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Unformatted text preview: 101 4 + 294 CHAPTERS The Operating Cycle and Merchandising Operations CHAPTER ASSIGNMENTS Short Exercises Identification of Management Issues SE 1. Identify each of the following decisions as most directly related to (a) cash flow management, (b) choice of inventory system, (c) foreign merchandising transactions, or (d) internal controls: 1. Determination of how to protect cash from theft or embezzlement 2. Determination of the effects of changes in exchange rates 3. Determination of policies governing sales of merchandise on credit 4. Determination of whether to use the periodic or the perpetual inventory system Operating Cycle SE 2. On average, Mason Company holds its inventory 40 days before it is sold, waits 25 days for customers' payments, and takes 33 days to pay suppliers. For how many days must it provide financing in its operating cycle? LO2 Term s of Sale SE 3. A dealer buys tooling machines from a manufacturer and resells them. a. The manufacturer sets a list or catalogue price of $12,000 for a machine. The manufacturer offers its dealers a 40 percent trade discount. b. The manufacturer sells the machine under terms of FOB shipping point. The cost of shipping is $700. c. The manufacturer offers a sales discount of 2/10, n/30. The sales discount does not apply to shipping costs. What is the net cost of the tooling machine to the dealer, assuming it is paid for within ten days of purchase? L02 Sales and Purchases Discounts SE 4. On April 15, Meier Company sold merchandise to Curran Company for $5,000 on terms of 2/10, n/30. Assume a return of merchandise on April 20 of $850, and payment in full on April 25. What is the payment by Meier to Curran on April 25? L03 Purchases of Merchandise: Perpetual Inventory System SE S. Record in T account form each of the following transactions, assuming the perpetual inventory system is used: Aug. 2 Purchased merchandise on credit from Indio Company, invoice dated August 1, terms n/10, FOB shipping point, $1,150. 3 Received bill from Lee Shipping Company for transportation costs on August 2 shipment, invoice dated August 1, terms n/30, $105. 7 Returned damaged merchandise received from Indio Company on August 2 for credit, $180. 10 Paid in full the amount due to Indio Company for the purchase of August 2, part of which was returned on August 7. 104 Purchases of Merchandise: Periodic Inventory System SE 6. Record in T account form the transactions in SE 5, assuming the periodic inventory system is used. REVIEW of Concepts and Terminology Stop & Review 293 LOS Describe the components of internal control, con- trol activities, and limita- tions on internal control. LO6 Apply internal control activities to common merchandising transactions....
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- Spring '12