14. Anthony Corp reported the following amounts for the year: Net Sales COGS Ave

Question

14. Anthony Corp reported the following amounts for the year: Net Sales COGS Average Inventory$50,000 $138.000 What is Anthony Corp's inventory turnover ratio and average days in inventory? 15. Inventory records for Marvin Company revealed the following $8.00/unit March 1 Beginning Inventory March 5 Sale March 10 Purchase March 14 Sale March 16 Purchase March 20 Sale March 23 Purchase March 26 Sale 1,000 400 600 700 800 500 600 700 59.S0/unit $8.00/unit Marvin keeps his records on a periodic inventory basis. Calculate his COGS and ending inventory using FIFO : COGS Ending Inventory Average Cost COGS Ending Inventory 16. If a company understates ending inventory in Year 1, which of the following is true? 1. CoGS is understated at the end of Year 1 2. Profit is correct in Year 2 3. The balance of retained earnings is overstated at the end of Year 1 4. The balance of retained earnings is correct at the end of Year2 Chapter 9 1. Give two examples of external financing available to corporations. 2. A bond with a face value of $100,000 is issued at a discount. The company receives $95,000. Prepare the journal entry to record the issuance of this bond 3. California Corporation's accounting equation on the 12/31/15 balance sheet is: Calculate CA Corp's Debt to Equity ratio Assets: Liabilities Stockholders Equity: S415,000 $435,000 4. What is a lease called that is essentially the purchase of an asset with debt financing? S. A 10 year bond, with an interest rate of 5% is issued for $1,000,000. Make the journal entry in good form to record the semi-annual interest rate.

Explanation / Answer

14 Inventory Turnover Ratio Cost of Good Sold/Average Inventory $138000/$50000 = 2.76 Its days inventory equals 1/2.76*365    = 132 days approx 15 COGS Amount ($) 5march sale of 400 unites $3,200 (400*8) 14 march sale 600 units $5,625 ( 600*8+ 100*8.25) 20 march sale 500 units $4,125 (500*8.25) 26 march sale 700 units $6,650 ( 700*9.5) Cost of good sold $19,600 Ending Inventory 1st march inventory at beginning 1000 unit $8 per unit $8,000 10 march purchase of 600 unit @ $ 8.25 600unit $4,950 16 march purchase of 800 unit @ $ 9.5 800 unit $7,600 23 march purchase of 600 unit @ $ 8 600 unit $4,800 Less Sale of Inventory 2300 unit (400+700+500+700) Ending Inventory 700 Units 5750 (100*9.5+600*8) 16 (2) Profit is correct in year 2 Ending inventory understate in year- 1 leads decrease the profit in year-1 AND understate in beginning inventory in year 2 which leads to correct profit in year 2 1 Example of External fianace available to corporation A. Taking Term Loan From bank/Bank Overdraft facility B. Issue of Debt/ Debenture/ Share Etc 2 Journal entries for issue of bond Cash a/c dr. $95,000 Discount on bond issue Dr. $5,000 Bond payable cr, $100,000 ( Being Bond issued at dicount 95000 having face value100000) 3 Debt/Equity Ratio = Total Liabilities / Shareholders' Equity liabilities $435,000 Equity $416,000 D/E Ratio = $435000/$416000 = 1.05 4 Finance lease becaues in finance lease lessee has right to purchase assets at minimum prices 5 Journal entries A. Cash A/c Dr. $1,000,000          5% Bond payable $1,000,000 ( Being bond issue) B, Intrest exp a/c Dr $25,000 (1000000*5%*1/2)          Intrest on bond payable $25,000

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