Accounting Solutions:-

Answer 12:-
Sub- Subject :- Accounting
Topic:- Inventory Management

Step 1 of 1 :-
The given question depicts the statement of inventory account.
It is required to determine the reason behind Inventory account will usually require adjust-ment
at year-end for a merchandiser that uses the perpetual inventory system.

The "Inventory account" refers to a specific account in a company's accounting system that
records the cost of goods held by the business for the purpose of resale. This account is
typically found on a company's balance sheet as a current asset, and it represents the value of
the inventory the company currently possesses.

Explanation:-
There are different methods for valuing inventory, such as the First-In, First-Out (FIFO), Last-In,
First-Out (LIFO), and Weighted Average Cost methods. The choice of inventory valuation
method can impact the value of the Inventory account and, consequently, the cost of goods sold
and, potentially, the company's financial statements and tax liabilities.

Step 2 of 2 -

The Inventory account typically requires adjustment at year-end for a merchandiser that uses
the perpetual inventory system for several reasons:
● Price Fluctuations: In a perpetual inventory system, the inventory is updated
continuously to reflect purchases, sales, and returns. However, the cost of inventory
items can fluctuate over time due to factors like inflation, changes in supplier pricing, or
seasonal discounts. Therefore, the value of inventory on the books may not accurately
represent the current market value of the inventory. To ensure the financial statements
reflect the true economic value of the inventory, adjustments are necessary.

● Spoilage, Obsolescence, or Damage: Perpetual inventory systems do not always

account for inventory items that become obsolete, spoiled, or damaged. These events
can result in a reduction in the realizable value of inventory. Adjustments are needed to
account for these losses and accurately represent the inventory's value on the balance
sheet.

● Counting Errors: While perpetual systems aim to provide real-time accuracy, they are
still subject to human error. Employees may make mistakes in recording transactions or
counting inventory items. To rectify these errors and ensure the inventory's accuracy, a
 physical inventory count is often performed at year-end, and any discrepancies are
adjusted in the accounting records.

● Returns and Allowances: Perpetual systems track returns and allowances, but
sometimes these adjustments may not be accurately reflected throughout the year. At
year-end, the company needs to review all returns and allowances to ensure they are
correctly accounted for and adjust the Inventory account accordingly.

● Inventory Shrinkage: Inventory shrinkage refers to the loss of inventory due to theft,
fraud, or other factors. In a perpetual system, it might be challenging to detect or quantify
these losses throughout the year. Year-end adjustments can help identify and account
for any inventory shrinkage that occurred.

● Matching Principle: To adhere to the matching principle in accounting, which aims to

match expenses with related revenues in the same accounting period, the cost of goods
sold (COGS) should be accurately calculated. Adjusting the Inventory account at year-
end helps in determining the correct ending inventory balance, which is crucial for
calculating the accurate COGS for the period.

Explanation:-
In summary, year-end adjustments to the Inventory account for a merchandiser using the
perpetual inventory system are essential to ensure the financial statements accurately represent
the current value of the inventory, account for any losses, and align with accounting principles
like the matching principle. These adjustments help provide a more accurate picture of the
company's financial position and performance.

Final Answer:-

The Inventory account typically requires adjustment at year-end for a merchandiser using the
perpetual inventory system due to the nature of this accounting method and the need to
accurately reflect the true value of inventory on the financial statements.

Answer 18:-

Subject :- Accounting
Topic :- Cost of goods sold

Step 1 of 1 :-
The given question depicts the data of the Christel Madan Corporation.
It is required to determine the cost of goods sold.
Cost of Goods Sold (COGS) is an accounting measure that represents the direct costs
associated with the production or acquisition of the goods that a company sells during a specific
period. In other words, it includes the costs directly related to the production or purchase of the
products that are sold by a business. COGS is a significant expense for many companies,
especially those involved in manufacturing, retail, and distribution.

The formula to calculate COGS is as follows:

COGS =

Explanation:-
It's important to note that the method of calculating COGS may vary depending on the inventory
accounting system used by a company. In a periodic inventory system, COGS is determined
through physical inventory counts, while in a perpetual inventory system, it's continually updated
based on individual transactions. Regardless of the method, COGS is a crucial metric for
businesses to track, as it directly impacts a company's financial performance and profitability.

Step 2of 2 :-

To compute Christel Madan Corporation's gross profit and operating expenses, we'll start
with the given information and follow these steps:

a. Compute Christel Madan's gross profit:

Gross Profit =

Cost of Goods Sold (COGS) can be calculated using the formula:

COGS =

Where:

Beginning Inventory) =
Purchases =

Now, calculate COGS:

COGS =

Since the COGS is negative, indicating that inventory decreased during the year, we need to
add it to the beginning inventory to calculate the Gross Profit:
Gross Profit =

So, Christel Madan's gross profit is

Explanation:-
Gross profit is a financial metric that represents the profit a company earns from its core
business operations before deducting other expenses, such as operating expenses, interest,
taxes, and non-operating income or expenses. It is an essential indicator of a company's
profitability and financial health.

Step 3 of 3:-
b. Compute Christel Madan's operating expenses:

Operating Expenses =

Given that the net income is (as per the instructions), you can calculate operating
expenses as follows:

Operating Expenses =

Since operating expenses are calculated as a difference, the negative sign indicates that
Christel Madan Corporation had a net income of and operating expenses were less
than that by

Therefore, Christel Madan's operating expenses are assuming there are no

non-operating activities.

Explanation:-
Operating expenses, often referred to as OPEX, are the day-to-day costs that a business incurs
to maintain its regular operations. These expenses are essential for running a company and are
distinct from the cost of goods sold (COGS), which represents the direct costs associated with
producing goods or services.

Final answer :-
a. Christel Madan's gross profit is
b. Christel Madan's operating expenses are
Answer 5.12:-

Subject :- Accounting
Topic: - Cost of goods sold

Step 1 of 1 :-
The given question depicts the data of the Matt Cruz Company .
It is required to compute the gross profit.

Gross profit is a financial metric that represents the profit a company earns from its core
business operations before deducting other expenses, such as operating expenses, interest,
taxes, and non-operating income or expenses. It is an essential indicator of a company's
profitability and financial health.

The formula for calculating gross profit is:

Gross Profit =

Explanation:-
Gross profit is an important financial metric because it shows how efficiently a company is
producing and selling its products or services. A higher gross profit margin indicates that a
company is able to generate more profit from its core operations, which is generally a positive
sign for investors and stakeholders.

Step 2 of 2 :-

a. Compute Cruz's gross profit:

Gross Profit =
Gross Profit =

Cruz's gross profit is

Explanation:-
Investors and analysts often use gross profit margins to compare companies in the same
industry or to track a company's financial performance over time. It's important to note that the
interpretation of gross profit can vary across industries, so comparing it to industry benchmarks
and other financial metrics is essential for a more comprehensive assessment of a company's
financial health.

Step 3 of 3 :-
b. Compute the gross profit rate and explain why it is computed by financial statement users:

Gross Profit Rate =

Gross Profit Rate =
Gross Profit Rate =

The gross profit rate is computed by financial statement users to assess the efficiency of a
company's production or purchasing process and to gauge the company's ability to generate a
profit from its core operations. It helps users understand the percentage of each sales dollar that
remains after accounting for the cost of goods sold.

Explanation:-
A high gross profit rate indicates that the company is effectively managing its production or
inventory costs and generating a substantial margin on its sales.

Step 4 of 4
c. Calculate Cruz's income from operations and net income:

Income from Operations =

Income from Operations =
Income from Operations =

Net Income =
Net Income =
Net Income =

Cruz's income from operations is and the net income is

Explanation:-
Income from operations, also referred to as operating income or operating profit, is a financial
measure that represents the profit a company generates from its core business operations
before considering interest and income taxes. It is a key indicator of a company's ability to
generate profit from its day-to-day activities.

Step 5 of 5:-
d. If Cruz prepared a single-step income statement, it would report one total for net income. In
this case, the net income amount would still be

Explanation:-

A single-step income statement is a simplified format for presenting a company's financial

performance by grouping revenues and expenses into two main categories: operating revenues
and operating expenses. It's called a "single-step" because it calculates net income in one
single step by subtracting total expenses from total revenues.
Step 6 of 6 :-
e. Cruz should report inventory on its classified balance sheet in the current assets section,
specifically under "Inventory" or "Inventories."

Explanation:-
Inventory represents the value of goods or products that the company has on hand and intends
to sell in the normal course of business. It is considered a current asset because it is expected
to be converted into cash or used up within one year or the operating cycle, whichever is longer.

Final Answer :-
a. Cruz's gross profit is
b. Gross Profit Rate is
c. Cruz's income from operations is and the net income is
d.If Cruz prepared a single-step income statement, it would report one total for net income
e. Cruz should report inventory on its classified balance sheet in the current assets section,
specifically under "Inventory" or "Inventories."

Answer 5.20:-

Subject: Accounting
Topic :- Posting of journal entries

Step 1 of 1 ;-
The given question depicst the data of Alifile corporation.
It is required to post the journal entries of the given transaction.
A journal entry is a formal accounting record used to capture a specific financial transaction of a
business. It is the first step in the accounting cycle and serves as a chronological and
systematic way to document all financial transactions that occur within a company.

Explanation:-
Journal entries serve as the basis for posting to the general ledger, where transactions are
categorized, summarized, and organized. The general ledger, in turn, is used to prepare
financial statements and reports that reflect the financial health of the business.

Step 2 of 2 :-
a. To record these transactions on the books of Alfie Co. using a periodic inventory system, you
will need to make the following journal entries
 Date Particulars Debit Credit

Account $27000
April 5 To merchandise payable $2700
0

April 6 Freight Costs 1,200

1,200
Cash

April 7
Equipment 30,000

To Accounts Payable 30,000

April 8
Accounts Payable 3,600

Merchandise Inventory 3,600

April 15
Accounts Payable 23,400

Merchandise Inventory 2,700

To Cash
26,100

Explanation:-
Journal entries serve as the basis for posting to the general ledger, where transactions are
categorized, summarized, and organized. The general ledger, in turn, is used to prepare
financial statements and reports that reflect the financial health of the business.

Step 3 of 3 :-
Assuming Alfie Co. paid the balance due to Bach Company on instead of , make
the following journal entry to record the payment:

May 4 Account payable 23400

To Cash 23400
Explanation:-
Journal entries are a fundamental aspect of accounting, and they provide a clear and systematic
way to record, track, and analyze a company's financial transactions.

Final answer :-
a. The entries has been recorded as per the requirement refer to step 2.
b. The entries has been recorded as per the requirement refer to step 3.

Answer P 5.5:-

Subject :- Financial accounting.

Topic :- Trial Balance

Step 1 of 1 :-
The given question depicts the data of the Valdez Fashion Center.
It is required to prepare the trial balance .

A trial balance is a financial statement that lists the balances of all the accounts in a company's
general ledger at a specific point in time. It is prepared at the end of an accounting period
(typically monthly, quarterly, or annually) and serves as a fundamental tool in the accounting
process
Explanation:-
The trial balance is an important tool for accountants and auditors in verifying the accuracy of
financial records and for preparing financial statements like the income statement and the
balance sheet. It helps ensure that the accounting equation is maintained and that financial
statements provide a true and fair view of a company's financial position.

Step 2 of 2:-
a. Create a worksheet:
A worksheet is a tool used to facilitate the preparation of financial statements. Here's how you
can set up the worksheet:

Account Debit Credit Adjusted trial

balance

Sales Revenue 755,200

Sales returns amd allowances 40000

Cost of goods sold 497400

 Gross profit

Expenses

Saalries and wages payable 51000

Advertising expenses 48500

Utilities expense 12000

Maintanenece and repairs 8800

Freight out 14000

Total expenes

Cash 28000

Accounts receivable 30700

Inventory 44700 44800

Supplies 6200 2000

Equipment 133000

Accumulated Depriciation 11500

Total assets

Notes payable 50000

Common stock 48500

Retained earnings 40000

Dividends

Total liabilities and equity 16700

Totals 972700 972700

Explanantion:-
A trial balance is a financial statement that lists the balances of all the accounts in a
company's general ledger at a specific point in time. It is prepared at the end of an
accounting period (typically monthly, quarterly, or annually) and serves as a fundamental
tool in the accounting process
Step 3 of 3 :-

b. Prepare the financial statements:

Multiple-Step Income Statement:

Sales Revenue: $755,200

Less: Sales Returns and Allowances $40,000
Net Sales: $715,200

Cost of Goods Sold: $497,400

Gross Profit: $217,800

Expenses:
Salaries and Wages Expense: $51,000
Advertising Expense: $48,500
Utilities Expense: $12,000
Maintenance and Repairs Expense: $8,800
Freight-Out: $14,000
Total Expenses: $134,300

Net Income: $83,500

Retained earning statement :

Valdez Fashion Center
Retained Earnings Statement
For the Year Ended November 30, 2022

Retained Earnings (beginning): $40,000

Add: Net Income: $83,500
Less: Dividends: $16,700

Retained Earnings (ending): $106,800

Classified Balance Sheet:

 Balance Sheet
As of November 30, 2022

Assets:
Cash: $28,000
Accounts Receivable: $30,700
Inventory: $44,800
Supplies: $2,000
Equipment: $133,000
Less: Accumulated Depreciation: ($11,500)
Total Assets: $227,000

Liabilities:
Notes Payable: $50,000
Accounts Payable: $48,500
Total Liabilities: $98,500

Equity:
Common Stock: $40,000
Retained Earnings: $106,800
Total Equity: $146,800

Total Liabilities and Equity: $227,300

Explanation:
Financial statements are formal reports that summarize the financial transactions and
the financial performance of a business during a specific period, typically a fiscal quarter
or year. These statements provide valuable information about a company's financial
position, results of operations, and cash flows.

Step 4 of 4 :-
c. Journalize the adjusting entries::

Nov 30 Supplies Expense 4200

Supplies 4200

Nov 30 Depreciation Expense 11500

Accumulated Depreciation- 11500
Equipment

Nov 30 Interest Expense 4000

Interest Payable 4000
Explanation:-

Journal entries are the formal recording of financial transactions in a company's

accounting system. They are the foundation of the double-entry accounting system,
where each transaction affects at least two accounts with equal debits and credits,

Step 5 of 5 :-
d. Journalize the closing entries:

Nov 30 Income Summary 755,200

Sales Revenue
755,200

Nov 30 Income Summary 40000

Sales Returns and 40000
Allowances

Salaries and Wages Expense 51,000

Income Summary 51,000
Advertising Expense 48,500
Income Summary 48,500
Utilities Expense 12,000
Income Summary 12,000
Maintenance and Repairs 8,800
Expense 8,800
Income Summary
Freight-Out 14,000
Income Summary 14,000

Explanation:-
Closing entries, also known as closing journal entries, are a series of accounting entries
made at the end of an accounting period (typically a month, quarter, or year) to close out
temporary or nominal accounts. Temporary accounts include revenue, expense, and
dividend accounts.
 Step 6 of 6:
e. Prepare a post-closing trial balance:
The post-closing trial balance will include only the permanent (real) accounts after the
closing entries are made. The temporary accounts (revenue, expense, and dividends)
have been closed.

Account Debit ($) Credit ($)

Cash 28,000
Accounts Receivable 30,700
Inventory 44,800
Supplies 2,000
Equipment 133,000
Accumulated Depreciation
-Equipment 11,500
Notes Payable 50,000
Accounts Payable 48,500
Common Stock 40,000
Retained Earnings 106,800
Total Assets 238,500
Total Liabilities and Equity 238,500 238,500

Explanation:-
This post-closing trial balance only includes permanent accounts, and it shows that the
accounting equation (Assets = Liabilities + Equity) is in balance.

Final Answer :-
a. The worksheet for Valdez Fashion Center ha been prepared refer to step 2.
b. The financial statements has been prepared refer to step 3.
c. The Adjusting journal entries have been posted refer to step 4.
d. The closing entries has been posted refer to step 5.
e. The post closing trail balance has been prepared refer to step 6.