Based on the following data, estimate the cost of the ending merchandise inventory:

$$\begin{array}{lrr} \text { Sales (net) } & \$ 1,450,000 \\ \text { Estimated gross profit rate } & 42 \% \\\\ \text { Beginning merchandise inventory } & \$~~~~100,000 \\ \text { Purchases (net) } & \underline{~~~~~~860,000}\\ \text { Merchandise available for sale } & \underline{\underline{\$~~~~960,000}} \end{array}$$

The merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records:

Estimate the cost of the merchandise destroyed.

On the basis of the following data, estimate the cost of the merchandise inventory at June 30 by the retail method:

$$\begin{array}{llrr} & & \textbf { Cost } & {\textbf { Retail }} \\ \hline \text { June 1 } & \text { Merchandise inventory } & \$ 165,000 & \$ 275,000 \\ \text { June 1-30 } & \text { Purchases (net) } & 2,361,500 & 3,800,000 \\ \text { June 1-30 } & \text { Sales (net) } & & 3,550,000 \end{array}$$

A business using the retail method of inventory costing determines that merchandise inventory at retail is $775,000. If the ratio of cost to retail price is 66%, what is the amount of inventory to be reported on the financial statements?

A business using the retail method of inventory costing determines that merchandise inventory at retail is $396,400. If the ratio of cost to retail price is 61%, what is the amount of inventory to be reported on the financial statements?

A business using the retail method of inventory costing determines that merchandise inventory at retail is $1,235,000. If the ratio of cost to retail price is 54%, what is the amount of inventory to be reported on the financial statements?

Kroger, Safeway Inc., and Winn-Dixie Stores Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory information:

$$\begin{array}{c} ~~~~~~~~~~~~~~~~\textbf{Merchandise Inventory} \end{array}\\ \begin{array}{lrr} \hline & \textbf { End of Year (in millions) } & \textbf { Beginning of Year (in millions) } \\ \hline \text { Kroger } & \$ 4,966 & \$ 4,935 \\ \text { Safeway } & 2,623 & 2,509 \\ \text { Winn-Dixie } & 658 & 665 \end{array}$$

The cost of goods sold for each company was:

$$\begin{array}{lc} & \textbf { Cost of Goods Sold (in millions) } \\ \hline \text { Kroger } & \$ 63,927 \\ \text { Safeway } & ~~29,443 \\ \text { Winn-Dixie } & ~~~~5,182 \end{array}$$

If Winn-Dixie had Kroger’s number of days’ sales in inventory, how much additional cash flow (rounded to nearest million) would have been generated from the smaller inventory relative to its actual average inventory position?

Kroger, Safeway Inc., and Winn-Dixie Stores Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory information:

$$\begin{array}{c} ~~~~~~~~~~~~~~~~\textbf{Merchandise Inventory} \end{array}\\ \begin{array}{lrr} \hline & \textbf { End of Year (in millions) } & \textbf { Beginning of Year (in millions) } \\ \hline \text { Kroger } & \$ 4,966 & \$ 4,935 \\ \text { Safeway } & 2,623 & 2,509 \\ \text { Winn-Dixie } & 658 & 665 \end{array}$$

The cost of goods sold for each company was:

$$\begin{array}{lc} & \textbf { Cost of Goods Sold (in millions) } \\ \hline \text { Kroger } & \$ 63,927 \\ \text { Safeway } & ~~29,443 \\ \text { Winn-Dixie } & ~~~~5,182 \end{array}$$

Interpret your results in part (a).

Kroger, Safeway Inc., and Winn-Dixie Stores Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory information:

$$\begin{array}{c} ~~~~~~~~~~~~~~~~\textbf{Merchandise Inventory} \end{array}\\ \begin{array}{lrr} \hline & \textbf { End of Year (in millions) } & \textbf { Beginning of Year (in millions) } \\ \hline \text { Kroger } & \$ 4,966 & \$ 4,935 \\ \text { Safeway } & 2,623 & 2,509 \\ \text { Winn-Dixie } & 658 & 665 \end{array}$$

The cost of goods sold for each company was:

$$\begin{array}{lc} & \textbf { Cost of Goods Sold (in millions) } \\ \hline \text { Kroger } & \$ 63,927 \\ \text { Safeway } & ~~29,443 \\ \text { Winn-Dixie } & ~~~~5,182 \end{array}$$

Determine the number of days’ sales in inventory and the inventory turnover for the three companies. Round to the nearest day and one decimal place.

The following data (in thousands) were taken from recent annual reports of Apple Inc., a manufacturer of personal computers and related products, and American Greetings Corporation, a manufacturer and distributor of greeting cards and related products:

$$\begin{array}{lrr} & \textbf { Apple } & \textbf { American Greetings } \\ \hline \text { Cost of goods sold } & \$ 39,541,000 & \$ 682,368 \\ \text { Inventory, end of year } & 1,051,000 & 179,730 \\ \text { Inventory, beginning of the year } & 455,000 & 163,956 \end{array}$$

Would you expect American Greetings’ inventory turnover to be higher or lower than Apple’s? Why?

The following data (in thousands) were taken from recent annual reports of Apple Inc., a manufacturer of personal computers and related products, and American Greetings Corporation, a manufacturer and distributor of greeting cards and related products:

$$\begin{array}{lrr} & \textbf { Apple } & \textbf { American Greetings } \\ \hline \text { Cost of goods sold } & \$ 39,541,000 & \$ 682,368 \\ \text { Inventory, end of year } & 1,051,000 & 179,730 \\ \text { Inventory, beginning of the year } & 455,000 & 163,956 \end{array}$$

Determine the inventory turnover for Apple and American Greetings. Round to one decimal place.

The following is an excerpt from a conversation between Paula Marlo, the warehouse manager for Musick Foods Wholesale Co., and its accountant, Mike Hayes. Musick Foods operates a large regional warehouse that supplies produce and other grocery products to grocery stores in smaller communities.

Paula: Mike, can you explain what’s going on here with these monthly statements?

Mike: Sure, Paula. How can I help you?

Paula: I don’t understand this last-in, first-out inventory procedure. It just doesn’t make sense.

Mike: Well, what it means is that we assume that the last goods we receive are the first ones sold. So the inventory consists of the items we purchased first.

Paula: Yes, but that’s my problem. It doesn’t work that way! We always distribute the oldest produce first. Some of that produce is perishable! We can’t keep any of it very long or it’ll spoil.

Mike: Paula, you don’t understand. We only assume that the products we distribute are the last ones received. We don’t actually have to distribute the goods in this way.

Paula: I always thought that accounting was supposed to show what really happened. It all sounds like “make believe” to me! Why not report what really happens?

The beginning inventory at RTE Office Supplies and data on purchases and sales for a three-month period are shown in Problem 6-1A.

Instructions

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out method.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost as of August 31, 2014.

The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in Problem 6-1B.

Instructions

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out method.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost on June 30, 2014.