Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet wonAc€?ct damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2013. All watches are sold for $304 each.
Jul. 17 Purchased 58 watches for $9,106 ($157 per watch) on account.
Jul. 31 Sold 43 watches for $13,072 cash.
Aug. 12 Purchased 49 watches for $7,742 ($158 per watch) cash.
Aug. 22 Sold 31 watches for $9,424 on account.
Sep. 19 Paid for watches ordered on July 17.
Sep 27 Received full payment for watches sold on account on August 22.
Oct. 27 Purchased 81 watches for $13,041 ($161 per watch) cash.
Nov. 20 Sold 104 watches for $31,616 cash.
Dec. 4 Purchased 100 watches for $17,300 ($173 per watch) cash.
Dec. 8 Sold 35 watches for $10,640 on account.
Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated market value of MU watches is only $120 per watch.
a. Record any necessary entry on December 31, 2013, related to this information. (Omit the “$” sign in your response.)
Date General Journal Debit Credit
b. For what amount would MU inventory be reported in the December 31, 2013, balance sheet? (Omit the “$” sign in your response.)
MU Inventory $
c. Prepare an updated gross profit section of a partial income statement accounting for this additional information. (Amounts to be deducted should be indicated with minus sign. Omit the “$” sign in your response.)
GREAT ADVENTURES, INC.
Partial Income Statement
For the year ended December 31, 2013
COST OF GOODS SOLD: