ACC 557 Week 4 Chapter 5 and 6 Problems

ACC 557 Week 4 Chapter 5 and 6 Problems

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Chapter 5

Exercise 5-4

On June 10, Rebecca Company purchased $7,600 of merchandise from Clinton Company, FOB shipping point, terms 2/10, n/30. Rebecca pays the freight costs of $400 on June 11. Damaged goods totaling $300 are returned to Clinton for credit on June 12. The fair value of these goods is $70. On June 19, Rebecca pays Clinton Company in full, less the purchase discount. Both companies use a perpetual inventory system.

(a) Prepare separate entries for each transaction on the books of Rebecca Company. (Record journal entries in the order in which they must have occurred. Credit account titles are automatically indented when amount is entered. Do not indent manually.) 

(b) Prepare separate entries for each transaction for Clinton Company. The merchandise purchased by Rebecca on June 10 had cost Clinton $4,300. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) 

Exercise 5-8

	Your answer is correct.

Presented below is information related to Taylor Co. for the month of January 2014.

Ending inventory per				Insurance expense		$ 12,000
perpetual records		$ 21,600		Rent expense		20,000
Ending inventory actually				Salaries and wages expense		59,000
on hand		21,000		Sales discounts		8,000
Cost of goods sold		208,000		Sales returns and allowances		13,000
Freight-out		7,000		Sales revenue		378,000

(a) Prepare the necessary adjusting entry for inventory. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) 

(b) Prepare the necessary closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) 

Exercise 5-13

Presented below is financial information for two different companies.

(a) Determine the missing amounts.

(b) Determine the gross profit rates. (Round answer to 1 decimal place, e.g. 25.2%.)

Problem 5-3A

Starz Department Store is located near the Towne Shopping Mall. At the end of the company’s calendar year on December 31, 2014, the following accounts appeared in two of its trial balances.

		Unadjusted		Adjusted				Unadjusted		Adjusted
Accounts Payable		$ 79,300		$ 80,300		Interest Revenue		4,000		4,000
Accounts Receivable		50,300		50,300		Inventory		75,000		75,000
Accumulated Depr.—Buildings		42,100		52,500		Mortgage Payable		80,000		80,000
Accumulated Depr.—Equipment		29,600		42,900		Prepaid Insurance		9,600		2,400
Buildings		290,000		290,000		Property Tax Expense				4,800
Cash		23,800		23,800		Property Taxes Payable				4,800
Common Stock		112,000		112,000		Retained Earnings		64,600		64,600
Cost of Goods Sold		412,700		412,700		Salaries and Wages Expense		108,000		108,000
Depreciation Expense				23,700		Sales Revenue		724,000		724,000
Dividends		24,000		24,000		Sales Commissions Expense		10,200		14,500
Equipment		110,000		110,000		Sales Commissions Payable				4,300
Insurance Expense				7,200		Sales Returns and Allowances		8,000		8,000
Interest Expense		3,000		8,600		Utilities Expense		11,000		12,000
Interest Payable				5,600

a) Prepare a multiple-step income statement. (List other revenues before other expenses.)

b) Prepare retained earnings statement. (List items that will increase retained earnings first.)

c) Prepare a classified balance sheet. $16,000 of the mortgage payable is due for payment next year. (List current assets in order of liquidity. Property, plant and equipment list in order of land, buildings and equipment.)

d) Journalize the adjusting entries that were made. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Chapter 6

Exercise 6-1

	Your answer is correct.

Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that further discussions with Alou’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $297,000. Discussions with the accountant reveal the following.

1.		Alou sold goods costing $38,000 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2.		The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end.
3.		Alou received goods costing $19,000 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count.
4.		Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory.
5.		Alou received goods costing $44,000 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000.

Determine the correct inventory amount on December 31.

The correct inventory amount

$

Exercise 6-10

	Your answer is correct.

Fenton Company applied FIFO to its inventory and got the following results for its ending inventory.

Cameras		100		units at a cost per unit of		$68
DVD players		150		units at a cost per unit of		$75
iPods		125		units at a cost per unit of		$80

The cost of purchasing units at year-end was cameras $70, DVD players $69, and iPods $78.

Determine the amount of ending inventory at lower-of-cost-or-market.

The ending inventory

$

Exercise 6-14

The cost of goods sold computations for Silver Company and Gold Company are shown below.

		Silver Company		Gold Company
Beginning inventory		$ 47,000		$ 71,000
Cost of goods purchased		200,000		290,000
Cost of goods available for sale		247,000		361,000
Ending inventory		55,000		69,000
Cost of goods sold		$192,000		$292,000

a) Compute inventory turnover for each company. (Round answers to 2 decimal places, e.g. 1.25.)

b) Compute days in inventory for each company. (Round inventory turnover values to 2 decimal places, e.g. 1.25 and final answers to 0 decimal places, e.g. 125.)

Problem 6-3A

Milo Company had a beginning inventory of 400 units of Product Kimbo at a cost of $8 per unit. During the year, purchases were:

Feb. 20		300		@		$9		Aug. 12		600		@		$11
May 5		500		@		$10		Dec. 8		200		@		$12

Milo Company uses a periodic inventory system. Sales totaled 1,500 units.

a)

Determine the cost of goods available for sale.

The cost of goods available for sale

$

b) Calculate the weighted-average unit cost. (Round answer to 2 decimal places, e.g. $2.25.)

c) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. $2,120.)

d) Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement?