Question

For each of the following cases determine the ending balance in the inventory account. (Hint: First, determine the total cost of inventory available for sale. Next, subtract the cost of the inventory sold to arrive at the ending balance.)
a. Jill’s Dress Shop had a beginning balance in its inventory account of $50,000. During the accounting period, Jill’s purchased $105,000 of inventory, returned $7,000 of inventory and obtained $950 of purchases discounts. Jill’s incurred $1,400 of transportation-in cost and $800 of transportation-out cost. Salaries of sales personnel amounted to $41,000. Administrative expenses amounted to $45,600. The cost of goods sold amounted to $102,300.
b. Ken’s Bait Shop had a beginning balance in its inventory account of $12,000. During the accounting period, Ken’s purchased $52,900 of inventory, obtained $1,600 of purchase allowances, and received $560 of purchase discounts. Sales discounts amounted to $840. Ken’s incurred $1,300 of transportation-in cost and $460 of transportation-out cost. Selling and administrative cost amounted to $14,300. Cost of goods sold amounted to $37,900.

Answer 1

Answer:

a. $46,150

b. $26,140

Explanation:

The computation is shown below:

a. Beginning inventory $50,000

Add: Purchase made during the year $105,000

Less: Purchase return ($7,000)

Less: Purchase discount ($950)

Add: Inward transportation cost  $1,400

Less: Cost of goods sold ($102,300)

Ending inventory $46,150

b. Beginning inventory $12,000

Add: Purchase made during the year $52,900

Less: Purchase allowance ($1,600)

Less: Purchase discount ($560)

Add: Inward transportation cost  $1,300

Less: Cost of goods sold ($37,900)

Ending inventory $26,140

We simply applied the above calculations so that the correct amount of ending inventory could come