Resource 57 Financial Accounting Complete Exercises Be 51

Resourcech 57 Offinancial Accountingcompleteexercises Be51 Be52

Resource: Ch. 5–7 of Financial Accounting Complete Exercises BE5–1, BE5–2, BE6-5, BE6-7, BE7-4, BE7-5, & BE7-6. Submit as either a Microsoft® Excel® or a Microsoft® Word document BE5-1 Presented here are the components in Korinek Company’s income statement. Determine the missing amounts. Sales Cost of Gross Operating Net Revenue Goods Sold Profit Expenses Income $ 71,200 (b) $ 30,000 (d) $12,100 $108,000 $70,000 (c) (e) $29,500 (a) $71,900 $109,600 $46,200 (f ) BE5-2 Pocras Company buys merchandise on account from Wedell Company. The selling price of the goods is $900 and the cost of the goods sold is $590. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies. BE6-5 In its first month of operation, Moraine Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 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. Explain why this amount is referred to as phantom profit. The company uses the periodic method. BE6-7 Olsson Video Center accumulates the following cost and market data at December 31. Inventory Cost Market Categories Data Data Cameras $12,500 $13,400 Camcorders 9,000 9,500 DVDs 13,000 12,200 Compute the lower-of-cost-or-market valuation for Olsson inventory. BE7-4 Aldstadt Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure. (a) All over-the-counter receipts are registered on cash registers. (b) All cashiers are bonded. (c) Daily cash counts are made by cashier department supervisors. (d) The duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals. (e) Only cashiers may operate cash registers. BE7-5 While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $988.62. Prepare the required journal entry based upon the cash count sheet. BE7-6 Ndon Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. (a) Company checks are prenumbered. (b) The bank statement is reconciled monthly by an internal auditor.

Paper For Above instruction

Financial accounting exercises encompass a wide array of tasks that require analytical skills, understanding of accounting principles, and the ability to apply various methods such as FIFO and LIFO to inventory valuation. This paper discusses several exercises from chapters 5 to 7 of a typical financial accounting textbook, focusing on income statement component calculation, journalization of transactions, inventory valuation, and internal control procedures.

1. Calculating Missing Income Statement Components

The first task involves analyzing the components of Korinek Company’s income statement to determine missing figures such as sales, cost of goods sold, net income, and expenses. The given data includes total revenue and partial expenses but lacks certain figures. By applying the fundamental accounting equation and the relationships between revenue, expenses, and profit, we can infer the missing amounts. For example, from the gross profit margin and net income, the unknown sales revenue and costs can be calculated. Accurate determination of these components requires understanding of how gross profit is derived as sales minus cost of goods sold.

2. Journalizing Inventory Purchase Transactions

Pocras Company’s purchase of merchandise on account from Wedell Company presents a typical journal entry scenario under a perpetual inventory system. Both companies record inventory increases at the purchase price and accounts payable at the same value for the seller. The journal entries include debiting inventory and crediting accounts payable for Pocras, and debiting accounts receivable and crediting sales for Wedell. This process ensures real-time tracking of inventory and receivables, facilitating accurate financial reporting.

3. Inventory Valuation and Phantom Profit Calculation

Moraine Company’s inventory purchases involve different costs, and at month-end, some inventory remains unsold. The choice of inventory valuation method (FIFO vs. LIFO) impacts reported profits. FIFO assigns the oldest costs to cost of goods sold, potentially resulting in lower cost figures during inflation periods, thus inflating profits—referred to as phantom profit. The calculation involves determining the inventory costs under both methods and quantifying the difference. Phantom profit arises because these profits are not realized through actual cash flows but are accounting artifacts influenced by inventory cost flow assumptions.

4. Lower-of-Cost-or-Market Inventory Evaluation

Olsson Video Center’s inventory consists of categories such as cameras, camcorders, and DVDs, with known cost and market values. Applying the lower-of-cost-or-market rule involves comparing each category’s cost and market value and recording the lower amount in financial statements. This valuation principle ensures inventory is not overstated on the balance sheet, providing a conservative view of asset values, especially when market prices decline.

5. Internal Control Over Cash Receipts and Disbursements

Internal control procedures are designed to safeguard assets and ensure accurate recording of transactions. For cash receipts, controls such as registering all transactions via cash registers, bonding cashiers, and segregating duties help prevent theft and errors. The journal entry for cash receipts accounts for opening balances, cash on hand, and sales tape totals, ensuring that cash inflows are properly recorded. Over cash disbursements, controls like prenumbered checks and reconciliation by internal auditors mitigate fraud risks and ensure accountability. These procedures reflect key internal control principles such as segregation of duties, physical safeguards, and independent verification.

Conclusion

The exercises from chapters 5 to 7 illustrate essential concepts in financial accounting, including accurate financial statement preparation, inventory valuation methods, and robust internal control systems. Mastery of these concepts ensures reliable financial reporting and internal safeguards, which are vital for the integrity of financial information in any organization.

References

• Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2020). Financial Statement Analysis (12th ed.). McGraw-Hill Education.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th ed.). Wiley.
• Accounting Standards Codification (ASC). (2022). Financial Accounting Standards Board (FASB).
• Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2018). Introduction to Financial Accounting (11th ed.). Pearson.
• Gibson, C. H. (2021). Financial Reporting & Analysis. Cengage Learning.
• Loftus, J. (2018). Principles of Accounting. Pearson.
• American Institute of CPAs (AICPA). (2020). Internal Control Guidelines.
• Institute of Internal Auditors. (2021). International Standards for the Professional Practice of Internal Auditing.
• Messier, W. F., Glover, S. M., & Prawitt, D. F. (2020). Auditing & Assurance Services. McGraw-Hill Education.
• Financial Accounting Standards Board (FASB). (2022). Accounting Standards Updates (ASUs).