Part 1 Income statement J. L. Video Sales Ltd. Income Statements for the Years Ended (Amounts in millions) Net sales revenue 20X3 $ 39 20X2 $ 36 20X1 $ 33 33 Cost of goods sold: Beginning inventory Purchases $ 14 $ 13 $ 30 28 Goods available for sale 44 41 (15) (14) (13) 228 3 12 26 38 Less: Ending inventory Cost of goods sold Gross profit ** 29 27 25 10 9 8 1 1 Total operating expenses $ 8 $ 7 Net income J. L. Video Sales Ltd. reported the following data. The shareholders are very happy with J. L.'s steady increase in net income. View the Income Statement. Auditors discovered that the ending inventory for 20X1was understated by $2million, and that the ending inventory for 20X2was also understated by $2million. The ending inventory on December 31, 20X3was correct. Read the requirements. Requirement 1. Show corrected income statements for each of the three years. (Enter amounts in millions as provided in the problem statement.) J. L. Video Sales Ltd. Income Statements (adapted; amounts in millions) For the Years Ended December 31, 20X3, 20X2, and 20X1 Net sales revenue 20X3 20X2 20X1 Cost of goods sold: Beginning inventory Purchases Goods available for sale Less: Ending inventory Cost of goods sold Gross profit Total operating expenses Net income Requirement 2. How much did these assumed corrections add to or take away from J. L.'s total net income over the three-year period? How did the corrections affect the trend of net income? How much did these assumed corrections add to or take away from J. L.'s total net income over the three-year period? The assumed corrections How did the corrections affect the trend of net income? ▼ over the three-year period. Requirement 2. How much did these assumed corrections add to or take away from J. L.'s total net income over the three-year period? How did the corrections affect the trend of net income? How much did these assumed corrections add to or take away from J. L.'s total net income over the three-year period? The assumed corrections How did the corrections af The corrections Requirement 3. Will J. L.' Will J. L.'s shareholders st The shareholders over the three-year period. did not change total net income I of net income? Give a reason for your answer. overstated total net income by $2 million understated total net income by $2 million company is How did the corrections affect the trend of net income? The corrections made the company's trend look more variable. made the company's trend look worse with a steady decrease in net income. made the company's trend look better with a steady increase in net income. changed the trend from an increasing pattern to a flat pattern. Requirement 3. Will J. L.'s shareholders still be happy with the company's trend of net income? Give a reason for your answer. Will J. L.'s shareholders still be happy with the company's trend of net income? The shareholders be happy with the trend of net income because the company is Choices: How did the correc The corrections will Requirement 3. W Will J. L.'s sharehc will not The shareholders nd of net income? lers still be happy with the company's trend of net income? Give a reason for your answer. with the company's trend of net income? be happy with the trend of net income because the company is making no progress with its profits. consistently increasing its profits. decreasing its profit each year. Part 2 Purchases April (29,000 units @ cost of $55) August (49,000 units @ cost of $59) November (59,000 units @ cost of $65) $ 1,595,000 2,891,000 3,835,000 Total purchases Additional Information $ 8,321,000 Cash payments on account totalled $7,921,000. During the current fiscal year, the store sold 155,000 units of merchandise for $14,880,000. Cash accounted for $5,100,000 of this, and the balance was on account. Movie Buy uses the FIFO method for inventories. Operating expenses for the year were $2,000,000. The store paid 75% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 32%. Print Done Movie Buy purchases merchandise inventory by the crate; each crate of inventory is a unit. The fiscal year of Movie Buy ends each February 28. Assume you are dealing with a single Movie Buy store in Quebec City, Quebec, and that the store experienced the following: The store began the current fiscal year with an inventory of 22,000 units that cost a total of $1,100,000. During the year, the store purchased merchandise on account as follows: View the purchases. Read the requirements. View the additional information. Requirement 1. Make summary journal entries to record the store's transactions for the current fiscal year ended February 28, 20XX. Movie Buy uses a perpetual inventory system. Let's start with the entry to record the purchases. (Record debits first, then credits. Exclude explanations from journal entries.) Date February 28 Account Titles Debit Credit Next, record the cash payments on account. (Record debits first, then credits. Exclude explanations from journal entries.) Date February 28 Account Titles Debit Credit Now, record the cash received from sales and the balance on account. Do not yet record the cost related to the sale. We will do this in the next journal entry. (Record debits first, then credits. Exclude explanations from journal entries.) Date February 28 Account Titles Debit Credit Record the inventory transaction associated with the sale of merchandise. (Record debits first, then credits. Exclude explanations from journal entries. Round your answer to the nearest whole dollar.) Date February 28 Account Titles Debit Credit Now, record the operating expenses. (Record debits first, then credits. Exclude explanations from journal entries. Round your final answers to the nearest whole dollar.) Date February 28 Account Titles Debit Credit Finally, record the entry to accrue income tax. (Record debits first, then credits. Exclude explanations from journal entries. Round your final answers to the nearest whole dollar.) Account Titles Date Debit Credit February 28 Requirement 2. Prepare a T-account to show the activity in the Inventory account. Post the beginning balance and activity to the T-account, and calculate the ending inventory balance. (Abbreviation used: COGS = cost of goods sold. Only complete the necessary input fields.) Inventory Requirement 3. Prepare the store's Income Statement for the year ended February 28, 20XX. Show totals for gross profit, income before tax, and net income. Movie Buy Store in Quebec City, Quebec Income Statement For the Year Ended February 28, 20XX Net income Requirement 4. Compute the gross profit percentage. How does this compare with last year's gross profit percentage of 41%? What are some possible reasons for the change? Compute the gross profit percentage. Only enter the percentage value in the input field. Do not enter a percentage symbol in the input field. (Round the percentage to the nearest tenth percent, X.X% Gross profit percentage: How does this compare with last year's gross profit percentage of 41%? What are some possible reasons for the change? This year's gross profit percentage is last year's percentage of 41%. Possible causes could be that inventory is or the selling price is Choices for Req 4: Question Viewer Requirement 4. Compute the gross p Compute the gross profit percentage. Gross profit percentage: How does this compare with last year' This year's gross profit percentage is exactly the same as higher than lower than compare with last year's gross profit percentage of 41%? What are some possible reasons for the change? in the input field. Do not enter a percentage symbol in the input field. (Round the percentage to the nearest tenth percent, X.X%. ? What are some possible reasons for the change? ▼ last year's percentage of 41%. Possible causes could be that inventory is ▼or the selling price is Question Viewer 4. Compute the gross profit percentage. How does this compare with last year's gross profit percentage of 41%? What a Compute the gross profit percentage. Only enter the percentage value in the input field. Do not enter a percentage symbol in the input Gross profit percentage: the change? costing too little e to the nearest tenth percent, X.X%. costing too much priced just right ▼last year's percentage of 41%. Possible causes could be that inventory is or the selling price is How does this compare with last year's gross profit percentage of 41%? What are some possible reasons for the change? This year's gross profit percentage is Requirement 4. Compute the gross profit percentage. How does this compare with last year's gross profit percentage of 41%? What are some possible reasons for the change Question Viewer Compute the gross profit percentage. Only enter the percentage value in the input field. Do not enter a percentage symbol in the input field. (Round the percentage to the nea Gross profit percentage: not low enough. not high enough. just right. last year's percentage of 41%. Possible causes could be that inventory is ▼or the selling price is How does this compare with last year's gross profit percentage of 41%? What are some possible reasons for the change? This year's gross profit percentage is Part 3 Transactions March 3 March 5 March 7 March 15 Sold $15,600 of merchandise to Watford Company on account. Watford Company returned $440 of the merchandise from March 3. Sold $1,300 of merchandise to Mason, Inc., on account. Watford Company paid the balance of what it owed for the purchase on March 3. March 19 Sold $22,600 of merchandise to Zuber Co. on account. March 21 Zuber reported that some of the merchandise received was the wrong colour and returned $1,040 worth of merchandise to Sawyer. March 23 Sold $33,500 of merchandise to Nesbits Co. on account. March 31 Zuber paid the balance of what it owed for the purchase on March 19. Print Done Requirement 1. Record Sawyer's transactions, including the cost of goods sold entry for each sale. March 3: Sold $15,600 of merchandise to Watford Company on account. In this step, record the sales transaction. The journal entry for the cost of goods sold will be recorded in the next step. (Record debits first, then credits. Exclude explanations from any journal entries.) Date March 3 Account Titles Debit Credit Now, record the cost of goods sold for the sale of merchandise on March 3. (Record debits first, then credits. Exclude explanations from any journal entries. Round your answers to the nearest whole dollar.) Date March 3 Account Titles Debit Credit