Be7–11 At July 31 Southco Limited Had An Unadjusted Cash Bal
Be7– 11at July 31 Southco Limited Had An Unadjusted Cash Balance Of
Be7– 11at July 31 Southco Limited had an unadjusted cash balance of $16,320. An examination of the July bank statement shows a balance of $15,840 on July 31; outstanding cheques of $2,300; deposits in transit of $4,300; EFT collections on account of $1,960 that were not yet recorded on the books; NSF cheque of $290; NSF fee of $80; and bank service charges of $70. Prepare a bank reconciliation at July 31. BE7– 12 Using the data in BE7– 11, prepare the adjusting entries required on July 31 for Southco Limited. E6-6 Lakshmi Ltd. uses the perpetual inventory system and reports the following inventory transactions for June:
| Date | Explanation | Units | Unit Cost | Total Cost |
|-------|--------------|--------|-----------|------------|
| June 1 | Inventory | 150 | $5 | $750 |
| June 12 | Purchase | 380 | | |
| June 15 | Sale | (150) | | |
| June 23 | Purchase | 200 | | |
| June 27 | Sale | (570) | | |
Instructions:
a) Determine the cost of goods sold and the cost of the ending inventory using (1) FIFO and (2) average. (For average, use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
b) Which cost formula results in the higher cost of goods sold? Why?
c) Which cost formula results in the higher profit? Why?
d) Which cost formula results in the higher ending inventory? Why?
e) Which cost formula results in the higher pre-tax cash flow? Why? E6-6 The following information is available for Gildan Activewear Inc., headquartered in Montreal, for three recent fiscal years (in U.S. thousands):
| Year | Inventory | Net Sales | Cost of Sales |
|-------|--------------|------------|--------------|
| 2009 | $332,542 | $1,311,463 | $947,242 |
| 2010 | $301,867 | $1,038,319 | [missing data] |
| 2011 | $316,172 | $1,249,711 | [missing data] |
Instructions:
a) Calculate the inventory turnover, days in inventory, and gross profit margin for 2009 and 2010.
b) Based on the ratios calculated in (a), did Gildan’s liquidity and profitability improve or deteriorate in 2010? P7-5B On May 31, O’Hearn Limited had a cash balance per books of $13,400. The bank statement from Community Bank on that date showed a balance of $15,230. A comparison of the bank statement with the company’s Cash account revealed the following:
1. The bank statement included a bank service charge of $80.
2. The bank statement included two electronic collections from customers on account: $4,110 received from C. Campbell and $78 received from R. Pokoj. These were not previously recorded.
3. Cash sales of $1,672 on May 12 were deposited in the bank. The journal entry and the deposit slip were incorrectly made out and recorded by O’Hearn for $1,712. The bank detected the error and credited O’Hearn for the correct amount.
4. Outstanding cheques at April 30 totaled $2,900. Of these, $2,240 worth cleared the bank in May. There were $1,892 of cheques written in May that were still outstanding on May 31.
5. On May 18, the company issued cheque #1181 for $1,370 to a creditor. The cheque, which cleared the bank in May, was incorrectly journalized and posted by O’Hearn as being for $1,136.
6. Included with the canceled cheques was a cheque issued by O’Bearne Inc. for $1,200 that was incorrectly charged to O’Hearn by the bank.
7. On May 31, the bank statement showed a returned (NSF) cheque for $1,350 issued by a customer in payment of its account. The bank also charged an $80 processing fee for this transaction.
8. The May 31 deposit of $1,926 was not included in the deposits on the bank statement. The deposit had been placed in the bank’s night deposit vault on May 31.
Instructions:
(a) Prepare the bank reconciliation on May 31.
(b) Prepare any adjusting journal entries required from the reconciliation.