Chapter 6 Homework
1. Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had a
beginning balance of $7,740,000. Ranns engaged in the following transactions during the year.
1. Purchased merchandise inventory for $11,400,000.
2. Generated net sales of $31,200,000.
3. Recorded inventory shrinkage of $12,000 after taking a physical inventory at year-end.
4. Reported gross profit for the year of $18,000,000 in its income statement.
a. At what amount was Cost of Goods Sold reported in the company’s year-end income
statement?
b. At what amount was Merchandise Inventory reported in the company’s year-end balance
sheet?
c. Immediately prior to recording inventory shrinkage at the end of the year, what was the
balance of the Cost of Goods Sold account? What was the balance of the Merchandise Inventory
account? (Input all amounts as positive values.)
a.
b.
c. The entry to record inventory shrinkage at the end of the year increased the Cost of
Goods Sold account and reduced its Merchandise Inventory account by $12,000.
Immediately prior to recording inventory shrinkage, the Cost of Goods Sold account had
a debit balance of $13,188,000 ($13,200,000 computed in part a minus $12,000), whereas
the Merchandise Inventory account had a debit balance of $5,952,000 ($5,940,000
computed in part b plus $12,000).
1. Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had a
beginning balance of $7,740,000. Ranns engaged in the following transactions during the year.
1. Purchased merchandise inventory for $11,400,000.
2. Generated net sales of $31,200,000.
3. Recorded inventory shrinkage of $12,000 after taking a physical inventory at year-end.
4. Reported gross profit for the year of $18,000,000 in its income statement.
a. At what amount was Cost of Goods Sold reported in the company’s year-end income
statement?
b. At what amount was Merchandise Inventory reported in the company’s year-end balance
sheet?
c. Immediately prior to recording inventory shrinkage at the end of the year, what was the
balance of the Cost of Goods Sold account? What was the balance of the Merchandise Inventory
account? (Input all amounts as positive values.)
a.
b.
c. The entry to record inventory shrinkage at the end of the year increased the Cost of
Goods Sold account and reduced its Merchandise Inventory account by $12,000.
Immediately prior to recording inventory shrinkage, the Cost of Goods Sold account had
a debit balance of $13,188,000 ($13,200,000 computed in part a minus $12,000), whereas
the Merchandise Inventory account had a debit balance of $5,952,000 ($5,940,000
computed in part b plus $12,000).
