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Merchandising Activities Chapter 6 ventory EXERCISE 6.6 Gold & Silver Hardware uses a perpetual inventory system. At year-end, the Inventory account has a balance of $2.500.000, but a physical count shows that the inventory on hand has a cost of only $2,460,000. Explain the probable reason(s) for this discrepancy. a. b. Indicate all the accounting records to which your journal entry in part b should be posted Prepare the journal entry required in this situation. c. EXERCISE 6.7 Aberdeen Bait Shop uses a periodic inventory system. At 31 December, Year 2, ystems the accounting records include the following information: $ 28,000 796,000 302,000 a. C. Inventory (as at 31 December, Year 1) Net sales Purchases A complete physical inventory taken at 31 December, Year 2, indicates goods costing $30,000 remains in stock. How were the amounts of beginning and ending inventory determined? b. Compute the amount of the cost of goods sold in Year 2. Prepare two closing entries at 31 December, Year 2: the first to create a Cost of Goods Sold account with the appropriate balance and the second to bring the Inventory account up-to-date Prepare a partial income statement showing the shop's gross profit for the year. Describe why a company such as Aberdeen Bait Shop would use a periodic inventory system rather than a perpetual inventory system. EXERCISE 6.8 This exercise stresses the relationships between the information recorded in a periodic inventory system and the basic elements of an income statement. Each of the five lines represents a separate set of information. You are to fill in the missing amounts. A net loss in the right-hand column is to be indicated by placing brackets around the amount, as for example in line d. e. -riodic e Begin- ing Inventory Net Sales Net Pur- chases Cost of Goods Sold Profit or (Loss) Gross Profit Expenses Ending Inventory 35,200 ? ? ? 104,000 272,000 95,200 ? 72,000 ? 20,000 76,000 72,000 207,000 ? a. 240,000 b. 480,000 c. 630,000 d. 810,000 e. ? 264,000 441,000 ? ? 450,000 166,500 135,000 153,000 ? 189,000 234,000 135,000 ? 148,500 270,000 ? 156,000 ? 396,000 stem EXERCISE 6.9 Year after year two huge supermarket chains-Park Super Stores, and Well done Super Stores-consistently report gross profit rates between 15 percent and 18 per- cent. Each uses a sophisticated perpetual inventory system to account for billions of dollars in inventory transactions. a. b. Discuss reasons why these firms consistently report such similar and stable gross profit rates. What technologies make it possible for these retailing giants to use perpetual inventory systems? EXERCISE 6.10 Golf World sold goods to Repulse Bay for $100,000, offering terms of 1/15, n/30. Repulse Bay paid for the goods within the discount period. Both companies use perpetual inventory systems. a. Prepare journal entries in the accounting records of Golf World to account for this sale and the subsequent collection. Assume the original cost of the goods to Golf World had been $65,000

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