| Question 1 |
Presented here are the components in Pedersen Company’s income statement. Determine the missing amounts.
| Sales |
| Cost |
| Gross Profit |
| Operating Expenses |
| Net Income |
| $71,200 |
| (b)$ |
| $30,000 |
| (d)$ |
| $10,800 |
| $108,000 |
| $70,000 |
| (c)$ |
| (e)$ |
| $29,500 |
| (a)$ |
| $71,900 |
| $109,600 |
| $46,200 |
| (f)$ |
Prior Company buys merchandise on account from Wood Company. The selling price of the goods is $900 and the cost of goods is $630. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.
Prior Company
| Account/Description | Debit | Credit |
| Cost of Goods SoldAccounts PayableMerchandise InventoryCashSalesAccounts ReceivableSupplies |
|
|
| Accounts PayableMerchandise InventoryCashAccounts ReceivableCost of Goods SoldSuppliesSales |
|
|
Wood Company
| Account/Description | Debit | Credit |
| SalesAccounts ReceivableCost of Goods SoldMerchandise InventoryAccounts PayableCashSupplies |
| |
| SalesMerchandise InventoryAccounts ReceivableAccounts PayableCashSuppliesCost of Goods Sold |
|
|
| (To record the sale) |
|
|
| Accounts ReceivableSuppliesSalesCost of Goods SoldMerchandise InventoryAccounts PayableCash |
|
|
| SuppliesCost of Goods SoldSalesMerchandise InventoryAccounts PayableCashAccounts Receivable |
|
|
| (To record the cost of inventory) |
|
|
| Question 3 |
In its first month of operation, Maze Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. The company uses the periodic method.
Phantom Profit $
| Question 4 |
O’Connor Video Center accumulates the following cost and market data at December 31.
|
| Inventory Categories | Cost Data | Market Data | ||
| Cameras | $12,500 |
| $13,400 |
| |
| Camcorders | 9,000 |
| 9,500 |
| |
| DVD’s | 13,000 |
| 12,800 |
| |
Compute the lower of cost or market valuation for O’Connor’s inventory.
$
Beaty Company has the following internal control procedures over cash receipts. Match the internal control principle that is applicable to each procedure.
| Establishment of responsibility | – -12345 |
| Segregation of duties | – -12345 |
| Independent internal verification | – -12345 |
| Human resource controls | – -12345 |
| Physical controls | – -12345 |
| 1. | The duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals. |
| 2. | All over-the-counter receipts are registered on cash registers. |
| 3. | Only cashiers may operate cash registers. |
| 4. | All cashiers are bonded. |
| 5. | Daily cash counts are made by cashier department supervisors. |
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