Acc 6 & 7 assign.docx
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Ch 6 Exercise 6.12
LO6-3, LO6-5 Sky Probe sells state-of-the-art telescopes to individuals and organizations
interested in studying the solar system. At December 31 last year, the
company’s inventory amounted to $250,000. During the first week of January
this year, the company made only one purchase and one sale. These
transactions were as follows:
Jan. Sold one telescope costing $90,000 to Central State University for cash,
Jan. Purchased merchandise on account from Lunar Optics, $50,000. Terms,
net 30 days.
a.Prepare journal entries to record these transactions assuming that Sky
Probe uses the perpetual inventory system. Use separate entries to record
the sales revenue and the cost of goods sold for the sale on January 2.
b.Compute the balance of the Inventory account on January 7.
c.Prepare journal entries to record the two transactions, assuming that Sky
Probe uses the periodic inventory system.
d.Compute the cost of goods sold for the first week of January assuming
use of a periodic inventory system. Use your answer to part b as the ending
e.Which inventory system do you believe that a company such as Sky Probe
would probably use? Explain your reasoning.
CPI sells computer peripherals. At December 31, 2015, CPI’s inventory
through LO6- amounted to $500,000. During the first week in January 2016, the company
made only one purchase and one sale. These transactions were as follows:
Jan. Purchased 20 modems and 80 printers from Sharp. The total cost of these
machines was $25,000, terms 3/10, n/60.
Jan. Sold 30 different types of products on account to Pace Corporation. The
total sales price was $10,000, terms 5/10, n/90. The total cost of these 30
units to CPI was $6,100 (net of the purchase discount).
CPI has a full-time accountant and a computer-based accounting system. It
records sales at the gross sales price and purchases at net cost and maintains
subsidiary ledgers for accounts receivable, inventory, and accounts payable.
a.Briefly describe the operating cycle of a merchandising company. Identify
the assets and liabilities directly affected by this cycle.
b.Prepare journal entries to record these transactions, assuming that CPI uses
a perpetual inventory system.
c.Compute the balance in the Inventory account at the close of business on
d.Prepare journal entries to record the two transactions, assuming that
CPI uses a periodic inventory system.
e.Compute the cost of goods sold for the first week of January assuming use
of the periodic system. (Use your answer to part c as the ending inventory.)
f.Which type of inventory system do you think CPI most likely would use?
Explain your reasoning.
g.Compute the gross profit margin on the January 6 sales transaction
LO7-1, LO7-3 The Ski Factory provided the following information at
through LO7- December 31, 2015:
The company invested $52,000 in a portfolio of marketable
securities on December 22, 2015. The portfolio’s market value
on December 31, 2015, had increased in value to $57,000.
On November 1, 2015, The Ski Factory sold 250 pairs of skis to
Arctic Lodge for $130,000. The lodge paid $10,000 at the point
of sale and issued a one-year, $120,000, 5 percent note for the
remaining balance. The note, plus accrued interest, is due in full
on October 31, 2016. The Ski Factory adjusts for accrued
interest revenue monthly.
The Ski Factory uses a balance sheet approach to account for
uncollectible accounts expense. Outstanding accounts
receivable on December 31, 2015, total $900,000. After aging
these accounts, the company estimates that their net realizable
value is $870,000. Prior to making any adjustment to record
uncollectible accounts expense, The Ski Factory’s Allowance
for Doubtful Accounts has a credit balance of $8,000.
a.Prepare the journal entry necessary to update the
company’s accounts immediately after performing its bank
reconciliation on December 31, 2015.
b.Prepare the journal entry necessary to adjust the
company’s marketable securities to market value at
December 31, 2015.
c.Prepare the journal entry necessary to accrue interest in
d.Prepare the journal entry necessary to report the
company’s accounts receivable at their net realizable value
at December 31, 2015.
e.Discuss briefly how the entry performed in part d affects
the accounts receivable turnover rate. Does the write-off of
an account receivable affect the accounts receivable
turnover rate differently than the entry performed in part d?
Purchase answer to see full
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