profit of 25% of sales. The following information is available from the records for ten months ended October 31,2014: Inventory, January 1 520,000 Purchases 4,120,000 Purchase returns 60,000 Sales 5,600,000 Sales returns Fi 400,000 Sales allowances ° . 100,000 A physical inventory disclosed usable damaged goods which can be sold for P70,000. Using the gross profit method, what is the estimated cost of goods sold for the ten months ended October 31, 2014? a. 3,360,000 b. 3,830,000 .. c. 3,900,000 d. 3,825,000‘Problem 30-4 (AICPA Adapted) | On September 30, 2014, Brock Company reported that a fire caused severe damage to the entire inventory. The entity has a gross profit of 30% on cost. The following data are available for nine months ended September 30, 2014: . ' Inventory at January 1 ‘ . 1,100,000 Net purchases 6,000,000 Net sales - 7,280,000 A physical inventory disclosed usable damaged goods which can be sold for P100,000. What is the estimated cost of goods sald for the nine months ended September 30; 2014? . - : a. 5,500,000 ¥ b. 4,970,000 fa c. 5,096,000 d. 5,600,000 ’ ;Problem 30-5(AICPA Adapted) Tonette Company provided the following information for the carrest vear: Net sales 3,0 Freight in LM Purchase discounts DI Ending inventory 240,590 The gross margin is 40% of sales. What is the cost of-goods zvailable for sale? a. 1,680,000 b. 1,920,000 c. 2,400,000 d. 2,440,000 Solution 30-5 Answer c Cost of goods sold (60% x 3,600,000) 2,160,900 Ending inventory . 240.090 ost of goods available for sale 240 VO 366Problem 30-6 (IAA) Keepsake Company estimated the i March 31 for use in interim financial stator” cel iri cost is 25%. The inventory on January 1 was P5 500,00 Dene period January I to March 31, the entity had purchases of Poa on purchase returns of P200,000 and sales of P7.500,000. Ween estimated cost ofinventoryonMarch31?. "ute a 2,100,000 b. 3,600,000 c. 3,975,000 - @ 2,800,000‘Problem 30-7 (IAA) . . - A fire destroyed Newbom Company’s inventory on October 31. On January 1, the inventory had a cost of P2,500,000. During the period - January 1 to October 31, the entity had net purchases of P7,500,000 and net sales of P15,000,000. Undamaged inventory at the date of fire had a cost of P150,000. The markup on cost is 66 2/3%. What was the cost of inventory destroyed by fire? a a. 3,850,000. . b. 4,000,000 ¢. 1,000,000 d= 850,000Problem 30-8 (IAA) Moderate Company provided the following information: June July August Sales on account 7,200,000 7,360,000 7,600,000 Cash sales 720,000 . 800,000 1,040,000 Allmerchandise is marked up to sell at invoice Cost plus 20%. In' at the beginning of each month is 30% of that month’s cost of goods Sold. 1. What is the cost of goods sold for June? . a. 5,760,000 : b. 6,000,000 d. 6,600,000 2. Whatis the amount of purchases for July? a. 6,528,000° b. 8,304,000 c. 6,800,000 d. 6,920,000 -" Problem 30-9 (IAA) ~On the night of September 30, 2014, merchandise inventory of Sonia _ completely destroyed except for normally sell for P100,000 and that had an estimated net realizable value of P25,000 and undamaged goods that normally sell for . P60,000. The following data are available: a Inventory, January 1 8 fire destroyed most of the Company. All goods were Partial damaged goods that 660,000 Net purchases, January t through September 30. 4,240,000 Net sales, January 1 through September 30 5,600,000 . 0 Total 2013 © 201202011 . Net sales 9,000,000 - 5,000,000 3,000,000. 1,000,000 Cost of sales’ 6,750,000 3,840,000. _2,200,000 710,000 Gross'intome 2,250,000 © 1,160,000 " __800,000 _290,000 " Wyhat is the estimated amount of fire loss on September 30, 20147 a. 700,000 : 5; . B, 615,000 vo 1 : &. 630,000": : 4 589,000 : . © ket ~Problem 30-10 (LAA) Fairy Company provided the following information: ; 2014 2015 Net sales 7,500,000’. 4,500,000 Beginning inventory . 1,260,000 Purchases ‘6,450,000 3,180,000 Freight in . 350,000 220,000 Purchase discounts 90,000 - 45,000 Purchase retums _ 120,000 * 40/600 Purchase allowances 20,000 . 15,000 Ending inventory : «2,355,000 2 1. What is the amount of gross profit for 2014? a. 2,025,000, b. 2,625,000 ‘ ¢. 2,250,000. °°: _ . .3,000,000 : : 2. Whatiis the gross profit rate for 20147” 30% ‘. 5 27% 35% 40% poop 3. Whats the inventory on December 31,2015?“ ‘a. 2,370,000 ie b. 2,025,000 -€ 3,285,000 4. 2,505,000problem 30-11 (IAA) 0% of its inventory by fire on D, ecem| ny lost 5 en taken on December 3], 29), 31 » 2014»? Cool Air Compa! 2014, No inventory had be: following profit and loss data are available: 2014 2013 Inventory, January 1 1,040,000 840,000 2012 Purchases 3,600,000 2,876,000 bag Purchase returns 240,000 1 40,000 283600 sa 4,060,000 3,900,000 20 60,000 100,000 * 200m 000 Sales returns Whats th: value of the inventory’ destroyed by fire? a. 1,600,000 b. 1,760,000 c. 800,000 d. 880,000prolem30-12(AICPA. Adapted) 2 December 31, 2014, Empress Company had a fire whic On pletely destroyed the goods in process inventory. After the ie cofyscal inventory was ken. The raw materials were valued a .1f90,000, the finished goods at P1,000,000 and eupplies at 100,000 on December 31, 2014. The inventories on January 1, Jo14 consisted of the following: Raw materials 300,000 supplies 400,000 pata for the current year sales. Purchases 1,000,000 Freight in 100,000 Direct labor 800,000 Manufacturing overhead - 50% of direct labor 1 ‘Average gross profit rate 30% 1. Whatis the cost of goods sold? 2,100,000 ». 1,700,000 . . 1,900,000 4, 2,300,000 2. What isthe cost of goods manufactured? * a 2,500,000 b. 1,700,000 3,100,000 4. 2,300,000 3. "What i the estimated oost of the goods in process on December 31,2014 that were: destroyed by fire? & 1,300,000 b. 2,100,000 373Problem 30-15 (AICPA Adapted) wudit of Remy Company for the year ended June anal conte the ‘entity's CPA observed the physical inventory at an interim date, may a ‘The followirig information was obtained: July 1,20 $75,000 seven ent ’ May 31,2014 950,000 Sales for 11 months ended May 31,2014 8,400,000 Sates for year ended June 30, 2014 "600°000 purchases for 11 months ended May 31, 2014 6,750,000 Purchases for year ended June 30, 2014 £000,063 ipmentsreceived in May and included in the . pine ‘inventory but recorded as June purchases 15,000 received in unsalable condition and b Stipejed from physical inventory. Credit memos had not been received nor had chargebacks to recorded: ‘vendors been . vrfoalst May, 2014 . 10,000 Total at June 30, 2014 Gacluding the May ‘unrecorded chargebacks) 15,000 c. Deposit made with vendor and charged to purchases bye 2014. Product was shipped in uly, 2014 20,000 4 grade with vendor and charged to purchases in May, 2014, Product was shipped FOB destination, ‘on May 29, 2014 and was included in May 31, 2014 ‘physical inventory as goods in transit 55,000 ‘o Through the cacletones ofthe receiving deparment ‘a June shipment was damaged is shipment : S stor old a Jane at scan oF 100,000 L What is the cost of goods sold for the month of June 2014? “a 980,000~ . . 5b. 960,000 ¢ 880,000. ” . - & 780,000 ‘ . 2 ‘What Sens meaner! 2014? a 1,240,000 b. 1,140,000. ° © 4,160,000 + € 340,000Problem 30-16 (IAA) Beyonce Company sells merchandise on a consignment basis to dealers. The selling price of the merchandise averages 25% above cost. The dealer is paid a 10% commission of the sales price for all sales made. All dealer sales are made on a cash basis. The following consignment activities occurred during the current year: Manufacturing cost of goods shipped onconsignment -, 8,800,000 Sales price of merchandise sold by dealers 9,600,000 Payments remitted by dealers after deducting commission 6,300,000 What is the gross profit on sales? a. 2,400,000 —.. b. 1,920,000 c. 1,700,000 d. 1,220,000