9. Which of the following can be used to estimate ending inventory?

A. weighted-average cost B. FIFO

C. LIFO

D. gross margin

10. Cost of Goods Sold is debited directly using:

A. only

the

perpetual

inventory

C.

only the serial inventory system

system

B.

only the periodic inventory system

D. both the periodic and perpetual inventory systems

II. Complete each of the following (10PTS)

1. The largest current asset for most retailers is _____________________________________.

2. The largest single expense for most merchandisers is _______________________________.

3. The inventory system that maintains continuous records of items in the inventory is called

_______________________________________.

4. Which inventory system(s) require(s) a physical count of inventory? __________________________

____________________________.

5. Estimating the warranty expense is an example of the _________________________ principle.

6. Obligations due within one year or within the companys operating cycle if it is longer than one year are called ____________________.

7. Short-term _______________ are promissory notes that must be repaid ___________________.

8. To calculate the amount to withhold for income taxes, the following information is required:

________________________, and _____________________________.

9. ____________________________is a measure of making small cash disbursements quickly.

10. ___________________ establishes ethical standards for chartered accountants.

Demonstration Problem #1 (20PTS)

The following petty cash transactions occurred in March:

March 1 Management decided to establish a petty cash fund. A cheque for $200 was written and cashed with the proceeds given to Becky Stone, who was designated custodian of the fund.

March 1 Rami Naraine, the owner of the business, immediately took $25 for lunch money.

March 4 $12.95 was disbursed to reimburse an employee for an air-express package paid for with personal funds.

March 6 COD freight charges on Supplies were paid, $22.00.

March 9 $29 was spent on postage stamps while the postage meter was being repaired.

March 11 Mr. Naraine borrowed another $35 from the fund.

March 12 COD freight charges on merchandise were paid, $31.

March 13 Because the fund was running low, Ms. Stone requested a cheque to replenish it for the disbursements made. As there was $44.45 on hand, Ms. Stone requested a cheque for $155.55. However, her supervisor authorized a cheque for $355.55 so sufficient funds would be on hand and only require monthly replenishment.

March 16 The monthly charge for the office newspaper was paid, $18.

March 19 COD charges on merchandise were paid, $47.

March 20 Mr. Naraine took $55 from the fund.

March 22 Ms. Stone took $12 from the fund to purchase coffee and supplies for the office coffee room.

March 25 Mr. Naraines spouse arrived by taxi. The fare of $19 plus a $3 tip was paid from the petty cash fund.

March 26 $35 was paid from the fund to have the front windows washed.

March 28 A coworker did not have lunch money. Ms. Stone gave the coworker $15 from the fund and took a postdated cheque for that amount.

March 31 The company decided to replenish the fund on the last working day each month. There was $193.00 left in the fund.

Required:

1. Record the appropriate transactions in the general journal.

2. Post any entries to the Petty Cash Fund account.

Requirement 1 (General Journal entries)

Date Accounts and Explanation PR Debit Credit

Requirement 2 (Post entries to Petty Cash Fund)

Petty Cash Fund