Questions 1. Briefly contrast the accounting procedures in perpetual and periodic inventory systems. 2. The December bank statement for Kowal Publishing Co. reports a balance of $13,847.59 at December 31, 2018. Kowal's accounting records, however, show a balance of $15,245.47 in the same bank account prior to preparation of the bank reconciliation Which amount should be included in the amount of cash reported in Kowal's balance sheet at December 31, 2018? Explain your answer. Problem 1 Jordan's Boutique is a retail clothing store for men & women. The store operates out of a rented building in Malaga, Spain. The following is the store's adjusted year-end trial balance dated December 31, current year. A A A 21,888 3.744 25,200 2,592 1,296 59,040 A A A Cash Accounts receivable Merchandise inventory Prepaid rent Office supplies Office equipment Accumulated depreciation: office equipment Accounts payable Sales taxes payable Capital stock Retained earnings Sales Sales returns and allowances Cost of goods sold Purchase discounts lost Utilities expense Office supply expense Depreciation expense: office equipment Rent expense Insurance expense Salaries expense Income taxes expense 17,280 18,360 4,608 25,920 30,312 325,440 $ 3,600 144,828 360 5,932 749 3,960 8,784 1,296 126,857 11,794 421,920 $ 421,920 a. Prepare an income statement for Jordan's Boutique dated December 31, current year, b. Compute the store's gross profit margin as a percentage of net sales. c. Do the store's customers seem to be satisfied with their purchases? Defend your answer. d. Explain how you can tell that the business records inventory purchases net of any purchase discounts. e. The store reports sales taxes payable of $4,608 in its adjusted trial balance. Explain why it does not report any sales taxes expense. Problem 2: On October 1, 2018, Pipes & Plumbing Company received a 10 percent, six-month note receivable from Kirkman Constructions, one of Pipes & Plumbing Company's problem credit customers. Kirkman had owed $75,000 on an account receivable that had defaulted. Pipes & Plumbing insists that any customer who fails to pay an account receivable when due must replace their unpaid account receivable with an interest- bearing note receivable. Assume the Pipes & Plumbing Company makes adjusting entries for accrued interest revenue once a year on December 31. Journalize the following events on the books of Pipes & Plumbing Company 1. Record the receipt of the note on October 1 in settlement of the account receivable 2. Record accrued interest at December 31, 2018. 3. Assume that Kirkman Constructions pays the note plus accrued interest in full. Record the collection of the principal and interest on April 1, 2019 4. Assume that Kirkman Constructions did not make the necessary principal and interest payment on April 1, 2019, defaulting on his obligation. Record the default on April 1, 2019 5. Why does Pipes & Plumbing Company insist that any customer who fails to pay must replace their unpaid account receivable with an interest-bearing note receivable? Problem 3: Walmarket uses a periodic inventory system. It sells domestic appliances and one of the store's most popular products is a WM3 washing machine. The inventory quantities, purchases, and sales of this product for the most recent year are as follows. Number of Units Inventory. Jan. 1 First purchase (May 12) Second purchase (July 9) Third purchase (Oct. 4) Fourth purchase (Dec. 18) Goods available for sale Units sold during the year Inventory, Dec. 31 Cost per Unit $ 359 $367 $ 370 $ 378 $ 384 Total Cost $ 4,308 $ 5,505 $ 7,770 $ 3,024 $ 6,528 $ 27,135 Instructions a. Using periodic costing procedures, compute the cost of the December 31 inventory and the cost of goods sold for the WM3 systems during the year under each of the following cost flow assumptions. 1. First-in, first-out. 2. Last-in, first-out. 3. Average cost (round to nearest dollar, except unit cost). b. Which of the three inventory pricing methods provides the most realistic balance sheet valuation of inventory in light of the current replacement cost of the WM3 units? Explain. c. Does this same method also produce the most realistic measure of income in light of the current replacement cost of the WM3 units? Explain. Problem 4 Given below are comparative Balance Sheets and Income Statement for Oro Corporation: Oro Corporation Oro Corporation Balance Sheets - Year 2017 Income Statement for year ended 31 Dec. 31 Jan. 1 December 2017 Cash $ 31,600 $ 26,900 Sales $965,000 Accounts receivable 248,000 214,000 Cost of goods sold (453.000) Inventory 173,000 176,000 Gross profit $512,000 Equipment (net) Operating expenses (314,000) 132,000 155,000 $584,600 $571,900 Operating income $ 198,000 Accounts payable $131,000 $142,000 Interest expense income taxes and (59,000) Dividends payable 18,000 14,000 Net income $ 139.000 Capital stock. $9 par 90,000 90,000 Retained earnings 345.600 324.900 $584.600 $571.900 Compute the following. Show workings. times days (a) Inventory Tumover (b) Days to Sell Inventory (c) Receivables Turnover (d) Days to Collect Receivables (e) Operating Cycle times days _days