Reference no: EM132450941

Question 1

• Presented below is information for Zales Company for the month of January 2017.
• Cost of goods sold $280,000 Rent expense $35,000
• Freight-out 7,000 Sales discounts 8,000
• Insurance expense 12,000 Sales returns and allowances 13,000
• Salaries and wages expense 42,000 Sales revenue 421,000

Instructions

(a) Prepare a multiple-step income statement.
(b) Calculate the profit margin and the gross profit rate.

Question 2

• Assume that Mitchell Company uses a periodic inventory system and has these account balances: Purchases $620,000; Purchase Returns and Allowances $25,000; Purchases Discounts $11,000; and Freight-In $19,000; beginning inventory of $45,000; ending inventory of $55,000; and net sales of $750,000. Determine the amounts to be reported for cost of goods sold and gross profit.

Question 3

• Woodson Company sells many products. Gizmo is one of its popular items. Below is an analysis of the inventory purchases and sales of Gizmo for the month of March. Woodson Company uses the perpetual inventory system.

Purchases Sales
Units Unit Cost Units Selling Price/Unit

3/1 Beginning inventory     100 $40
3/3 Purchase                   60 $50
3/4 Sales                        60 $80
3/10 Purchase               200 $55
3/16 Sales                     90 $90
3/19 Sales                     70 $90
3/25 Sales                     60 $90
3/30 Purchase                40 $60

Instructions

(a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Question 4

The management of Otto Corp. is considering the effects of various inventory costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will:
1. result in the lowest income tax expense?
2. provide the highest net income?
3. provide the highest ending inventory?
4. result in the most stable earnings over a number of years?

Question 5

• Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify the three factors and explain what is meant by each.

Question 6

Identify the internal control procedures applicable to cash receipts for Colorado Company in each of the following situations.
1. All cashiers are bonded.
2. The treasurer compares the total cash receipts to the bank deposit daily.
3. The bookkeeper records cash receipts which are held by the treasurer.
4. Only the treasurer holds cash receipts.
5. Deposit slips are completed for each deposit.