The following is an excerpt from a conversation between Paula Marlo, the warehouse manager for Musick Foods Wholesale Co., and its accountant, Mike Hayes. Musick Foods operates a large regional warehouse that supplies produce and other grocery products to grocery stores in smaller communities. Paula: Mike, can you explain what’s going on here with these monthly statements? Mike: Sure, Paula. How can I help you? Paula: I don’t understand this last-in, first-out inventory procedure. It just doesn’t make sense. Mike: Well, what it means is that we assume that the last goods we receive are the first ones sold. So the inventory consists of the items we purchased first. Paula: Yes, but that’s my problem. It doesn’t work that way! We always distribute the oldest produce first. Some of that produce is perishable! We can’t keep any of it very long or it’ll spoil. Mike: Paula, you don’t understand. We only assume that the products we distribute are the last ones received. We don’t actually have to distribute the goods in this way. Paula: I always thought that accounting was supposed to show what really happened. It all sounds like “make believe” to me! Why not report what really happens? Respond to Paula’s concerns.
> Tehra Dactyl is an accountant for Skeds, Inc., a footwear and apparel company. The company’s revenue and net income have increased by more than 100% over the past three years. During the same period, Tehra and her colleagues in the Accounting Department
> TearLab Corp. is a health care company that specializes in developing diagnostic devices for eye disease. TearLab reported the following data (in thousands) for three recent years: 1. Determine the monthly cash expenses for Year 3, Year 2, and Year 1.
> The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31. The cash balance on the bank statement as of July 31 is $10,575. This balance includes a note of $2,250 plus $150 interest c
> The following is an excerpt from a conversation between the store manager of Wholesome Grocery Stores, Kara Dahl, and Lynn Shutes, president of Wholesome Grocery Stores: Lynn: Kara, I’m concerned about this new scanning system. Kara: What’s the problem?
> The following is an excerpt from a conversation between two salesclerks, Jean Moen and Sara Cheney. Jean and Sara are employed by Turpin Meadows Electronics, a locally owned and operated electronics retail store. Jean: Did you hear the news? Sara: What n
> All-Around Sound Co. discovered a fraud whereby one of its front office administrative employees used company funds to purchase goods such as computers, digital cameras, and other electronic items for her own use. The fraud was discovered when employees
> Wholesome and Happy Foods is a farm-to-family grocery store located in the Pacific Northwest. The company recently installed four self-checkout lanes that allow customers to scan their own groceries and pay for their purchases using an automated checkout
> Select a business in your community and observe its internal controls over cash receipts and cash payments. The business could be a bank or a bookstore, a restaurant, a department store, or another retailer. In groups of three or four, identify and discu
> The following procedures were recently installed by The China Shop: a. All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record locked inside the cash register. b. Each cashier is assigned a s
> Sunshine Interiors deposits all cash receipts each Wednesday and Friday in a night depository after banking hours. The data required to reconcile the bank statement as of July 31 have been taken from various documents and records and are reproduced as fo
> Journalize the following transactions, using the direct write-off method of accounting for uncollectible receivables: Oct. 2. Received $600 from Rachel Elpel and wrote off the remainder owed of $1,350 as uncollectible. Dec. 20. Reinstated the account of
> The cash account for Collegiate Sports Co. on November 1 indicated a balance of $81,145. During November, the total cash deposited was $293,150, and checks written totaled $307,360. The bank statement indicated a balance of $112,675 on November 30. Compa
> The cash account for Stone Systems at July 31 indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following
> Cedar Springs Company completed the following selected transactions during June: June 1. Established a petty cash fund of $1,000. 12. The cash sales for the day, according to the cash register records, totaled $9,440. The actual cash received from cash s
> The following procedures were recently installed by Raspberry Creek Company: a. After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting docum
> Beeler Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository after banking hours. The data required to reconcile the bank statement as of June 30 have been taken from various documents and records and are reproduced
> An employee of JHT Holdings, Inc., a trucking company, was responsible for resolving roadway accident claims under $25,000. The employee created fake accident claims and wrote settlement checks of between $5,000 and $25,000 to friends or acquaintances ac
> The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank state
> The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed t
> Jeremiah Restoration Company completed the following selected transactions during January: Jan. 1. Established a petty cash fund of $900. 12. The cash sales for the day, according to the cash register records, totaled $6,148. The actual cash received fro
> Ramona’s Clothing is a retail store specializing in women’s clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through J
> Jimmy Pace has recently been hired as the manager of Jittery Jon’s Coffee Shop. Jittery Jon’s Coffee Shop is a national chain of franchised coffee shops. During his first month as store manager, Jimmy encountered the following internal control situations
> The following three identical units of Item A are purchased during April: Assume that one unit is sold on April 30 for $118. Determine the gross profit for April and ending inventory on April 30 using the (a) First-in, first-out (FIFO); (b) Last-in, fi
> Using Wikipedia (www.wikipedia.com), look up the entry for Sarbanes-Oxley Act. Look over the table of contents and find the section that describes Section 404. What does Section 404 require of management’s internal control report?
> Amicus Therapeutics, Inc., is a biopharmaceutical company that develops drugs for the treatment of various diseases, including Parkinson’s disease. Amicus Therapeutics reported the following financial data (in thousands) for three recen
> Capstone Turbine Corporation produces and sells turbine generators for such applications as charging electric, hybrid vehicles. Capstone Turbine reported the following financial data for a recent year (in thousands): Net cash flows from operating activit
> Mattel, Inc., designs, manufactures, and markets toy products worldwide. Mattel’s toys include Barbie® fashion dolls and accessories, Hot Wheels®, and Fisher-Price brands. For a recent year, Mattel reported the following net cash flows from operating act
> One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank Societe Generale. The trader was able to circumvent internal controls and create more than $7 billion in trading losses in six mont
> Journalize the entries to record the following: a. Check is issued to establish a petty cash fund of $750. b. The amount of cash in the petty cash fund is now $176. Check is issued to replenish the fund, based on the following summary of petty cash recei
> Alaska Impressions Co. records all cash receipts on the basis of its cash register tapes. Alaska Impressions Co. discovered during October that one of its salesclerks had stolen an undetermined amount of cash receipts while taking the daily deposits to t
> The following June 30 bank reconciliation was prepared for Poway Co. a. Identify the errors in the following bank reconciliation: b. Prepare a new bank reconciliation for Poway Co., using the format shown in the illustrative problem.
> An accounting clerk for Chesner Co. prepared the following bank reconciliation: a. From the data in this bank reconciliation, prepare a new bank reconciliation for Chesner Co., using the format shown in the illustrative problem. b. If a balance sheet i
> Using the data presented in Exercise 8-18, journalize the entry or entries that should be made by the company. In Exercise 8-18 The following data were accumulated for use in reconciling the bank account of Mathers Co. for July: 1. Cash balance accordin
> The following data were accumulated for use in reconciling the bank account of Mathers Co. for July: 1. Cash balance according to the company’s records at July 31, $32,110. 2. Cash balance according to the bank statement at July 31, $31,350. 3. Checks ou
> Journalize the following transactions, using the direct write-off method of accounting for uncollectible receivables: Apr. 15. Received $800 from Jean Tooley and wrote off the remainder owed of $1,200 as uncollectible. Aug. 7. Reinstated the account of J
> Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Y
> Which of the reconciling items listed in Exercise 8-16 require an entry in the company’s accounts? In Exercise 8-16 1. Bank service charges, $30. 2. Check of a customer returned by bank to company because of insufficient funds, $400. 3. Check for $320 i
> Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (Costco.com) and in Canada (Costco.ca). Fo
> Identify each of the following reconciling items as: (a) An addition to the cash balance according to the bank statement, (b) A deduction from the cash balance according to the bank statement, (c) An addition to the cash balance according to the company’
> Halibut Company purchased merchandise on account from a supplier for $18,600, terms 2/10, n/30. Halibut Company returned $5,000 of the merchandise and received full credit. a. If Halibut Company pays the invoice within the discount period, what is the am
> Pacific Bank provides loans to businesses in the community through its Commercial Lending Department. Small loans (less than $100,000) may be approved by an individual loan officer, while larger loans (greater than $100,000) must be approved by a board o
> (a) Name and describe the five elements of internal control. (b) Is any one element of internal control more important than another?
> Knott Inc. has a petty cash fund of $750. (a) Since the petty cash fund is only $750, should Knott Inc. implement controls over petty cash? (b) What controls, if any, could be used for the petty cash fund?
> What is the purpose of preparing a bank reconciliation?
> Assume that Brooke Miles, accounts payable clerk for West Coast Design Inc., stole $48,350 by paying fictitious invoices for goods that were never received. The clerk set up accounts in the names of the fictitious companies and cashed the checks at a loc
> The ticket seller at a movie theater doubles as a ticket taker for a few minutes each day while the ticket taker is on a break. Which control procedure of a business’s system of internal control is violated in this situation?
> Sizemo Elektroniks sells semiconductors that are used in games and small toys. The company has been extremely successful in recent years, recording an increase in earnings each of the past six quarters. At the end of the current quarter, Jay Shulz, the c
> The general merchandise retail industry has a number of segments represented by the following companies: Company Name ______________Merchandise Concept Costco Wholesale Corporation ………â
> Target Corp. sells merchandise primarily through its retail stores. On the other hand, Amazon.com uses its e-commerce services, features, and technologies to sell its products through the Internet. Recent balance sheet inventory disclosures for Target an
> Based on the data presented in Exercise 6-25, journalize the closing entries. In Exercise 6-25 On March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, are as follows:
> Dave Elliott, CPA, is an assistant to the controller of Lyric Consulting Co. In his spare time, Dave also prepares tax returns and performs general accounting services for clients. Frequently, Dave performs these services after his normal working hours,
> Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows: Purchases: Sales: April …………â&#
> In teams, select a public company in the merchandising industry that interests you. Obtain the company’s most recent annual report on Form 10-K. The Form 10-K is a company’s annually required filing with the Securities and Exchange Commission (SEC). It i
> Anstead Co. is experiencing a decrease in sales and operating income for the fiscal year ending October 31. Ryan Frazier, controller of Anstead Co., has suggested that all orders received before the end of the fiscal year be shipped by midnight, October
> The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are as follows: Instructions 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory reco
> Selected data on merchandise inventory, purchases, and sales for Jaffe Co. and Coronado Co. are as follows: Instructions 1. Determine the estimated cost of the merchandise inventory of Jaffe Co. on February 28 by the retail method, presenting details o
> Data on the physical inventory of Katus Products Co. as of December 31 follow: Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Instructions Determine the invento
> Pappa’s Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the year, and the inventory count at December 31 are summarized as follows: Instructions 1. D
> The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in Problem 7-1B. In Problem 7-1B The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending
> The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in Problem 7-1B. In Problem 7-1B The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending
> The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019: Instructions 1. Prepare a multiple-step income statement. 2. Prepare a statement of owner’s equi
> The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in Problem 7-1B. In Problem 7-1B The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending
> Hard Bodies Co. is a fitness chain that has just completed its second year of operations. At the beginning of its first fiscal year, the company purchased fitness equipment at a cost of $600,000 and estimated that the equipment would have a useful life of fiv
> The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A. In Problem 7-1A The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending
> The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31, are as follows: Instructions 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record si
> Selected data on merchandise inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows: Instructions 1. Determine the estimated cost of the merchandise inventory of Celebrity Tan Co. on August 31 by the retail method, pres
> Data on the physical inventory of Ashwood Products Company as of December 31 follow: Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Instructions Determine the i
> Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the next 12 months, and the inventory count at December 31 are summarized as follows: Instructions 1. Determine t
> The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A. In Problem 7-1A The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period endin
> The following units of a particular item were available for sale during the calendar year: The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance
> Summary operating data for Custom Wire & Tubing Company during the year ended April 30, 2019, are as follows: cost of merchandise sold, $6,100,000; administrative expenses, $740,000; interest expense, $25,000; rent revenue, $60,000; sales, $9,332,500; an
> Assume that the business in Exercise 7-5 maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form il
> Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows: a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory b
> The following is an excerpt from a conversation between two employees of WXT Technologies, Nolan Sears and Stacy Mays. Nolan is the accounts payable clerk, and Stacy is the cashier. Nolan: Stacy, could I get your opinion on something? Stacy: Sure, Nolan.
> Assume that the business in Exercise 7-3 maintains a perpetual inventory system, costing by the last-in, first-out method. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form ill
> Beginning inventory, purchases, and sales data for portable game players are as follows: The business maintains a perpetual inventory system, costing by the first-in, first-out method. a. Determine the cost of the merchandise sold for each sale and the
> Hardcase Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items: a. Because the shop carries mostly high-quality, designer luggage, all inventory items a
> Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system. Kevin is unhappy with the periodic i
> Based on the following data, estimate the cost of the ending merchandise inventory: Sales …………………………………………………… $1,450,000 Estimated gross profit rate ………………………………. 42% Beginning merchandise inventory ……………. $ 100,000 Purchases (net) ………………………………………… 860
> Based on the following data, estimate the cost of the ending merchandise inventory: Sales ………………………………………………… $9,250,000 Estimated gross profit rate ……………………………. 36% Beginning merchandise inventory ………… $ 180,000 Purchases (net) …………………………………… 5,945,000
> The merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records: a. Estimate the cost of the merchandise destroyed. b. Briefly describe the situations in which the gross profit method is usef
> Identify the errors in the following income statement: Curbstone Company Income Statement For the Year Ended August 31, 2019 Sales... $8,595,000 Cost of merchandise sold 6,110,000 $2,485,000 Income from operations Expenses: Selling expenses . Admini
> On the basis of the following data, estimate the cost of the merchandise inventory at June 30 by the retail method: Cost Retall June 1 Merchandise inventory $ 165,000 $ 275,000 June 1-30 Purchases (net) 2,361,500 3,800,000 June 1-30 Sales 3,550,000
> Kroger, Sprouts Farmers Market, Inc., and Whole Foods Markets, Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the f
> The following data (in millions) were taken from recent annual reports of Apple Inc., a manufacturer of personal computers and related products, and Mattel Inc., a manufacturer of toys, including Barbie®, Hot Wheels®, and Disney Cla
> Godwin Co. owns three delivery trucks. Details for each truck at the end of the most recent year follow: • At the beginning of the year, a hydraulic lift is added to Truck 1 at a cost of $4,500. The addition of the hydraulic lift will
> During 20Y5, the accountant discovered that the physical inventory at the end of 20Y4 had been understated by $42,750. Instead of correcting the error, however, the accountant assumed that the error would balance out (correct itself) in 20Y5. Are there a
> Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 20Y8, Fonda Motorcycle Shop incorrectly counted its inventory as $337,500 instead of the correct amount
> Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $233,400 instead of the correct amo
> On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 9. Inventory Item Inventory Quantity Cost per Unit Market Value per Unit (Net Realizable Va
> Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. a. In each space that follows, place the correct sign [less than (), or equal (=)] for each comparison, assuming periods of rising prices. b. Why woul
> The units of an item available for sale during the year were as follows: There are 2,000 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by
> On March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, are as follows: a. Prepare a multiple-step income statement for the year ended March 31, 2019. b. Compare the major advantage
> The units of an item available for sale during the year were as follows: There are 1,200 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) The first-in, first-out meth
> Assume that the business in Exercise 7-9 maintains a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, assuming the last-in, first-out method. Present the data in the form illustra
> Assume that the business in Exercise 7-9 maintains a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, assuming the first-in, first-out method. Present the data in the form illustr
> The following units of a particular item were available for sale during the calendar year: The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance
> Go to the Internet and review the procedures for applying for a patent, a copyright, and a trademark. You may find information available on Wikipedia (Wikipedia.org) useful for this purpose. Prepare a brief written summary of these procedures.
> Before inventory purchases are recorded, the receiving report should be reconciled to what documents?
> In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities and Exchange Commission (SEC). It includes the company's financia
