Question 1

Presented here are the components in Pedersen Company’s income statement. Determine the missing amounts.


of Goods Sold

Gross Profit

Operating Expenses

Net Income
















Prior Company buys merchandise on account from Wood Company. The selling price of the goods is $900 and the cost of goods is $630. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.

Question 3

In its first month of operation, Maze Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. The company uses the periodic method.

Phantom Profit $

O’Connor Video Center accumulates the following cost and market data at December 31.

Inventory Categories

Cost Data

Market Data










Compute the lower of cost or market valuation for O’Connor’s inventory.

Question 5

Beaty Company has the following internal control procedures over cash receipts. Match the internal control principle that is applicable to each procedure.