Question #2

20 marks

Part A and Part B are independent.

Part A. (15 marks)

Time Period	Revenues	CGS	EI
Fiscal year 2017	-	-	$1588
1st quarter 2018	$430	$305	729
2nd quarter 2018	799	503	720
3rd quarter 2018	619	419	627
4th quarter 2019	421	317	606
Fiscal year 2018	2,269	1544	606

(i)

Using the fiscal year (annual) information for 2018, calculate GP percentage and inventory turnover ratio

Inventory turnover = CGS/ av. Inv (2 marks)

(ii) (4 marks)

Calculate GP percentage by quarter

1^st quarter GP percentage =

2^nd quarter GP percentage =

3^rd quarter GP percentage =

4^th quarter GP percentage =

(iii)

Recalculate inventory turnover ratio for 2018 using a weighted average of inventory over the year as follows: Use an average of averages. [See lesson notes # 10, example 5]. (6 marks) Comment on your results. (3 marks)

Part B.

(5 marks)

Hector Companys records indicate the following information:

Inventory, January 1, 2018 $ 550,000

Purchases during 2018 2,250,000

Sales during the year 3,000,000

On December 31, 2018, a physical inventory count determined that EI of $600,000 was in the warehouse. Hectors gross profit on sales has remained constant at 30%. Hector suspects some of the inventory may have been taken by some unsavory employees.

Required:

At December 31, 2018, what is the estimated cost of missing inventory?