Financial statement data for years ending December 31 for Holland Company follow:

$$\begin{array}{lrr} & \mathbf{2 0 Y 4} & \mathbf{2 0 Y 3} \\ \hline \begin{array}{l} \text { Cost of merchandise sold } \\ \text { Inventories: } \end{array} & \$ 4,504,500 & \$ 3,715,200 \\ \quad \text { Beginning of year } & 788,000 & 760,000 \\ \quad \text { End of year } & 850,000 & 788,000 \end{array}$$

a. Determine the inventory turnover for $20 \mathrm{Y} 4$ and $20 \mathrm{Y} 3$.

b. Determine the days' sales in inventory for $20 \mathrm{Y} 4$ and 20Y3. Use 365 days and round to one decimal place.

c. Does the change in inventory turnover and the days' sales in inventory from $20 \mathrm{Y} 3$ to $20 \mathrm{Y} 4$ indicate a favorable or an unfavorable trend?

Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system.

Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand.

Kevin is also concerned about lost sales while a physical inventory is being taken. Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count.

Will switching to a perpetual inventory system strengthen Triple Creek Hardware’s control over inventory items? Will switching to a perpetual inventory system eliminate the need for a physical inventory count? Explain.

Accrued revenues would appear on the balance sheet as

A. Assets

B. Liabilities

C. Stockholders' equity

D. Prepaid expenses

The inventory at the end of the year was understated by $14,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error?

The following units of a particular item were available for sale during the calendar year:

$$\begin{array}{lrll}\text { Jan. } & 1 & \text { Inventory } & 30,000 \text { units at } \$ 30.00 \\ \text { Mar. } & 18 & \text { Sale } & 24,000 \text { units } \\ \text { May } & 2 & \text { Purchase } & 54,000 \text { units at } \$ 31.00 \\ \text { Aug. } & 9 & \text { Sale } & 45,000 \text { units } \\ \text { Oct. } & 20 & \text { Purchase } & 21,000 \text { units at } \$ 32.10\end{array}$$

The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale. Present the data in the form illustrated previously in the exhibit.

During the taking of its physical inventory on December 31, 2019, Waterjet Bath Company incorrectly counted its inventory as $728,660 instead of the correct amount of$719,880. Indicate the effect of the misstatement on Waterjet Bath’s December 31, 2019, balance sheet and income statement for the year ended December 31, 2019.

A large tank has a plastic window on one wall that is designed to withstand a force of 90,000 N. The square window is 2 m on a side, and its lower edge is 1 m from the bottom of the tank.

If the tank is filled to a depth of 4 m, will the window withstand the resulting force?

On April 18, 2014, Bontanica Company, a garden retailer, purchased $9,800 of seed, terms 2/10, n/30, from Whitetail Seed Co. Even though the discount period had expired, Shelby Davey subtracted the discount of$196 when he processed the documents for payment on May 1, 2014. Discuss whether Shelby Davey behaved in a professional manner by subtracting the discount, even though the discount period had expired

Kroger Co., a national supermarket chain, reported the following data (in millions) in its financial statements for a recent year:

$$\begin{array}{lr} \text{Total revenue} & \$108,465\\ \text{Total assets at end of year} & 30,556\\ \text{Total assets at beginning of year} & 29,281 \end{array}$$

a. Compute the asset turnover. Round to two decimal places.

b. Tiffany & Co. is a large North American retailer of jewelry with an asset turnover of $0.86$. Why would Tiffany's asset turnover be lower than that of Kroger?

Determine the amount to be paid in full settlement of each of the following invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

During the taking of its physical inventory on August 31, 2019, Kate Interiors Company incorrectly counted its inventory as $366,900 instead of the correct amount of$378,500. Indicate the effect of the misstatement on Kate Interiors’ August 31, 2019, balance sheet and income statement for the year ended August 31, 2019.

Alert Security Services Co, offers security services to business clients. The trial balance for Alert Security Services Co. has been prepared on the following end-of-period spreadsheet for the year ended October 31, 2016: The data for year-end adjustments are as follows: a. Fees earned, but not yet billed, $\$ 13$. b. Supplies on hand, $\$ 4$. c. Insurance premiums expired, $\$ 10$.

The general merchandise retail industry has a number of segments represented by the following companies:

$$\begin{array}{ll} \text { Company Name } & \text { Merchandise Concept } \\ \hline \text { Costco Wholesale Corporation } & \text { Membership warehouse } \\ \text { Wal-Mart } & \text { Discount general merchandise } \\ \text { JCPenney Company } & \text { Department store } \end{array}$$

For a recent year, the following cost of merchandise sold and beginning and ending inventories have been provided from corporate annual reports (in millions) for these three companies:

$$\begin{array}{lrrr} & \text { Costco } & \text { Wal-Mart } & \text { JCPenney } \\ \hline \text { Cost of merchandise sold } & \$ 101,065 & \$ 365,086 & \$ 8,074 \\ \text { Merchandise inventory, beginning } & 8,908 & 45,141 & 2,721 \\ \text { Merchandise inventory, ending } & 8,456 & 44,858 & 2,652 \end{array}$$

Selected data on merchandise inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows:

$$\begin{array}{lrr} & \text { Cost } & \text { Retail } \\ \hline \text { Celebrity Tan } & & \\ \text { Merchandise inventory, August 1 } & 300,000 & \$\hspace{10pt}575,000 \\ \text { Transactions during August: } \\ \quad \text { Purchases (net) } & 2,149,000 & 3,375,000 \\ \quad \text { Sales } & & 3,170,000\\ \\ \text { Ranchworks Co. } \\ \text { Merchandise inventory, March 1 } & \$\hspace{10pt}880,000 \\ \text { Transactions during March through November: } \\ \quad \text { Purchases (net) } & 9,500,000\\ \quad \text { Sales } & 15,800,000 \\ \text { Estimated gross profit rate } & 38 \% \end{array}$$

Instructions

1. Determine the estimated cost of the merchandise inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations.
2. a. Estimate the cost of the merchandise inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations.
   b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $\$ 369,750$ of merchandise was on hand. What was the estimated loss of inventory due to theft or damage during March through November?