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Exercise 4-12 (10 minutes)
Multiple-Step Income Statement — Sales Related Information Only
Exercise 4-13 (20 minutes)
The employee’s oversight in omitting these goods from the physical count
would cause the cost of the physical count of ending inventory to be
understated. Therefore, the comparison of the perpetual inventory records
asset.
Exercise 4-14 (20 minutes)
See the solution explanation in Exercise 4-13. As a result of this error:
Exercise 4-15 (15 minutes)
Case X
Case Y
Case Z
Current ratio computation
Current assets ........................
$5,200
$3,500
$7,410
Current liabilities ....................
$2,000
$1,000
$3,800
Current ratio ............................
2.60
3.50
1.95
Acid-test ratio computation
Cash .........................................
$2,000
$ 110
$1,000
Short-term investments .........
50
0
580
Current receivables ................
350
470
700
Quick assets ...........................
$2,400
$ 580
$2,280
Current liabilities ....................
$2,000
$1,000
$3,800
Acid-test ratio .........................
1.20
0.58
0.60
Interpretation:
Case X has the highest acid-test ratio and a healthy current ratio. Since Case
X has enough current assets to cover its current liabilities by more than two
times and enough liquid assets to cover its current liabilities by more than one
time, Case X appears to be in the best position to meet its short-term
obligations.
Exercise 4-16A (30 minutes)
Apr. 2 Purchases .......................................................... 4,600
Accounts Payable—Lyon .......................... 4,600
Purchased merchandise on credit.
3 Transportation-In ............................................... 300
Exercise 4-17A (30 minutes)
1. BUYER – Santa Fe Company
Credit Purchase
Purchases ......................................................... 24,000
2. SELLER – Mesa Company
Credit Sale
Accounts Receivable ....................................... 24,000
Exercise 4-18A (25 minutes)
1. Entries for Sydney Company (BUYER):
May 11 Purchases ........................................................ 40,000
Accounts Payable .................................... 40,000
Purchased merchandise on credit.
2. Entries for Troy Corporation (SELLER):
May 11 Accounts Receivable ...................................... 40,000
Sales.......................................................... 40,000
Exercise 4-19A (20 minutes)
Periodic Inventory System
1)
Nov. 1 Purchases .......................................................... 1,500
2)
Nov. 5 Accounts Payable ............................................. 1,500
Purchases Discount* ................................. 30
3)
Nov. 7 Cash .................................................................... 196
4)
Exercise 4-20 (20 minutes)
L´Oréal
Income Statement (€ millions)
For Year Ended December 31, 2013
Net sales ................................................................................... €22,976.6
Cost of sales ............................................................................. 6,601.8
Gross profit.......................................................................... 16,374.8
Research and development expense .................................... (857.0)
PROBLEM SET A
Problem 4-1A (40 minutes)
July 1 Merchandise Inventory ..................................... 6,000
Accounts Payable—Boden ....................... 6,000
Purchased goods on credit, terms 1/15, n/30.
2 Accounts Receivable—Creek........................... 900
Sold goods for cash.
8 Cost of Goods Sold ........................................... 1,300
Merchandise Inventory .............................. 1,300
To record cost of the July 8 sale.
9 Merchandise Inventory ..................................... 2,200
Problem 4-1A (Concluded)
July 16 Accounts Payable—Boden ............................... 6,000
Merchandise Inventory (1%) ..................... 60
Cash ............................................................ 5,940
Paid payable within discount period.
24 Accounts Payable—Leight ............................... 2,000
Merchandise Inventory * ........................... 40
Cash ............................................................ 1,960
Paid payable in discount period (*2% x $2,000).
30 Cash .................................................................... 980
Problem 4-2A (40 minutes)
Aug. 1 Merchandise Inventory ..................................... 7,500
Accounts Payable—Arotek ....................... 7,500
Purchased goods on credit, terms 1/10, n/30.
5 Accounts Receivable—Laird ............................ 5,200
