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 che
cks, 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 Steffs 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