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) (a) $71,900 $109,600 $46,200 (f )
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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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 pre-numbered.
(b) The bank statement is reconciled monthly by an internal auditor.
(c) Blank checks are stored in a safe in the treasurer’s office.
(d) Only the treasurer or assistant treasurer may sign checks.
(e) Check signers are not allowed to record cash disbursement transactions.
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