Ass xam (4-6 +)
Questions 19-21
[The following information applies to the questions displayed below.]
On August 31, 2014, merchandise inventory was $25,017. Supplementary records of merchandising activities for the year ended August 31, 2015, reveal the following itemized costs.
19.
| Valley Company’s adjusted trial balance on August 31, 2015, its fiscal year-end, follows. |
| Debit | Credit | ||||||
| Merchandise inventory | $ | 31,000 | |||||
| Other (noninventory) assets | 124,000 | ||||||
| Total liabilities | $ | 35,805 | |||||
| Common stock | 41,729 | ||||||
| Retained earnings | 62,912 | ||||||
| Dividends | 8,000 | ||||||
| Sales | 212,040 | ||||||
| Sales discounts | 3,244 | ||||||
| Sales returns and allowances | 13,995 | ||||||
| Cost of goods sold | 82,768 | ||||||
| Sales salaries expense | 29,049 | ||||||
| Rent expense—Selling space | 9,966 | ||||||
| Store supplies expense | 2,544 | ||||||
| Advertising expense | 18,023 | ||||||
| Office salaries expense | 26,505 | ||||||
| Rent expense—Office space | 2,544 | ||||||
| Office supplies expense | 848 | ||||||
| Totals | $ | 352,486 | $ | 352,486 |
On August 31, 2014, merchandise inventory was $25,017. Supplementary records of merchandising activities for the year ended August 31, 2015, reveal the following itemized costs.
| Invoice cost of merchandise purchases | $ | 91,140 |
| Purchase discounts received | 1,914 | |
| Purchase returns and allowances | 4,375 | |
| Costs of transportation-in | 3,900 |
19.
| Required: | ||||||
| 1. | Compute the company’s net sales for the year.
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Explanation:
| Sales | $ | 212,040 | |||
| Less: Sales discounts | (3,244 | ) | |||
| Sales returns and allowances | (13,995 | ) | |||
| Net sales | $ | 194,801 |
20.
| 2. | Compute the company’s total cost of merchandise purchased for the year. |
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Explanation:
| Cost of Merchandise Purchased | |||||
| Invoice cost of merchandise purchased | $ | 91,140 | |||
| Purchase discounts received | (1,914 | ) | |||
| Purchase returns and allowances | (4,375 | ) | |||
| Costs of transportation-in | 3,900 | ||||
| Total cost of merchandise purchased | $ | 88,751 |
21.
| 3. |
Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.
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22.
| Valley Company’s adjusted trial balance on August 31, 2015, its fiscal year-end, follows. |
| Debit | Credit | ||||||
| Merchandise inventory | $ | 39,800 | |||||
| Other (noninventory) assets | 49,930 | ||||||
| Total liabilities | $ | 25,800 | |||||
| Common stock | 17,040 | ||||||
| Retained earnings | 4,260 | ||||||
| Dividends | 8,700 | ||||||
| Sales | 226,400 | ||||||
| Sales discounts | 2,270 | ||||||
| Sales returns and allowances | 12,000 | ||||||
| Cost of goods sold | 75,700 | ||||||
| Sales salaries expense | 31,000 | ||||||
| Rent expense—Selling space | 8,600 | ||||||
| Store supplies expense | 1,600 | ||||||
| Advertising expense | 12,000 | ||||||
| Office salaries expense | 28,100 | ||||||
| Rent expense—Office space | 3,300 | ||||||
| Office supplies expense | 500 | ||||||
| Totals | $ | 273,500 | $ | 273,500 | |||
On August 31, 2014, merchandise inventory was $25,200. Supplementary records of merchandising activities for the year ended August 31, 2015, reveal the following itemized costs.
| Invoice cost of merchandise purchases | $ | 92,800 |
| Purchase discounts received | 2,400 | |
| Purchase returns and allowances | 5,000 | |
| Costs of transportation-in | 4,900 | |
| Required: | |
| 1. | Prepare closing entries as of August 31, 2015 (the perpetual inventory system is used). |
| Aug 31 | Sales | 226,400 | |
| Income summary | 226,400 | ||
| Aug 31 | Income summary | 175,070 | |
| Sales discounts | 2,270 | ||
| Sales returns and allowances | 12,000 | ||
| Cost of goods sold | 75,700 | ||
| Sales salaries expense | 31,000 | ||
| Rent expense—Selling space | 8,600 | ||
| Store supplies expense | 1,600 | ||
| Advertising expense | 12,000 | ||
| Office salaries expense | 28,100 | ||
| Rent expense—Office space | 3,300 | ||
| Office supplies expense | 500 | ||
| Aug 31 | Income summary | 51,330 | |
| Retained earnings | 51,330 | ||
| Aug 31 | Retained earnings | 8,700 | |
| Dividends | 8,700 |
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Questions 23-25
[The following information applies to the questions displayed below.]
[The following information applies to the questions displayed below.]
Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.
| Date | Activities | Units Acquired at Cost | Units Sold at Retail | |||||||||
| Mar. | 1 | Beginning inventory | 140 | units | @ $51.80 per unit | |||||||
| Mar. | 5 | Purchase | 245 | units | @ $56.80 per unit | |||||||
| Mar. | 9 | Sales | 300 | units | @ $86.80 per unit | |||||||
| Mar. | 18 | Purchase | 105 | units | @ $61.80 per unit | |||||||
| Mar. | 25 | Purchase | 190 | units | @ $63.80 per unit | |||||||
| Mar. | 29 | Sales | 170 | units | @ $96.80 per unit | |||||||
| Totals | 680 | units | 470 | units | ||||||||
23.
| Required: | |
| 1. |
Compute cost of goods available for sale and the number of units available for sale.
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24.
| 2. | Compute the number of units in ending inventory. |
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| Units available (from part 1) | 680 | units |
| Less: Units sold (300 + 170) | 470 | units |
| Ending inventory (units) | 210 | units |
25.
| 3. |
Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d)specific identification. For specific identification, the March 9 sale consisted of 85 units from beginning inventory and 215 units from the March 5 purchase; the March 29 sale consisted of 65 units from the March 18 purchase and 105 units from the March 25 purchase. (Round your average cost per unit to 2 decimal places.)
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26.
Kiona Co. set up a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in May (the last month of the company's fiscal year).
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| May 1 | Prepared a company check for $450 to establish the petty cash fund. |
| 15 |
Prepared a company check to replenish the fund for the following expenditures made since May 1.
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| a. Paid $140.40 for janitorial services. | |
| b. Paid $114.62 for miscellaneous expenses. | |
| c. Paid postage expenses of $78.30. | |
| d. Paid $102.87 to The County Gazette (the local newspaper) for an advertisement. | |
| e. Counted $34.51 remaining in the petty cash box. | |
| 16 |
Prepared a company check for $200 to increase the fund to $650.
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| 31 |
The petty cashier reports that $462.13 cash remains in the fund. A company check is drawn to replenish the fund for the following expenditures made since May 15.
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| f. Paid postage expenses of $69.85. | |
g. Reimbursed the office manager for business mileage, $55.61.
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h. Paid $57.41 to deliver merchandise to a customer, terms FOB destination.
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| 31 |
The company decides that the May 16 increase in the fund was too large. It reduces the fund by $50, leaving a total of $600.
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| Required: | |
| 1. |
Prepare journal entries to establish the fund on May 1, to replenish it on May 15 and on May 31, and to reflect any increase or decrease in the fund balance on May 16 and May 31. (Round your answers to 2 decimal places.)
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| May 01 | Petty cash | 450.00 | |
| Cash | 450.00 | ||
| May 15 | Janitorial expenses | 140.40 | |
| Miscellaneous expenses | 114.62 | ||
| Postage expenses | 78.30 | ||
| Advertising expense | 102.87 | ||
| Cash over and short | 20.70 | ||
| Cash | 415.49 | ||
| May 16 | Petty cash | 200.00 | |
| Cash | 200.00 | ||
| May 31 | Postage expenses | 69.85 | |
| Mileage expense | 55.61 | ||
| Delivery expense | 57.41 | ||
| Cash over and short | 5.00 | ||
| Cash | 187.87 | ||
| May 31 | Cash | 50.00 | |
| Petty cash | 50.00 |
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Questions 27-28
[The following information applies to the questions displayed below.]
[The following information applies to the questions displayed below.]
The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2015.
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| a. |
On July 31, the company’s Cash account has a $25,750 debit balance, but its July bank statement shows a $28,590 cash balance.
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| b. |
Check No. 3031 for $1,730 and Check No. 3040 for $857 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $641 and Check No. 3069 for $2,498, both written in July, are not among the canceled checks on the July 31 statement.
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| c. |
In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,260.
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| d. |
A credit memorandum enclosed with the July bank statement indicates the bank collected $9,500 cash on a non-interest-bearing note for Branch, deducted a $48 collection fee, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.
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| e. |
A debit memorandum for $805 lists a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.
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| f. |
Enclosed with the July statement is a $14 debit memorandum for bank services. It has not yet been recorded because no previous notification had been received.
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| g. |
Branch’s July 31 daily cash receipts of $10,652 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.
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27.
| Required: | |
| 1. |
Prepare the bank reconciliation for this company as of July 31, 2015.
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28.
| 2. |
Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. )
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| a. | No journal entry required | ||
| b. | No journal entry required | ||
| c. | Rent expense | 10 | |
| Cash | 10 | ||
| d. | Cash | 9,452 | |
| Collection expense | 48 | ||
| Notes receivable | 9,500 | ||
| e. | Accounts receivable—E. Shaw | 805 | |
| Cash | 805 | ||
| f. | Miscellaneous expenses | 14 | |
| Cash | 14 | ||
| g. | No journal entry required |
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A merchandiser:
Earns net income by buying and selling merchandise.
A remittance advice is a(n):
Explanation for a payment by check.
The days' sales uncollected ratio is used to:
Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.
Which of the following accounts would be closed at the end of the accounting period with a debit?
Sales.
Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except:
Counters of inventory should be those who are responsible for the inventory.
Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between
ending inventory and cost of goods sold.
All of the following statements related to U.S. GAAP and IFRS are true except:
Neither system requires separate disclosure of items when their size, nature, or frequency are important.
Decisions management must make in accounting for inventory cost include all of the following except:
Customer demand for inventory.
The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the
Invoice.
Cash equivalents meet all of the following criteria except:
Are more liquid than cash.
The number of days' sales uncollected is calculated by:
Dividing accounts receivable by net sales and multiplying by 365.
The internal document prepared to notify the appropriate persons that goods ordered have been received, describing the quantities and condition of the goods is the
Receiving report.
The amount recorded for merchandise inventory includes all of the following except:
Freight costs paid by the seller.
The operating cycle for a merchandiser that sells only for cash moves from:
Purchases of merchandise to inventory to cash sales.
Ferguson Co. has a $200 petty cash fund. At the end of the first month the accumulated receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The journal entry to record the reimbursement of the account includes a:
Credit to Cash for $182.
Internal control procedures for cash receipts do not require that:
All collections for sales are be received immediately upon making the sales.
Beginning inventory plus net purchases is:
Merchandise (goods) available for sale.
Quick assets are defined as:
Cash, short-term investments, and current receivables.
The inventory turnover ratio:
Reveals how many times a company sells its merchandise inventory during a period.
A voucher is an internal document or file:
Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded.
An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):
Bank reconciliation.
A voucher system is a set of procedures and approvals:
Designed to control cash disbursements and the acceptance of obligations.
During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:
Add the check amount to the bank balance.
The principles of internal control include:
Separate recordkeeping from custody of assets.
Which of the following events would cause a bank to debit a depositor's account?
The depositor orders new checks through the bank at a cost of $50.
If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should:
Add the deposit to the bank statement balance.
Goods in transit are included in a purchaser's inventory:
When the purchaser is responsible for paying freight charges.
Assume that the custodian of a $450 petty cash fund has $64.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
A credit to Cash for $385.50.
$450.00 - 64.50 - 382.50 = $3.00 cash shortage
$450 - 64.50 = $385.50 cash reimbursement needed
$450 - 64.50 = $385.50 cash reimbursement needed
Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals:
4.79.
Inventory Turnover = Cost of Goods Sold/Average Inventory
Inventory Turnover = $9,421/$1,965 = 4.79 times
Inventory Turnover = $9,421/$1,965 = 4.79 times
Prentice Company, Inc. had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal:
$172,550.
Net Sales = $94,275 + $83,450 - $1,700 - $3,475 = $172,550
A company has net sales of $752,000 and cost of goods sold of $543,000. Its net income is $17,530. The company's gross margin and operating expenses, respectively, are:
$209,000 and $191,470
Gross Margin = Net Sales - Cost of Goods Sold; $752,000 - $543,000 = $209,000
Operating Expenses = Gross Margin - Net Income; $209,000 - $17,530 = $191,470
Operating Expenses = Gross Margin - Net Income; $209,000 - $17,530 = $191,470