Exam 2 Review Problems

Exam 2 Review Problems - EXAM 2 REVIEW PROBLEMS Chapter 5...

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EXAM 2 REVIEW PROBLEMS Chapter 5, Merchandising Operations 1. Jones Company is a furniture retailer and uses the perpetual inventory system. On January 14, 2007, Jones purchased merchandise inventory at a cost of $25,000. Credit terms were 3/10, n/30. On January 16, Jones returned $800 of the merchandise because it was damaged. It paid freight costs of $750 on the merchandise on January 17. The Accounts Payable was settled on January 23. a. Prepare journal entries to record each of these transactions. b. As a result of these events, by what amount did Jones Company’s Merchandise Inventory change? 2. Prepare the journal entries to record the following transactions on Paula Worth Company's books using a perpetual inventory system. On February 6, Paula Worth Company sold $60,000 of merchandise to the Jacobs Company, terms 2/10, net /30. The cost of the merchandise sold was $30,000. On February 7, Paula Worth paid freight of $1,100 on the February 6 sale. On February 8, the Jacob Company returned $10,000 of the merchandise purchased on February 6 because it was defective. The cost of the merchandise returned was $5,000. On February 15 Paula Worth Company received the balance due from the Jacob Company. 3. Financial information is presented below: Operating Expenses $ 200,000 Sales Returns and Allowances 18,000 Sales Discount 21,000 Sales 750,000 Cost of Goods Sold 400,000 a. What is the amount of net sales on the income statement? b. What is the gross profit? c. What is the gross profit rate? d. What is the profit margin ratio? Page 1
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4. Assume that Guardian Company uses a periodic inventory system and has these account balances: Purchases $600,000; Purchase Returns and Allowances $25,000; Purchases Discounts $11,000; and Freight-in $19,000; Freight-out $11,500; beginning inventory of $45,000; ending inventory of $55,000; and net sales of $750,000. a. Determine the amount to be reported for cost of goods sold. b. Determine the amount to be reported for gross profit. Chapter 7, Internal Control and Cash Page 2
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5. Listed below are seven errors or problems that might occur in the processing of cash transactions. Also shown is a list of internal control principles. Evaluate each possible error and cite a principle that is listed that would reduce the probability of the error occurring. If none of the principles given will correct the problem, write "None." If you think more than one principle is appropriate, list all principles that apply. Possible Errors or Problems
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Exam 2 Review Problems - EXAM 2 REVIEW PROBLEMS Chapter 5...

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