Question

Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2022. All watches are sold for $500 each.

Jul. 17 Purchased 50 watches for $7,500 ($150 per watch) on account.

Jul. 31 Sold 40 watches for $20,000 cash.

Aug. 12 Purchased 40 watches for $6,400 ($160 per watch) cash.

Aug. 22 Sold 30 watches for $15,000 on account.

Sep. 19 Paid for watches purchased on July 17.

Sep. 27 Receive cash of $9,000 for watches sold on account on August 22.

Oct. 27 Purchased 80 watches for $13,600 ($170 per watch) cash.

Nov. 20 Sold 90 watches for $45,000 cash.

Dec. 4 Purchased 100 watches for $18,000 ($180 per watch) on account.

Dec. 8 Sold 40 watches for $20,000 on account.

1)

Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2022, assuming Suzie uses FIFO to account for inventory.

2) Prepare the gross profit section of a partial income statement for transactions related to MU watches.

3) Record the adjustment for inventory

4) For what amount would MU inventory be reported in the December 31, 2022, balance sheet?

5)

Prepare an updated gross profit section of a partial income statement accounting for this additional information.

Answer 1