Question: The following information was taken from the accounting records of

The following information was taken from the accounting records of Chicoutimi Ltée and Jonquière Ltée at December 31, 2016. The two companies are competitors.
Required:
a. Calculate the gross margin, gross margin ratio, and inventory turnover ratio at December 31, 2016, for:
i. Chicoutimi Ltée.
ii. Jonquière Ltée.
b. During the December 20, 2016, inventory count at Chicoutimi Ltée, $75,000 of inventory shrinkage was identified. It had not been recorded in the inventory account.
i. Prepare the entry to record the inventory shrinkage of $75,000.
ii. Recalculate Chicoutimi’s gross margin, gross margin ratio, and inventory turnover ratio after the adjusting journal entry is made.
iii. Describe what happened to Chicoutimi’s gross margin ratio and inventory turnover ratio after adjusting for the inventory shrinkage.
c. Which company do you think is better at managing inventory? Explain your answer.

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  • CreatedJune 11, 2015
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