30 Minutes, Strong
a. $ 100,000
PROBLEM 6.7B
COMPUTER RESOURCES
Sales
a.
40 Minutes, Strong PROBLEM 6.8B
HEARTHSTONE
Parts a, c, g, and h follow; parts b, d, e, and f are on the next page.
The operating cycle of a merchandising company consists of purchasing merchandise,
Education.
Jan 5 58,200
Accounts Pa
y
able
(
Rock Creek Cor
p
oration
)
58,200
10 42,000
Sales 42,000
10 15,000
Inventor
y
15,000
d. Inventor
y
at Dec. 31, 2015 750,000$
y
(
p
)
10 42,000
Sales 42,000
f. Inventor
y
(
Dec. 31, 2015
)
750,000$
Add: Purchases 58,200
Accounts Receivable (Harolds, Inc.)
Sale on account; terms, 5/10, n/90.
Computation of cost of goods sold:
PROBLEM 6.8B
b.
2016
General Journal
HEARTHSTONE (concluded)
Cost of Goods Sold
To record the cost of merchandise sold to Harolds, Inc.
Inventory
Purchased merchandise on account; terms, 3/10,
Accounts Receivable (Harolds, Inc.)
Sale on account; terms, 5/10, n/90.
Computation of inventory at January 10.
n/60, net cost, $60,000, less 3%.
Education.
y
35 Minutes, Medium
a.
SOLUTIONS TO CRITICAL THINKING CASE
S
SELECTING AN INVENTORY SYSTEM
CASE 6.1
The Frontier Shop would probably use a periodic inventory system. Several factors
support this conclusion. First, this is a small business that does not have a computerized
accounting system. An antique cash register is not an electronic device that can
Education.
e.
f.
CASE 6.1
Several factors suggest that TransComm would use a perpetual inventory system. For one,
management needs to know precisely how many units are on hand at any time in order to
know whether the company can fill the large sales orders it receives from customers. Next, the
(concluded)
An ice cream truck would use a periodic inventory system. Several factors support this
conclusion. First, it would be impractical for an ice cream truck to utilize a perpetual system,
as this would involve separately recording the cost of each ice cream bar and popsicle sold.
Next, inventory is not material in this type of business. In the course of a month, the quantity
SELECTING AN INVENTORY SYSTEM
a.
580,000$
58,000$
297,250 355,250$ 49,300 305,950 274,050$
CASE 6.2
A
COST-BENEFIT ANALYSI
S
25 Minutes, Medium
VILLAGE HARDWARE
Cost of goods sold:
For the Year Ended December 31, 20__
Net sales
Partial Income Statement
Inventory, January 1
Purchases
Cost of goods available for sale
Group assignment:
No time estimate
No specific solution is provided for this group assignment.
In this assignment, students are likely to encounter many variations in perpetual inventory
systems. For example, some businesses may maintain perpetual records only in units, others may
enter dollar amounts on a monthly basis, and still others may maintain perpetual records for use
the specific needs of the organization.
CASE 6.3
GROUP ASSIGNMENT WITH
BUSINESS COMMUNITY
INVOLVEMENT
20 Minutes, Medium
a.
b. There are several implications, other than integrity, which come into play in a situation such
as the one described in this case. For example, an intentional overstatement of ending
inventory for purposes of reducing cost of goods sold and increasing gross profit and net
CASE 6.
4
MANIPULATING INCOM
E
Your first thought should probably be whether you want to work for someone who asks you
to do something that is wrong in order to benefit himself. You should probably start by
reasoning with your supervisor about why you think what he proposes is not a good thing,
or the right thing, to do. One factor that should be considered is the potential for a criminal
judgment against you and the potential that might have on your life, reputation, career,
family, etc. Another implication is what will happen in future years should you start down
the “slippery slope” proposed by your supervisor. (See answer to part b.) Once you start
doing things like your supervisor proposes, will you have to continue doing them, perhaps in
greater proportions over time?
ETHICS, FRAUD & CORPORATE GOVERNANCE
Ultimately, you are going to have to decide whether to take the high ground or the low
cannot afford to go down with him. If Albers, Inc. is a public company, it will be required to
have a “hotline” where employees can confidentially report concerns regarding the
company’s accounting practices. You might want to avail yourself of the hotline in this
situation.
25 Minutes, Easy
a.
CASE 6.5
INTERNET
Note: We cannot supply quantitative answers to this assignment as they are time sensitive. Our
answers provide only general information about the requirements.
Financial information available at the company’s web site include financial news and
events, financial information, analyst coverage, stock information, real estate, governance,
EXPLORING THE ANNUAL REPORT OF GAP, INC.