PROBLEM 8-8 (a) 1. 2. 3. Ending inventory in units Portable 6,000 + 15,000 – 14,000 = Midsize 8,000 + 20,000 – 24,000 = Flat-screen 3,000 + 10,000 – 6,000 = Ending inventory at current cost Portable 7,000 X $110 = Midsize 4,000 X $300 = Flat-screen 7,000 X $500 = Ending inventory at base-year cost Portable 7,000 X $100 = Midsize 4,000 X $250 = Flat-screen 7,000 X $400 = 4. Price index $5,470,000 ÷ $4,500,000 = 1.2156 5. Ending inventory $3,800,000 X 1.0000 = 700,000* X 1.2156 = 7,000 4,000 7,000 18,000 $ 770,000 1,200,000 3,500,000 $5,470,000 $ 700,000 1,000,000 2,800,000 $4,500,000 $3,800,000 850,920 $4,650,920 *($4,500,000 – $3,800,000 = $700,000) 6. 8-53 Cost of goods sold Beginning inventory.................................................. Purchases [(15,000 X $110) + (20,000 X $300) + (10,000 X $500)]....................................................... Cost of goods available............................................ Ending inventory....................................................... Cost of goods sold.............................................. $ 3,800,000 12,650,000 16,450,000 (4,650,920) $11,799,080 PROBLEM 8-8 (Continued) (b) 7. Gross profit Sales revenue [(14,000 X $150) + (24,000 X $405) + (6,000 X $600)].............................................................. $15,420,000 Cost of goods sold.......................................................... 11,799,080 Gross profit...................................................................... $ 3,620,920 1. Ending inventory at current cost restated to base cost Portable $ 770,000 ÷ 1.10a = Midsize 1,200,000 ÷ 1.20b = Flat-screen 3,500,000 ÷ 1.25c = $ 700,000 $ 1,000,000 $ 2,800,000 a. $110 ÷ $100 b. $300 ÷ $250 c. $500 ÷ $400 2. Ending inventory Portable $ 600,000 X 1.00 = 100,000 X 1.10 = Midsize 1,000,000 X 1.00 = Flat-screen 1,200,000 X 1.00 = 1,600,000 X 1.25 = 600,000 110,000 1,000,000 1,200,000 2,000,000 $ 4,910,000 3. Cost of good sold Cost of good available.................................................. $16,450,000 Ending inventory........................................................... (4,910,000) Cost of goods sold.................................................. $11,540,000 4. Gross profit Sales revenue................................................................ Cost of goods sold....................................................... Gross profit................................................................... LO: 4, Bloom: AP, Difficulty: Moderate, Time: 30-40, AACSB: Analysis , AICPA BB: None Reporting, AICPA PC:, AICPA BB: None 8-54 $ $15,420,000 11,540,000 $ 3,880,000