Question

Thompson TV and Appliance reported the following in its 2021 financial statements:

	2021
Sales	$	420,000
Cost of goods sold:
Inventory, January 1		82,000
Net purchases		340,000
Goods available for sale		422,000
Inventory, December 31		86,000
Cost of goods sold		336,000
Gross profit	$	84,000

Thompson's 2021 gross profit ratio is:

Multiple Choice

• 25%.

• 19%.

• 20%.

• None of these answer choices are correct.

____________________________________________________________________

Anthony Thomas Candies (ATC) reported the following financial data for 2021 and 2020:

	2021				2020
Sales	$	323,000			$	295,000
Sales returns and allowances		8,300				4,300
Net sales	$	314,700			$	290,700
Cost of goods sold:
Inventory, January 1		47,000				34,000
Net purchases		140,000				141,000
Goods available for sale		187,000				175,000
Inventory, December 31		70,000				47,000
Cost of goods sold		117,000				128,000
Gross profit	$	197,700			$	162,700

ATC's inventory turnover ratio for 2021 is: (Round your answer to two decimal places.)

Multiple Choice

• 1.60.

• 2.00.

• 2.20.

• None of these answer choices are correct.

___________________________________________________________

Udon Inc. adopted dollar-value LIFO (DVL) as of January 1, 2021, when it had an inventory of $715,000. Its inventory as of December 31, 2021, was $828,800 at year-end costs and the cost index was 1.12. What was DVL inventory on December 31, 2021?

Multiple Choice

• $800,800.

• $743,000.

• $828,800.

• $740,000.

)

Answer 1

1

Answer

Gross Profit Ratio = Gross Profit/Sales

84000/420000

20%

Option C is Correct

2

Answer

Average inventory = ($70,000 + $47,000) / 2 = $58,500

Inventory turnover ratio = Cost of goods sold / Average Inventory

$117,000 / $58500

2%

Option B is Correct

3

Answer

Dece 31, 2021 inventory at base year price = $828800/ 112% = $740,000

Change in inventory from Jan 1, 2021 = $740000 - $715000 = $25,000

DVL Inventory at Dec 31, 2021 = $715,000 + ($25000*112%) = $743,000

Option B is Correct

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