Accounting 2037 Homework up to Exam 2Chapter 18 Homework18-14. The Schulte Tape Company has a beginning inventory for May of $2,500 (250 tapes at $10 each) and makes the following purchases and sales of tapes during May:May 5 Purchases………………150 tapes @ $11 = $1,650 12 Sales…………………...160 tapes 22 Purchases………………150 tapes @ $12= $1,800 25 Sales……………………90 tapesRequired: Compute the cost of goods sold and the ending inventory for May if the company uses the following:(1) The perpetual inventory system and the FIFO cost flow assumption.(2) The perpetual inventory system and the LIFO cost flow assumption.(1) May 12: 160 tapes @ $10 each from beginning inventory=$1,600May 25: 90 tapes @ $10 each from beginning inventory=$900Cost of Goods Sold for May= $2,500 150 tapes @ $11 from purchase on May 5th=$1,650150 tapes @ $12 from purchase on May 22=$1,800 Cost of Ending Inventory= $3,450(2)May 12: 150 tapes @ $11 each from purchase on May 5=$1,650May 12: 10 tapes @ $10 each from beginning inventory=$100May 25: 90 tapes @ $12 each from purchase on May 22=$1.080Cost of Goods Sold for May= $2,830240 tapes @ $10 each from beginning inventory=$2,40060 tapes @ $12 each from purchase on May 22=$720Cost of Ending Inventory $3,12018-18. The Brabham Kite Company had the following FIFO costs and replacement costs of kites for its ending inventory:Item #Number of UnitsUnit CostUnit Replacement Cost804 100 $10 $11603 150 12 10331 320 8 6928 70 20 22Required: (1) Compute the value of the ending inventory under the lower of cost or market method.(2) How are the company’s financial statements affected by the application of the lower-of-cost-or-market method?(3) Show how the ending inventory would be reported on the company’s balance sheet.*Assume LCM for both inventory items separately and inventory as a whole.(1) Each item separatelyInventory as a wholeItems Units Cost Market Cost Market804 100 $10 $11 $1,000 $1,100603 150 12 10 1,800 1,500331 320 8 6 2,560 1,920928 70 20 22 1,400 1,540$6,760 $6,060(2)a. Each item separately: If the inventory was carried at LCM per item, the company would incur a loss of $1,240 in the computation of the gross profit in the income statement. The loss is equal tothe total cost of $6,760 less $5,520. It would report the inventory on the balance sheet at $5,520.b. Inventory as a whole: If the inventory was carried at LCM for the inventory as a whole, the company would incur a loss of $700 in the computation of gross profit in its income statement. The loss is equal to the total cost of $6,760 less $6,060. It would report the inventory on the balance sheet at $6,060.(3) a. each item separately:Inventory, at lower of cost or market value (cost, $6,760) $5,520b. inventory as a whole:Inventory, at lower of cost or market value (cost, $6,760) $6,06018-20. On March 31, Ireland Peat Company needs to estimate its ending inventory for preparation of its first quarter’s financial statements. The following information is available:Inventory, January 1….....……$40,000Purchases (net)……….………..40,000Sales (net)…………………..…85,000Item Units Cost Acquisition Cost LCM Carrying Value804 100 $10 $1,000 $10 $1,000603 150 12 1,800 10 1,200331 320 8 2,560 6 1,920928 70 20 1,400 20 1,400$6,760 $5,520A study of past income statements indicates that a gross profit percentage of 25% of net sales is appropriate.Required: Compute the cost of goods sold and the ending inventory.Gross Profit = Net Sales x Gross Profit Percentage= $85,000 x 25%=$21,250Cost of Goods Sold = Net Sales – Gross Profit= $85,000 - $21,250= $63,750Cost of Goods Available for Sale = Beginning Inventory + Net Purchases= $40,000 + $40,000= $80,000Ending Inventory = Cost of Goods Available for Sale – Cost of Goods Sold= $80,000 - $63,740=$16,25018-24. Burris Department Store uses the retail inventory method. At the end of the first quarter, the following information is available.Cost RetailInventory, Jan. 1 $5,000$9,000Purchases 35,00 68,0000Purchases returns 2,000 3,000Sales 70,000Sales returns 2,000Required: (1) Compute the cost of goods sold and the gross profit for the first quarter.(2) If the company took a physical inventory at the end of the first quarter, and the retail value was $5,000, what is the cost of the ending inventory?(3) What may have caused the difference in the answers for (1) and (2)?(1) Step 1: Compute goods available for sale at both cost and retail prices.Cost RetailBeginning Inventory $5,000 $9,000Purchases 35,000 68,000Less Purchases Returns (2,000) (3,000)Net purchases 33,000 65,000Goods available for sale$38,000 $74,000Step 2: Compute cost-to-retail ratio. (cost from step 1/retail from step 2)$38,000 ÷ $74,000 = .51Step 3: Compute ending inventory at retail prices. (retail from step 1 – net sales)Retail Goods Available for Sale $74,000Sales 70,000Less: sales returns (2,000)Net sales (68,000)Ending Inventory at Retail $6,000Step 4: Compute ending inventory at cost. (ending inventory at retail prices x cost to retail percentage)$6,000 x 0.51 = $3,060Gross Profit = Sales (net) – Cost of Goods Sold= $68,000 – ($5,000 + $33,000 - $3,060)= $68,000 – $34,940= $33,060(2) $5,000 x 0.51= $2,550(3) The $510 difference ($3,060 - $2,550) may have been due to a combination of theft and damaged merchandise.Chapter 1919-19. The following are four sets of cash flows:(a) a single $500 cash inflow at the end of year 5.(b) A series of $100 cash inflows at the end of years 1, 2, 3, 4, and 5.(c) A cash inflow of $300 at the end of year 3 and a cash inflow of $400 at the end of year 5.(d) A series of cash outflows of $60 at the end of years 1 through 10.Required: Determine the present value of each set of cash flows using a discount rate of 12%.(a) A single cash inflow at the end of year 5.a. Present value =$500 x (PV future amount, 12%, 5 years)=$500 x .567=$283.70(b) A series of $100 cash inflows at the end of years 1, 2, 3, 4, and 5.a. Present value =$100 x (PV future annuity, 12% 5 years)=$100 x 3.6048=$360.48(c) A cash inflow of $300 at the end of year 3 and cash inflow of $400 at the end of year 5.a. Present value =$300 x (PV future amount, 12% 3 years)=$300 x .7118=$213.54b. Present value =$400 x (PV future amount, 12% 5 years)=$400 x .5674=$226.96c. $213.54 + $226.96= $440.50(d) A series of cash outflows of $60 each at the end of years 1 through 10.a. Present value =$60 x (PV future