Accounting Principles I – Online Exam – Part II Solution

QUESTION

Accounting Principles I – Online Exam – Part IIComplete the following exam and save this file on your hard drive. Then submit your file to your instructor on Canvas.NAME_____PART A (26 Points) Use the general journal below to record the following transactions for the Linn Wholesale Company. Linn Wholesale uses a perpetual inventory system. Linn’s cost of all merchandise sold was 60% of the sales price.Mar. 2 Purchased $1,100 in merchandise on account from Sac Supply; terms 2/10, N/30.Mar. 4 Found $300 of the merchandise from Sac Supply to be defective and returned it for credit.Mar. 8 Sold merchandise on account to Strib Company in the amount of $1,500; terms 2/10, N/30.Mar. 9 Purchased merchandise on account from Ander Company at an invoice price of $2,200; terms 2/10, N/30.Mar. 10 Paid the freight company their freight bill of $75 on a shipment received.Mar. 11 Paid Sac Supply the amount due on March 2, invoice. (Don’t forget the return on Mar 4.)Mar. 15 Sold merchandise on account to Exiter Company in the amount of $700, terms 2/10, N/30.Mar. 24 Received check from Exiter for the amount due on the March 15 sale.Mar. 30 Paid Ander Company amount due on March 9 purchase.Mar. 31 Received check for amount due from Strib Company for March 8 sale.Linn Wholesale Company – General JournalDateAccount TitleDrCrPART B (12 Points, 4 points each)The following information is available for Miley Company.Administrative Expenses$30,000Cost of Goods Sold$245,000Sales$350,000Sales Returns and Allowances$10,000Selling Expenses$50,000Compute the following (show all your work):a. Net Sales __________________________________________________________b. Gross Profit ________________________________________________________c. Income from operations _______________________________________________PART C (24 Points, 4 points each)The beginning inventory balance of boodles on August 1 and the purchases of boodles during Augustwere as follows:August 1 Beginning Inventory600 units @ $4.00$2,400August 9 Purchase900 units @ $5.00$4,500August 23 Purchase500 units @ $6.00$3,000Totals2,000 units$9,900At August 31, the ending inventory was 700 units. Using the periodic inventory system, determine bothending inventory and the cost of goods sold based on each of the following methods of inventory valuation. (Show Computations)Ending Inventory Cost of Goods Solda. First-in, first-out (FIFO)………………… $______________ $_______________ b. Last-in, first-out (LIFO)…………………$______________ $________________ c. Weighted Average Cost………………….$______________ $________________ PART D(30 Points, 3 points each) For each of the following transactions indicate the journal which should be used by placing the appropriate symbol in the space provided: SJ = Sales Journal, PJ = Purchase Journal, CR = Cash Receipts Journal, CP = Cash Payments Journal, GJ = General Journal.A. Sold merchandise on credit……………………………………………….______B. Returned merchandise to supplier for credit…………………………______C. Purchased merchandise on credit……………………………………….______D. Purchased equipment used in the business on credit…………….______E. Purchased merchandise for cash………………………………………..______F. Collected accounts receivable and allowed a cash discount…..______G. Made an adjusting entry to accrue salaries at end of month…..______H. Sold merchandise for cash………………………………………………..______I. Recorded depreciation for the period…………………………………______J. Paid employees monthly salaries……………………………………….______PART E (10 Points)Ron Carter is a new accountant with Quartz Company. Quartz Company purchased merchandise onaccount for $4,000. The credit terms are 2/10, N/30. Ron has talked with the company’s banker andlearned that the company could earn 10% on any money invested in the company’s savings account. Should Ron pay the invoice within the discount period, or should he keep the $4,000 in the savingsaccount and pay at the end of the credit period? Write a memo to Ron with your recommendation and support your recommendation with a calculation showing which action would be best. (Remember that bank interest rates are always stated in yearly terms.) MEMO TO: FROM: SUBJECT: DATE:

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