Resource: Ch. 5–7 of Financial Accounting

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Resource: Ch. 5–7 of Financial Accounting

Complete Exercises BE5–1, BE5–2, BE6-5, BE6-7, BE7-4, BE7-5, & BE7-6.

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BE5-1 Presented here are the components in Korinek Company’s income statement.

 

 

 

Determine the missing amounts.

 

 

 

 

 

Sales                   Cost of                  Gross                   Operating                 Net

 

 

 

Revenue           Goods Sold              Profit                   Expenses            Income

 

 

 

$ 71,200                (b)                       $ 30,000                  (d)                      $12,100

 

 

 

$108,000           $70,000                        (c)                      (e)                       $29,500

 

 

 

(a)                    $71,900                      $109,600         $46,200                        (f )

 

 

 

 

 

BE5-2 Pocras Company buys merchandise on account from Wedell Company. The

 

 

 

selling price of the goods is $900 and the cost of the goods sold is $590. Both companies

 

 

 

use perpetual inventory systems. Journalize the transactions on the books of both

 

 

 

companies.

 

 

 

BE6-5 In its first month of operation, Moraine Company purchased 100 units of inventory

 

 

for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month,

 

 

 

180 units remained. Compute the amount of phantom profit that would result if the company

 

 

 

used FIFO rather than LIFO. Explain why this amount is referred to as phantom

 

 

 

profit. The company uses the periodic method.

 

 

 

 

 

BE6-7 Olsson Video Center accumulates the following cost and market data at

 

 

 

December 31.

 

 

 

 

 

Inventory           Cost               Market

 

 

 

Categories        Data                   Data

 

 

 

Cameras           $12,500            $13,400

 

 

 

Camcorders        9,000              9,500

 

 

 

DVDs              13,000               12,200

 

 

 

Compute the lower-of-cost-or-market valuation for Olsson inventory.

 

 

 

 

 

BE7-4 Aldstadt Company has the following internal control procedures over cash receipts.

 

 

 

 

 

 

 

Identify the internal control principle that is applicable to each procedure.

 

 

 

(a) All over-the-counter receipts are registered on cash registers.

 

 

 

(b) All cashiers are bonded.

 

 

 

(c) Daily cash counts are made by cashier department supervisors.

 

 

 

(d) The duties of receiving cash, recording cash, and having custody of cash are assigned

 

 

 

to different individuals.

 

 

 

(e) Only cashiers may operate cash registers.

 

 

 

 

 

 

 

 

 

BE7-5 While examining cash receipts information, the accounting department determined

 

 

 

 

 

 

 

the following information: opening cash balance $150, cash on hand $1,125.74,

 

 

 

and cash sales per register tape $988.62. Prepare the required journal entry based upon

 

 

 

the cash count sheet.

 

 

 

 

 

BE7-6 Ndon Company has the following internal control procedures over cash disbursements.

 

 

 

 

 

 

 

Identify the internal control principle that is applicable to each procedure.

 

 

 

(a) Company checks are prenumbered.

 

 

 

(b) The bank statement is reconciled monthly by an internal auditor.

 

 

 

 

 

 

 

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