# Financial Assignment Solutions
1. A retailer has a yearly sale of $650000. Inventory on January 1 is $260000(at cost).
During the year, $500000 of merchandise (at cost) is purchased. The ending inventory
is $265000(at cost). Operating costs are $90000
(a) Calculate the cost of goods sold
Solution
Cost of goods sold=Beginning Inventory+Merchandise-Ending Inventory
Beginning inventory=$260000
Merchandise purchased=$500000
Ending Inventory=$265000
Therefore,
Cost of Goods sold=$260000+$500000-$265000
=$495000
(b) Calculate the net profit
Solution
Net profit=Gross Profit-Operating costs
Gross Profit=Sales-Cost of goods Sold
Given;
Sales=$650000
Cost of goods sold=$495000
Operating cost=$90000
Thus;
Gross Profit=$650000-$495000
=$155000
This implies that;
Net Profit= Gross Profit-Operating costs
=$155000-$90000
=$65000
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2. A retailer has a beginning monthly inventory valued at $60000 at retail and $25000 at
cost.Net purchases during the month are $150,000 at retail and $70000 at cost.
Transportation charges are $7000. Sales are $150000. Markdown and discounts equal
$20000. A physical inventory at the end of the month shows merchandise valued at
$10000(at retail) on hand. Compute the following
(a) Total merchandise available for sale at cost and at retail
Solution
(i)
(ii)
Total Merchandise available for sale at cost
=Beginning inventory(cost)+Net purchases(cost)+Transportation Charges
=$25000+$70000+$7000
=$102000
Total Merchandise available for sale at retail
=Beginning inventory (at retail) +purchases(retail)
=$60000+$150000
=$210000
(b) Cost complement
Solution
Cost complement=Total merchandise at cost/ Total Merchandise available at retail
= ($102000/$210000) *100
=0.4857*100
=48.57%
(c) Ending retail book value of inventory
Solution
Ending retail book value of inventory
= (Total Merchandise available at retail)-(Sales)- (Markdown & Discounts at retail)
=$210000-$150000-$20000
=$40000
(d) Stock shortages
Solution
Stock Shortages=Ending retail Book value of inventory-Physical ending Inventory
=$40000-$10000
=$30000
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(e) Adjusted ending retail book value
Solution
Adjusted ending retail book value
= Ending retail book value of inventory -stock shortages + stock shortages
=$40000-$30000+0
=$10000
(f) Gross profit
Solution
Gross profit
=Sales - (Total Merchandise available at cost-Physical ending inventory*cost
complement)
=$150000-($102000-10000*0.4857)
=$52857
3. A car dealer purchased multiple-disc CD players for $1195 each and desires a 40%
markup (at retail). What retail price should be charged?
Solution
Purchase cost=$1195
Markup required=40%
Therefore,
Retail price charged=Purchase*(1+Markup)
=$1195*(1+0.4)
=$1673
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