The Mitchum Company has a beginning inventory for July of $375 (75 units at $5/unit) and makes the following purchases and sales of tapes during July: (40 pts)
07/07 Purchase 50 units @ $7
07/12 Sales 100 units
07/20 Purchase 125 units @ $8
07/28 Sales 90 units
Compute the cost of sales and the ending inventory for May if the firm uses the following:
a. The perpetual inventory system and the FIFO cost flow assumption
b. The perpetual inventory system and the LIFO cost flow assumption
For the FIFO method, you have to show the cost of sales (cost of goods sold) and the value of ending inventory.
For the LIFO method, you have to show the cost of sales (cost of goods sold) and the value of ending inventory.
2. An examination of the accounting records and bank statement of the Brian Donleavy Corporation at 31 May 2012 provides the following information: (40 pts)
a) The firm s checkbook has a balance of $4,304
b) The firm s bank statement has a balance of $3,538
c) The 31 May cash receipts of $1,500 were deposited in the bank at the end of that day but were not recorded by the bank until 01 Jun 2005
d) Checks issued and mailed in May but not included among the checks listed as paid on the bank statement were as follows:
Check No. 1615 $568
Check No. 1618 $112
Check No. 1621 $235
e) A bank service charge of $25 for May was deducted on the bank statement
f) A check received from a customer for $135 in payment of their account and deposited by the Brian Donleavy Corporation was returned marked NSF with the bank statement.
g) Interest of $15 earned on the firm s checking account was added on the bank statement
h) The Brian Donleavy Corporation discovered that Check No. 1585, which was correctly written as $584 for the May rent, was recorded as $548 in the firm s checking account.
Prepare the bank reconciliation as well as the adjusting journal entries. (There are two items – one is a bank reconciliation and the second are various journal entries)
3. A condensed balance sheet and other financial data for the Alpha Company appear below:
Alpha Company
Balance Sheet
Dec 31, 20X2
ASSETS
Current Assets
Cash $ 100,000
Account Receivable 200,000
Marketable securities 100,000
Inventory 200,000
Total Current Assets $ 600,000
Fixed Assets 500,000
Total Assets $1,100,000
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LIABILITIES & STOCKHOLDERS’ EQUITY
Liabilities
Accounts Payable $ 150,000
Other Current Liab. 50,000
Current liabilities $ 200,000
Long-term liabilities 100,000
Total liabilities $ 300,000
Stockholders’ Equity
Common stock – $1 par value
100,000 shares $ 100,000
Additional Paid-in capital 500,000
Retained earnings 200,000
Total Stockholders’ Equity 800,000
Total Liabilities & Stockholders’ Equity $1,100,000
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Alpha Company
Income Statement
For the Year Ended Dec 31, 20X2
Net Sales (100% credit sales) $10,000,000
Cost of Goods Sold 6,000,000
Gross Income $ 4,000,000
Selling, General & Administrative Expenses 1,000,000
Earnings before Interest and Taxes $ 3,000,000
Interest Expense 500,000
Earnings before Income Taxes $ 2,500,000
Income Taxes (40%) 1,000,000
Net Income $ 1,500,000
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Compute the following ratios: (40 pts)
a. Working capital
b. Current ratio
c. Quick ratio (acid-test)
d. Average Collection Period (utilizing a banker’s year)
e. Profit Margin
All wor must be shown