Assignment in attachment. Very simple assignment.

Question 1 Cost of goods sold is determined only at the end of the accounting period in both a perpetual and a periodic inventory system. neither a perpetual nor a periodic inventory system. a perpetual inventory system. a periodic inventory system. Question 2 Which of the following expressions is incorrect? Net income + operating expenses = gross profit Sales - cost of goods sold - operating expenses = net income Operating expenses - cost of goods sold = gross profit Gross profit - operating expenses = net income Question 3 Bryan Company purchased merchandise from Cates Company with freight terms of FOB shipping point. The freight costs will be paid by the buyer and the seller. seller. buyer. transportation company. Question 4 Zach's Market recorded the following events involving a recent purchase of merchandise: Received goods for $50,000, terms 2/10, n/30. Returned $1,000 of the shipment for credit. Paid $250 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's merchandise inventory increased by $48,265. increased by $49,250. increased by $48,020. increased by $48,270. Question 5 A sales invoice is a source document that provides support for goods purchased for resale. provides evidence of credit sales. serves only as a customer receipt. provides evidence of incurred operating expenses. Question 6 A credit sale of $900 is made on July 15, terms 2/10, n/30, on which a return of $50 is granted on July 18. What amount is received as payment in full on July 24? $882 $833 $850 $900 Question 7 All of the following are contra revenue accounts except sales. sales allowances. sales discounts. sales returns. Question 8 The operating cycle of a merchandiser is always one year in length. about the same as for a service company. generally longer than it is for a service company. generally shorter than it is for a service company. Question 9 Income from operations appears on both a multiplestep and a singlestep income statement. a multiplestep income statement. a singlestep income statement. neither a multiplestep nor a single step income statement. Question 10 If a company has net sales of $500,000 and cost of goods sold of $350,000, the gross profit percentage is 15%. 100%. 30%. 70%. Question 11 Gross profit for a merchandiser is net sales minus cost of goods sold. sales discounts. operating expenses. cost of goods available for sale. Question 12 A physical count of inventory is taken at the end of an accounting period under a periodic system in order to determine the amount of inventory purchased during the period. calculate property taxes. verify the accuracy of the accounting records. determine cost of goods sold for the period. Question 13 Which of the following accounts is not closed to Income Summary? Sales Sales Discounts Merchandise Inventory Cost of Goods Sold Question 14 Net sales is sales less sales returns and allowances. sales returns. sales discounts and sales returns and allowances. sales discounts. Question 15 Cost of goods available for sale is computed by adding beginning inventory to cost of goods purchased. freightin to net purchases. beginning inventory to net purchases. beginning inventory to purchases and freightin. Question 1 If goods in transit are shipped FOB destination the seller has legal title to the goods until they are delivered. the buyer has legal title to the goods until they are delivered. the transportation company has legal title to the goods while the goods are in transit. no one has legal title to the goods until they are delivered. Question 2 An auto manufacturer would classify vehicles in various stages of production as work in process. finished goods. merchandise inventory. raw materials. Question 3 Cost of goods sold is computed from the following equation: beginning inventory - cost of goods purchased + ending inventory. sales + gross profit - ending inventory + beginning inventory. beginning inventory + cost of goods purchased - ending inventory. sales - cost of goods purchased + beginning inventory - ending inventory. Question 4 The cost of goods available for sale is allocated between beginning inventory and cost of goods on hand. beginning inventory and cost of goods purchased. beginning inventory and ending inventory. ending inventory and cost of goods sold. Question 5 Which one of the following inventory methods is often impractical to use? Average cost Specific identification LIFO FIFO Question 6 Companies adopt different cost flow methods for each of the following reasons except cash flow effects. income statements effects. tax effects. balance sheet effects. Question 7 In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the averagecost method. tax method. FIFO method. LIFO method. Question 8 The managers of Teng Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices? Physical inventory method FIFO LIFO Average Cost Question 9 The consistent application of an inventory costing method is essential for conservatism. comparability. accuracy. efficienc y. Question 10 Inventory is reported in the financial statements at cost. the lowerofcostormarket. the higherofcostormarket. market . Question 11 Isaac Company developed the following information about its inventories in applying the lowerofcostormarket (LCM) basis in valuing inventories: Cost Market Product A $110,000 $120,000 B 80,000 76,000 C 160,000 162,000 If Isaac applies the LCM basis, the value of the inventory reported on the balance sheet would be $346,000. $362,000. $342,000. $350,00 0. Question 12 Understating beginning inventory will understate assets. owner's equity. cost of goods sold. net income. Question 13 Disclosures about inventory should include each of the following except the major inventory classifications. costing method. basis of accounting. quantity of inventory. Question 14 In a period of rising prices, FIFO will have lower net income than LIFO. lower cost of goods sold than LIFO. lower income tax expense than LIFO. lower net purchases than LIFO. Question 15 Euler Company made an inventory count on December 31, 2008. During the count, one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31, 2008, the effects of this error are Assets Liabilities Equity a. overstated understated overstated b. understated no effect understated c. overstated no effect overstated d. overstated overstated understated a. b. c. d. E72 Presented below are some business transactions that occurred during 2008 for Vicki Prowitz Company. In each of the situations below, identify the assumption, principle, or constraint that has been violated, if any. Give the correct journal entry. (If no journal entry should have been recorded select "No Entry" for the account and enter 0 for the amount.) 1. Merchandise inventory with a cost of $208,000 is reported at its market value of $260,000. The following entry was made. Account / Description Debit Merchandise Inventory Credit $52,000 Gain $52,000 Violations: Correct Entry: $ $ 2. Equipment worth $62,000 was acquired at a cost of $41,000 from a company that had water damage in a flood. The following entry was made. Account / Description Debit Equipment Credit $62,000 Cash $41,000 Gain on the purchase of equipment $21,000 Violations: Correct Entry: $ $ 3. The president of Vicki Prowitz Company, Mark Nabke, purchased a truck for personal use and charged it to his expense account. The following entry was made. Account / Description Debit Travel Expense Credit $18,000 Cash $18,000 Violations: Correct Entry: $ $ 4. An electric pencil sharpener costing $50 is being depreciated over 5 years. The following entry was made. Account / Description Debit Depreciation ExpensePencil Sharpener $10 Accum. DepreciationPencil Sharpener $10 and Materiality Correct Entry: Violations: Credit $ $ E74 Consider the following transactions of Parolini Company for 2008. For each item below, indicate the amount of revenue Parolini Company should recognize in calendar year 2008. (If answer is zero, please enter 0. Do not leave any fields blank.) 1. Sold a 6month insurance policy to Orosco Corporation for $9,000 on March 1. $ 2. Leased office space to Easley Supplies for a 1year period beginning September 1. The rent of $30,000 was paid in advance. $ 3. A sales order for merchandise costing $9,000 that had a sales price of $14,000 was received on December 28 from Gutierrez Company. The goods were shipped FOB shipping point on December 31. Gutierrez received them on January 3, 2009. $ 4. Merchandise inventory on hand at yearend that amounted to $160,000. Parolini Company expects to sell the inventory in 2009 for $180,000. $ 78 (a) Net sales, net income, total assets, and total common stockholders' equity information for a recent year is available for the following three companies. Company Net Sales Net Income Total Assets Total Common Equity (in millions) (in millions) (in millions) Southern Company Toys "R" Us, Inc. Intel Corp. $11,251 $11,305 $30,141 (in millions) $1,474 $35,045 $9,648 $229 $10,218 $5,641 $47,143 $4,222 $37,846 Compute the following relationships for each company. (Round all ratios to 1 decimal place, e.g. 10.5.) Debt to total assets ratio. Southern Company % Toys "R" Us, Inc. % Intel Corp. % Profit margin percentage (Return on sales) Southern Company % Toys "R" Us, Inc. % Intel Corp. % Return on assets Southern Company % Toys "R" Us, Inc. Intel Corp. Return on common stockholders' equity Southern Company % Toys "R" Us, Inc. % Intel Corp. % E710 Presented below is partial balance sheet information related to Batten Ltd., a United Kingdom company at December 31. All financial information has been translated from pounds to dollars. BATTEN LTD. Balance Sheet (partial) (in thousands) Fixed Assets Tangible assets Current Assets Stocks (inventory) Debtors Investments $900,000 $300,000 121,000 53,000 Cash 62,000 Creditors 536,000 100,000 Amounts falling due within one year 436,000 Net current assets Total assets less current liabilities Creditors 1,336,000 240,000 Amounts falling due over one year $1,096,000 Total net assets Restate the asset side of the balance sheet in accordance with generally accepted accounting principles in the United States. (List assets in order of liquidity.) BATTEN LTD. Partial Balance Sheet (in U.S. format) Current Assets (in thousands) $ Total current assets Total assets $ What is the amount of total stockholders' equity? $ P71A Scott and Quick are accountants for Millenium Computers. They disagree over the following transactions that occurred during the calendar year 2008. For each transaction, indicate why Quick disagrees. Identify the accounting principle or assumption that Scott would be violating if his suggestions were used. Prepare the correct journal entry for each transaction, if any. (If there is no transaction, enter No entry as the description and 0 for the amount.) 1. Scott suggests that equipment should be reported on the balance sheet at its liquidation value, which is $15,000 less than its cost. Violation: . Account Description Debit Credit $ $ 2. Millenium bought a custommade piece of equipment for $36,000. This equipment has a useful life of 6 years. Millenium depreciates equipment using the straightline method. "Since the equipment is custommade, it will have no resale value. Therefore, it shouldn't be depreciated but instead should be expensed immediately," argues Scott. "Besides, it provides for lower net income." Violation: . Account Description Debit Credit $ $ 3. Depreciation for the year was $18,000. Since net income is expected to be lower this year, Scott suggests deferring depreciation to a year when there is more net income. Violation: . Account Description Debit Credit $ $ 4. Land costing $60,000 was appraised at $90,000. Scott suggests the following journal entry. Account Description Debit Land Credit $30,000 Gain on Appreciation of Land $30,000 Violation: . Account Description Debit Credit $ $ 5. Millenium purchased equipment for $35,000 at a goingoutofbusiness sale. The equipment was worth $45,000. Scott believes that the following entry should be made. Account Description Debit Equipment Credit $45,000 Cash Gain on Purchase of Equipment $35,000 $10,000 Violation: . Account Description Debit Credit $ P75A part (a,b) $ The ledgers of Mid City Galleries Inc. contain the following balances as of December 31, 2008. Advertising expense Commissions expense on art sales Depreciation expense (administrative) Dividend revenue Insurance expense Interest expense Inventory, January1 Inventory, December 31 Loss on the sale of office equipment Miscellaneous administrative expenses Miscellaneous selling expenses Net purchases Net sales Rent expense Freightin Freightout Utilities expense Wages and salaries $123,000 1,200,000 1,650,000 1,424,000 3,200,000 9,275,000 1,264,000 Income taxes are calculated at 30 percent of income. The galleries had 90,000 shares of common stock outstanding for the entire year. Total assets amounted to $7,509,000, and common stockholder's equity was $3,975,400. Complete in good form the multiplestep income statement for Mid City Galleries. smallest e.g. 10, 5, 3, 2. Round earnings per share to 2 decimal places, e.g. 10.50 and all other an decimal places, e.g. 125. Enter all amounts as positive amounts and subtract where necessary.) Cost of goods sold Goods available for sale Cost of goods sold Gross profit Operating expenses Selling expenses Administrative expenses Total operating expenses Income from operations Other revenue and gains Other expenses and losses Income before income taxes Net income Calculate three measures of profitability and one ratio of solvency. Return on sales % Return on assets % Return on stockholders' equity % Debt to total assets % E85 Listed below are five procedures followed by The Beat Company. 1. 2. 3. 4. 5. Several individuals operate the cash register using the same register drawer. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities. Ellen May writes checks and also records cash payment journal entries. One individual orders inventory, while a different individual authorizes payments. Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording. Instructions Indicate whether each procedure is an example of good internal control or of weak internal control. If it is an example of good internal control, indicate which internal control principle is being followed. If it is an example of weak internal control, indicate which internal control principle is violated. Use the table below. Procedure IC Good or Weak Related Internal Control Principle 1. 2. 3. 4. 5. E87 James Hughes Company established a petty cash fund on May 1, cashing a check for $100. The company reimbursed the fund on June 1 and July 1 with the following results. June 1: Cash in fund $2.75. Receipts: delivery expense $31.25; postage expense $39.00; and miscellaneous expense $25.00. July 1: Cash in fund $3.25. Receipts: delivery expense $21.00; entertainment expense $51.00; and miscellaneous expense $24.75. On July 10, James Hughes increased the fund from $100 to $150. Instructions Prepare journal entries for James Hughes Company for May 1, June 1, July 1, and July 10. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 2 decimal places, e.g. 10.50.) Date Account / Description Debit Credit $ $ June 1 $ $ $ $ $ July 1 $ $ $ $ May 1 July 10 $ $ E813 The cash records of Givens Company show the following four situations. 1. The June 30 bank reconciliation indicated that deposits in transit total $720. During July the general ledger account Cash shows deposits of $15,750, but the bank statement indicates that only $15,600 in deposits were received during the month. 2. The June 30 bank reconciliation also reported outstanding checks of $680. During the month of July, Givens Company books show that $17,200 of checks were issued. The bank statement showed that $16,400 of checks cleared the bank in July. 3. In September, deposits per the bank statement totaled $26,700, deposits per books were $25,400, and deposits in transit at September 30 were $2,100. 4. In September, cash disbursements per books were $23,700, checks clearing the bank were $25,000, and outstanding checks at September 30 were $2,100. There were no bank debit or credit memoranda. No errors were made by either the bank or Givens Company. Instructions Answer the following questions. a. In situation (1), what were the deposits in transit at July 31? $ b. In situation (2), what were the outstanding checks at July 31? $ c. In situation (3), what were the deposits in transit at August 31? $ d. In situation (4), what were the outstanding checks at August 31? $ E814 (a) e. Lipkus Company has recorded the following items in its financial records. Cash in bank $47,000 Cash in plant expansion fund 100,000 Cash on hand 12,000 Highly liquid investments 34,000 Petty cash 500 Receivables from customers 89,000 Stock investments 61,000 f. The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments had maturities of 3 months or less when they were purchased. The stock investments will be sold in the next 6 to 12 months. The plant expansion project will begin in 3 years. What amount should Lipkus report as "Cash and cash equivalents" on its balance sheet? g. $ P82A Winningham Company maintains a petty cash fund for small expenditures. The following transactions occurred over a 2month period. July 1 Established petty cash fund by writing a check on Cubs Bank for $200. 15 31 Aug. 15 16 31 Replenished the petty cash fund by writing a check for $196.00. On this date the fund consisted of $4.00 in cash and the following petty cash receipts: freightout $94.00, postage expense $42.40, entertainment expense $46.60, and miscellaneous expense $11.20. Replenished the petty cash fund by writing a check for $192.00. At this date, the fund consisted of $8.00 in cash and the following petty cash receipts: freightout $82.10, charitable contributions expense $45.00, postage expense $25.50, and miscellaneous expense $39.40. Replenished the petty cash fund by writing a check for $187.00. On this date, the fund consisted of $13.00 in cash and the following petty cash receipts: freightout $75.60, entertainment expense $43.00, postage expense $33.00, and miscellaneous expense $37.00. Increased the amount of the petty cash fund to $300 by writing a check for $100. Replenished petty cash fund by writing a check for $284.00. On this date, the fund consisted of $16 in cash and the following petty cash receipts: postage expense $140.00, travel expense $95.60, and freightout $47.10. Journalize the petty cash transactions. (List multiple debit/credit entries in order of magnitude. Rou to 2 decimal places, i.e. $35.87) Date Account / Description July 1 July 15 July 31 Aug. 15 Aug. 16 Aug. 31 Post to the Petty Cash account. (If answer is zero, please enter 0, do not leave any fields blank.) Cash Date Explanation Ref. July 1 CP Aug. 16 CP What internal control features exist in a petty cash fund? P84A The bank portion of the bank reconciliation for Backhaus Company at November 30, 2008, was as follows. BACKHAUS COMPANY Bank Reconciliation November 30, 2008 Cash balance per bank $14,367.90 Add: Deposits in transit 2,530.20 16,898.10 Less: Outstanding checks Check Number Check Amount 3451 $2,260.40 3470 720.10 3471 844.50 3472 1,426.80 3474 1,050.00 6,301.80 $10,596.30 Adjusted cash balance per bank The adjusted cash balance per bank agreed with the cash balance per books at November 30. The December bank statement showed the following checks and deposits. Bank Statement Checks Date Deposits Number Amount Date Amount 121 3451 $2,260.40 121 $2,530.20 122 3471 844.50 124 1,211.60 127 3472 1,426.80 128 2,365.10 124 3475 1,640.70 1216 2,672.70 128 3476 1,300.00 1221 2,945.00 1210 3477 2,130.00 1226 2,567.30 Using the four steps in the reconciliation procedure, complete the bank reconciliation at December 31. from largest to smallest eg 10, 5, 3, 2. List outstanding checks numbers from smallest to largest Round answers to 2 decimal places, e.g. 10.50. Enter all amounts as positive amounts and subtr necessary.) Add: Less: Adjusted cash balance per bank Add: Less: Adjusted cash balance per books Prepare the adjusting entries based on the reconciliation. (Hint: The correction of a checks should be made to Accounts Payable. The correction of any errors relating made to Accounts Receivable.) (For multiple debit/credit entries, list amounts 3, 2. Round answers to 2 decimal places, e.g. 10.50.) Date Account / Description Dec. 31 (To record collection of note receivable by bank.) Dec. 31 (To record NSF check.) Dec. 31 (To record error on check no.3485.) Dec. 31 (To record error in deposit.) Communication Activity BYP8-5. As a new auditor for the CPA firm of Croix, Marais, and Kale, you have been assigned to review the internal controls over mail cash receipts of Manhattan Company. Your review reveals the following: Checks are promptly endorsed \"For Deposit Only,\" but no list of the checks is prepared by the person opening the mail. The mail is opened either by the cashier or by the employee who maintains the accounts receivable records. Mail receipts are deposited in the bank weekly by the cashier. Instructions Write a letter to Jerry Mays, owner of the Manhattan Company, explaining the weaknesses in internal control and your recommendations for improving the system