Page 328 - Accounting Principles (A Business Perspective)

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b. From the data given, compute the estimated inventory as of 2009 July 31.
Alternate problem K Apple Company's records contained the following inventory information:
Cost Retail
Sales $420,000
Purchases $396,000 582,000
Purchase returns 8,400 12,000
Transportation-in 10,800 —
Merchandise inventory
January 1 21,600 30,000
Beyond the numbers—Critical thinking

Business decision case A Susan Green and Carol Lewis, were interested in starting part-time business
activities to supplement their family incomes. Both heard a presentation by the manufacturer of an exercise device
and decided to become a distributor of this exerciser. Green's sales territory is Cobb County, and Lewis's sales
territory is Gwinnett County. Each owns her own business.
To induce Green and Lewis to become distributors, the manufacturer made price concessions on the first 1,000
units purchased. The manufacturer sold the first 200 units at USD 15 each, the next 300 at USD 18 per unit, and
the next 500 at USD 19 per unit. After that, Green and Lewis had to pay USD 20 per unit.
During the first year, each bought 1,200 units; coincidentally, both sold exactly 950 units for USD 27 each.
Green had USD 2,600 of selling expenses; Lewis incurred USD 1,700 of selling expenses. (Green's expenses were

considerably higher because on December 28 she distributed 4,000 sales brochures to households in her territory
at a cost of USD 800. The brochures stressed that people would want to take off the extra pounds gained during the
holiday season; also, these exercisers were inexpensive and could be used at home.)
At the end of the year, both had to determine their net incomes. Green received a B in the accounting course she
took at State University. She remembered the FIFO inventory method and plans to use it. Lewis knows nothing
about inventory costing methods. However, her husband is acquainted with the LIFO inventory method used at the
company where he works. He will help her compute the cost of the ending inventory and the cost of goods using

LIFO.
a. Prepare income statements for Green and Lewis.
b. Which business has performed better? Explain why.
c. Determine the inventory turnovers for Green and Lewis.
Business decision case B Connie Dalton owns and operates a sporting goods store. On February 2 the store
suffered extensive fire damage, and all of the inventory was destroyed. Dalton uses periodic inventory procedure
and has the following information in her accounting records, which were undamaged:

Accounting Principles: A Business Perspective 329 A Global Text