During 2014, Pretenders Furniture Company purchases a carload of wicker chairs.
ID: 2491386 • Letter: D
Question
During 2014, Pretenders Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Pretenders for a lump sum of $62,000 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below. During 2014, Pretenders sells 110 lounge chairs, 110 armchairs, and 140 straight chairs. What is the amount of gross profit realized during 2014? What is the amount of inventory of unsold straight chairs on December 31, 2014? (Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to O decimal places, e.g. 5,845.)Explanation / Answer
1) Computation of Cost per chair (Amount in $) Particular No.of Chairs Purchased Estimated Selling price Total selling price Weightage average Apportioned Purchase price Cost per Chair Lounge Chair 400 113 45200 0.34 21,246 53.12 Arm Chair 300 100 30000 0.23 14,102 47.01 Straight Chair 900 63 56700 0.43 26,652 29.61 Computation of Gross Profit Particular No.of Chairs Sold Estimated Selling price Total selling price Cost per Chair Cost of chairs sold Gross Profit Lounge Chair 110 113 12430 53.12 5,843 6,587 Arm Chair 110 100 11000 47.01 5,171 5,829 Straight Chair 140 63 8820 29.61 4,146 4,674 17,091 2) Statement Showing Amount of Inventory of unsold straight Chair Total Chair Purchased 900 Chairs Sold 140 Inventory 760 Cost per Straight chair 29.61 Amount of Inventory of Straight Chair 22504
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