Merchandise sold FOB shipping point indicates that:
1 answer:
You might be interested in
Answer: Option (a) is correct.
Explanation:
Ending inventory at retail:
= Total retail - net sales - markdown
= (Beginning inventory + purchases + freight-in + markups) - net sales - markdown
= ($396,000 + $2,200,000 + 0 + $48,000) - $2,000,000 - $72,000
= $572,000
Total cost = Beginning inventory + purchases + freight-in + markups
= $260,000 + $1,370,000 + $86,000 + 0
= $1,716,000
Cost to retail ratio:
= 0.6490 or 64.9%
Ending inventory at cost:
= Ending inventory at retail × Cost to retail ratio
= $572,000 × 64.9%
= $371,228
The above answer can be explained as under -
The journal entry to record estimated warranty expense is -
Warranty Expense Dr. ............. $ 17,800
Estimated Warranty Liability .......... Cr. $ 17,800.
The estimated warranty liability is calculated on the basis of the credit sales of the year and percentage estimated. Here, the credit sales of the year is $ 356,000 and the estimated percentage is 5 % of credit sales. Thus, estimated warranty liability is = $ 356,000