Homework 4 - P7-4 Req 1 Sales revenue Cost of goods sold(42...

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P7-4 Req. 1 Sales revenue 1,151,500 Cost of goods sold* (42 @ $10,000) + (5 @ $11,500) 477,500 Gross profit 674,000 Expenses 300,000 Pretax income 374,000 Ending inventory (15* 11500) 172,500 Req. 2 Sales revenue 1,151,500 Cost of goods sold* (20 @ $8,000) + (27 @ $10,000) 430,000 Gross profit 721,500 Expenses 300,000 Pretax income 421,500 Ending inventory (15* 10,000+20*11,500) 380,000 Req. 3 Pretax income increased by $47,500 because of the decision to purchase the additional units at the end of the year. This decision provided lower cost units to allocate to cost of goods sold, which increased pretax income. There is evidence of deliberate income manipulation. Although no information is provided as to expected future sales, nor the time to order and receive units, the timing of the purchase of the additional units is suspect because the cost of the equipment will be decreased again during the first quarter of next year.
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E8-14 Req. 1a Cash (+A) ............................................................................... 1,500,000 Accumulated depreciation ( XA, +A) .................................... 6,500,000 Furniture ( A) ....................................................................... 8,000,000 Sale of an asset at book value; the result is no loss or gain. Req. 1b Cash (+A) .............................................................................. 2,600,000 Accumulated depreciation ( XA, +A) ................................... 6,500,000 Gain on sale of long-lived asset (+Gain, +SE) ................... 1,100,000 Furniture ( A) ..................................................................... 8,000,000 Sale of an asset above book value; the result is a gain.
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