1.-Cheap Toys Case

Cheap Toys sells merchandise to the general public for cash or credit. It accepts several major credit cards. The company pays an average fee of 4% of sales to the credit card companies and 6% to the State of Florida in sales taxes.

A customer comes to the store and makes a purchase of $10,000. Mark, the store owner, tells the customer that if she pays cash, he will give her a 7% discount. The customer accepts.

Does Cheap Toys lose money on this deal? Why would Mark do it? Is it ethical?

2.-Omni Corporation Case

Omni Corporation's Board of Directors met over growing concern about the drop in the price of their stock. The company had seen a 25% price drop in the past six months. Since the price was so low, the Board decided to purchase a large bulk of stock for $50 million. Just before the end of the year, the stock increased dramatically and the corporation was able to sell this stock for a gain of $30 million dollars.

At the Board of Director's meeting to review the year-end financial statements, they were concerned that the gain on the sale of the stock was not reported on the income statement. They believed that since the stock was sold at a price higher than its purchase price, a gain should be recorded on the financial statements.

Did the accountant record the transaction correctly? Why would the Board of Directors want to show the gain? Are there any ethical issues involved? What is the correct journal entry for the sale of the stock?