Problem 1: Shippers Inc. had the following inventory situations to consider at January 31, its year end.
a. Goods held on consignment for Mailboxes Corp. since December 12.
b. Goods shipped on consignment to Rinehart Holdings Inc. on January 4.
c. Goods shipped to customer, FOB destination, on January 29 that are still in transit.
d. Goods shipped to a customer, FOB shipping point, on January 29 that are still in transit.
e. Goods purchased FOB destination from a supplier on January 25 that are still in transit.
f. Goods purchased FOB shipping point from a supplier on January 25 that are still in transit.
g. Office supplies on hand at January 31.
Instructions:
Identify which of the preceding items should be included in inventory. If the item should not be included in inventory, state where it should be recorded.
Problem 2: The following information is available for Gurek Company for the month of January: expected cash receipts $60,000; expected cash disbursements $67,000; cash balance on January 1, $12,000. Management wishes to maintain a minimum cash balance of $8,000. Prepare a basic budget for the month of January.
Problem 3: At Nystrom Company checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertaining to goods purchased for resale. Prior to payment, the purchasing agent determines that goods have been received and verifies the mathematical accuracy of the vendor’s invoice. After payment, the invoice is filed by vendor and the purchasing agent records the payment in the cash disbursements journal. The treasurer pays all other bills following approval by authorized employees. After payment, the treasurer stamps all the bills “paid,” files them by payment date, and records the checks in the cash disbursement journal. Nystrom Company maintains one checking account that is reconciled by the treasurer.
Instructions:
a. List the weaknesses in internal control over cash disbursements.
b. Identify improvements for correcting these weaknesses.
Problem 4: Below are three receivables transactions. Indicate whether these receivables are reported as accounts receivable, notes receivable, or other receivables on a balance sheet.
a. Advanced $10,000 to an employee.
b. Received a promissory note of $34,000 for services performed.
c. Sold merchandise on account for $60,000 to a customer.
Problem 5: On March 3 Metro Appliances sells $760,000 of its receivables to Universal Factors Inc. Universal Factors Inc. assesses a finance charge of 5% of the amount of receivables sold.
Instructions:
Prepare the entry on Metro Appliances’ books to record the sale of the receivables.
Problem 6: These expenditures were incurred by Gerald Ford Company in purchasing land: cash price $50,000; accrued taxes $5,000; attorney’s fees $2,100; real estate broker’s commission $2,800; and clearing and grading $3,500. What is the cost of the land?
During 2004 Federal Express reported the following information (in millions): net sales of $24,710 and net income of $838. Its balance sheet also showed total assets at the beginning of the year of $15,385 and total assets at the end of the year of $19,134.
Instructions:
Calculate the (a) asset turnover ratio and (b) return on assets ratio.
Problem 7: Gold supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $10,388. All sales are subject to a 6% sales tax. Compute sales taxes payable and make the entry to record sales taxes payable and sales.
Problem 8: On May 15, Kiwi’s Outback Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year: The interest rate on the note was 8%. At the time the note was due, the amount of interest owed was $320.
Instructions:
a. Determine the amount borrowed by Kiwi’s
b. Assume the amount borrowed was $18,500. What was the interest rate if the amount of interest owed was $740?
c. Prepare the entry for the initial borrowing and the repayment for the facts in part (a).
Problem 9: Duggen Inc, issues 5,000 shares of $100 par value preferred stock for cash at $108 per share. Journalize the issuance of the preferred stock.
Problem 10: Wells Fargo & Company, headquartered in San Francisco, is one of the nation’s largest financial institutions. It reported the following selected accounts (in millions) as of December 31, 2004.
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Retained earnings
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$27,143
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Preferred stock
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270
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Common stock - $1 2/3 par value, authorized 6,000,000,000 shares;
issued 1,736,381,025 shares
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2,894
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Treasury stock - 41,789,388 shares
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(2,247)
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Additional paid-in capital - common stock
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9,806
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Instructions:
Prepare the stockholders’ equity section of the balance sheet for Wells Fargo as of December 31, 2004.
Problem 11: The following information is taken from the 2007 general ledger of Pierzynski Company.
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Rent
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Rent expense
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$40,000
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Prepaid rent, January 1
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5,900
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Prepaid rent, December 31
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9,000
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Salaries
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Salaries expense
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$54,000
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|
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Salaries payable, January 1
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10,000
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|
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Salaries payable, December 31
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8,000
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Sales
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Revenue from sales
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$170,000
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|
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Accounts receivable, January 1
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16,000
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|
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Accounts receivable, December 31
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7,000
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Instructions:
In each case, compute the amount that should be reported in the operating activities section of the statement of cash flows under the direct method.