accounting

BCO114-ACCOUNTING I FORMATIVE ASSIGNMENT 3

Perpetual and periodict systems (Chapter 6) Problem 6.5A The following is a series of related transactions between Siogo Shoes, a shoe wholesaler, and Sole Mates, a chain of retail shoe stores Feb. 9 Siogo Shoes sold Sole Mates 100 pairs of hiking boots on account, terms 1/10, n/30. The cost of these boots to Siogo Shoes was $60 per pair, and the sales price was $100 per pair. Feb. 12 United Express charged $80 for delivering this merchandise to Sole Mates. These charges were split evenly between the buyer and seller and were paid immediately in cash. Feb. 13 Sole Mates returned 10 pairs of boots to Siogo Shoes because they were the wrong size. Siogo Shoes allowed Sole Mates full credit for this return. Feb. 19 Sole Mates paid the remaining balance due to Siogo Shoes within the discount period. Siogo Shoes uses a perpetual inventory system. Instructions Record this series of transactions in the general journal of Siogo Shoes. (The company records sales at gross sales Price and purchases at net.) Problem 6.7A Thompson Plumbing Inc. is a wholesaler of plumbing accessories. Thompson Plumbing began operations in September of the current year and engaged in the following transactions during September and October of this year. Thompson Plumbing uses a perpetual inventory system. Sept. 3 Purchased $240,000 of plumbing accessories, terms n/30. Sept. 15 Sold $180,000 of plumbing accessories, terms n/60. The cost of the accessories sold is $120,000. Sept. 28 Purchased $360,000 of plumbing accessories, terms n/45. Oct. 3 Settled the $240,000 purchase of September 3. Oct. 15 Sold $450,000 of plumbing accessories, terms n/60. The cost of the accessories sold is $300,000. Oct. 27 Purchased $540,000 of plumbing accessories, terms n/30. Record the above transactions in the genereal journal of the company.

Problem 6.8A CPI sells comp ter peripherals. At December 31, ear 1, CPI s in entor amo nted to $500,000. During the first week in January, year 2, the company made only one purchase and one sale. These transactions were as follows. Jan. 2 Purchased 20 modems and 80 printers from Sharp. The total cost of these machines was $25,000, terms 3/10, n/60. Jan. 6 Sold 30 different types of products on account to Pace Corporation. The total sales price was $10,000, terms 5/10, n/90. The total cost of these 30 units to CPI was $6,100 (net of the purchase discount). CPI has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable. Instructions a. Briefly describe the operating cycle of a merchandising company. Identify the assets and liabilities directly affected by this cycle. b. Prepare journal entries to record these transactions, assuming that CPI uses a perpetual inventory system. c. Compute the balance in the Inventory account at the close of business on January 6. d. Prepare journal entries to record the two transactions, assuming that CPI uses a periodic inventory system. e. Compute the cost of goods sold for the first week of January assuming use of the periodic system. (Use your answer to part c as the ending inventory.) f. Which type of inventory system do you think CPI most likely would use? Explain your reasoning. g. Compute the gross profit margin on the January 6 sales transaction. Financial Assets (Chapter 7) Exercise 7.2 The following financial assets appeared in a recent balance sheet of Apple, Inc. (dollar amounts are stated in millions Cash and cash equivalents $21,120 Marketable securities (short-term investments) 20,481 Accounts receivable (net of allowance for doubtful 16,849 Accounts of $82) a. Define financial assets. b. A different approach is used in determining the balance sheet value for each category of Apple Inc. s financial assets, altho gh each approach ser es a common goal. E plain. c. Why do companies like Apple Inc. hold so much of their financial assets in the form of marketable securities and receivables? d. What types of investments might Apple Inc. own that are considered cash equivalents?

e. Explain what is meant by the balance sheet presentation of Apple Inc. s Acco nts Receivable as shown in the table. Exercise 7.9 The following information was taken from recent annual reports of Goodyear Tire & Rubber and PPL Corp., a public utility:

Goodyear PPL Net sales $18.1 billion $ 11.5 billion Average accounts receivable 2.3 billion 923 million a. Compute for each company the accounts receivable turnover rate for the year. b. Compute for each company the average number of days required to collect outstanding receivables (round answers to nearest whole day). c. Explain why the figures computed for Goodyear in parts a and b are so different from those computed for PPL. Exercise 7.13 Wharton, Inc. pays income taxes on capital gains at a rate of 30 percent. At December 31,year 1, the company owns marketable securities that cost $180,000 but have a current market value of $520,000. a. Ho ill sers of Wharton s financial statements be made aware of this substantial increase in the market al e of the compan s in estments? b. As of December 31, year 1, what income taxes has Wharton paid on the increase in value of these investments? Explain. c. Prepare a journal entry at January 4, year 2, to record the cash sale of these investments at $520,000. d. What effect will the sale recorded in part c ha e on Wharton s ta obligation for ear 2?

Write-off of uncollectible account receivable On January 10, Winston, Inc.'s trial balance included the following accounts:

On January 11, Len Palmer, a major customer, declares bankruptcy, and Winston, determines that a receivable from Palmer in the amount of $3,400 is worthless. (a) In the space provided, show the journal entry made by Winston, to write off the account receivable from Len Palmer on January 11.

(b) Compute the net realizable value of Winston's accounts receivable at each of the following dates: January 10 (before write-off of Palmer's account) $_______________ January 11 (immediately after write-off of Palmers' account) $_______________

The flow of inventory costs (Chapter 8)

1. Perpetual inventory systems Funky Fashions uses a perpetual inventory system. The beginning inventory of a particular product, and the purchases during the current year, were as follows:

On September 3, the cocmpany sold 2,700 units. Determine the cost of goods sold on September 3 and the year-end inventory at December 31st for this product under each of the following methods of inventory valuation:

2. Perpetual inventory systems Tres Chic uses a perpetual inventory system. The beginning inventory of a particular product, and the purchases during the current year, were as follows:

On August 30 the company sold 2100 units. Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation (Rounded):

3. Inventory flow assumptions Flat TV uses a perpetual inventory system. Shown below are Flat TV's beginning inventory of a particular product and purchases during January:

On January 23 (prior to the purchase on January 25), Flat TV sold 13 units of this product. Determine the cost of goods sold relating to the sale on January 23 under each of the following flow assumptions. (Show your computations.)

4. Financial statement analysis Given the financial statements from Home Depot https://otp.tools.investis.com/clients/us/home_depot/SEC/sec- show.aspx?FilingId=14030444&Cik=0000354950&Type=PDF&hasPdf=1 and focusing in the Income Statement and the Balance Sheet compute the following:

a) Inventory Turnover rate b) Days to sell inventory c) Accounts Receivable Turnover rate d) Days to collect A/R e) Operating cycle of Home Depot