30 May Listed Below Are Five Procedures Followed By Paul Company. Good Weak Principle 1. Several Individuals Operate The Cash Register Using
Principles of Accounting 301 Week 3 Homework
Exercise #1
Listed below are five procedures followed by Paul Company.
GoodWeakPrinciple
1. Several individuals operate the cash register using the same register drawer.
2. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities.
3. Fran Vorbeck writes checks and also records cash payment journal entries.
4. One individual orders inventory, while a different individual authorizes payments.
5. Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording.
Instructions
A) Indicate whether each procedure is an example of good internal control or of weak internal control.
B) If it is an example of good internal control, indicate which internal control principle is being followed.
C) If it is an example of weak internal control, indicate which internal control principle is violated.
Exercise #2
Presented below is information for Baker Company for the month of March 2014.
Cost of goods sold$212,000 Rent expense$32,000
Freight-out 9,000 Sales discounts6,600
Insurance expense 6,000 Sales returns and allowances13,000
Salaries and wages expense 58,000 Sales revenue380,000
Instructions
(a) Prepare a classified income statement.
(b) Compute the gross margin rate.
Baker Company
Income Statement
For the period ending March 31, 2014
Exercise #3
The following information pertains to William Landscape Company.
1. Cash balance per bank, July 31, $7,293.
2. July bank service charge not recorded by the depositor $28.
3. Cash balance per books, July 31, $7,384.
4. Deposits in transit, July 31, $1,500.
5. Bank collected $800 note for William in July, plus interest $36, less fee $20. The collection has not been recorded by William, and no interest has been accrued.
6. Outstanding checks, July 31, $621.
Instructions
(a) Prepare a bank reconciliation at July 31.
William Landscape Company
Bank Reconciliation
July 31, 2014
Adjusted Balance as of July 31, 2014
Adjusted Balance as of July 31, 2014
Exercise #4
Calculate ending inventory, cost of goods sold, gross margin, and gross margin rate under periodic method; compare results.You are provided with the following information for Molly Inc. for the month ended October 31, 2014. Molly uses a periodic method for inventory.
DateDescriptionUnitsUnit Cost/ Selling PriceBeginning InvDateDescriptionUnitsUnit Cost/ Selling PriceRevenue from Sales
October 1Beginning inventory60$24 $1,440
October 9Purchase12026$3,120
October 11Sale10035$3,500
October 17Purchase7027$1,890
October 22Sale6540$2,600
October 25Purchase8028$2,240
October 29Sale12040$4,800
330$8,690 285$10,900
Average Cost per unit
Inventory Units remaining after Sales
Sales Revenue
Instructions
(a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross margin, and (iv) gross margin rate under each of the following methods.
LIFO, FIFO and average cost
LIFOFIFOAverage
Cost of Goods Available for Sale
Ending Inventory
Costs of Goods Sold
Sales Revenue
Less COGS
*Gross Margin
Gross Margin Rate
*also called gross profit
Exercise #5
Calculate inventory turnover, days in inventory, and gross margin rate for Steff’s Photo Corporation for 2012, 2013, and 2014. Comment on any trends.
This information is available for Steff Corporation for 2012, 2013, and 2014.
201220132014
Beginning inventory100,000330,000400,000
Ending inventory330,000400,000480,000
Cost of goods sold900,0001,120,0001,300,000
Sales revenue1,200,0001,600,0001,900,000
Instructions
Inventory Turnover Rate
Change in turnover rate between periods
Days in Inventory
Gross Margin
Gross Margin Percent
20122013 2014
Average Inventory
Inventory Turnover Rate
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