In 20x7, Alisa Harper opened a small retail store in a suburban mall. Called Harper Jeans Company,
Question:
Concerned about this turn of events, Harper compared the two years' results for the original store. The figures are as follows:
In addition, Harper's analysis revealed that the cost and selling price of jeans were about the same in both years and that the level of operating expenses was roughly the same in both years, except for the new manager's $25,000 salary. Sales returns and allowances were insignificant amounts in both years.
Studying the situation further, Harper discovered the following facts about the cost of goods sold:
Still not satisfied, Harper went through all the individual sales and purchase records for the year. Both sales and purchases were verified. However, the 20x8 ending inventory should have been $57,000, given the unit purchases and sales during the year. After puzzling over all this information, Harper comes to you for accounting help?
1. Using Harper's new information, recompute the cost of goods sold for 20x7 and 20x8, and account for the difference in net income between 20x7 and 20x8?
2. Suggest at least two reasons for the discrepancy in the company's 20x8 ending inventory?
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Principles of Accounting
ISBN: 978-0618736614
10th edition
Authors: Belverd Needles, Marian Powers, Susan Crosson