Exercise 1.
(a) Journalize the transactions, including explanations. (Note, enter all accounts in one box. The dates have been included to help with formatting).
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Date
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Account Titles and Explanation
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Debit
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Credit
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Sept. 6
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9
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10
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12
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12
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14
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14
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20
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20
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Exercise 2
(a) Prepare an income statement using the format presented on page 245. Assume a 25% tax rate.
(b) Calculate the profit margin ratio and gross profit rate.
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ZHOU COMPANY
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Income Statement
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For the Month Ended January 31, 2014
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Sales Revenues
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Amount (Total)
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Net Sales
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Cost of goods sold
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Gross profit
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Amount
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Operating Expenses
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Total operating expenses
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Amount
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Income before income taxes
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Amount
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Income tax expense
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Amount
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Net Income
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Amount
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(b) Profit Margin Ratio
Gross Profit Rate
PROBLEM 3
Prepare a correct detailed multiple-step income statement. Assume a tax rate of 25%.
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WRIGHT COMPANY
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Income Statement
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For the Month Ended December 31, 2014
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Sales Revenues
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Net Sales
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Cost of goods sold
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Gross profit
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Amount
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Operating Expenses
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Account title
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Amount
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Total operating expenses
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Amount
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Income from operations
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Amount
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Other revenues and gains
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Account title
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Amount
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Other expenses and losses
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Account title
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Amount
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Amount (Total)
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Income before income taxes
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Income tax expense
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Net Income
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Problem 4
(a) Determine the Cost of Goods Available for Sale
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Date
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Explanation
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Units
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Unit Cost
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Total Cost
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Total
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(b) Determine the ending inventory and cost of goods sold under each of the assumed cost flow methods. Prove the accuracy of the cost of goods sold under FIFO and LIFO.
FIFO
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(1) Ending Inventory
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(2) Cost of Goods Sold
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Date
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Units
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Unit Cost
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Total Cost
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Cost of goods available for sale
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Amount
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Amount
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Amount
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Less: ending inventory
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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Cost of Goods Sold
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Amount
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Proof of Cost of Goods Sold (FIFO)
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Date
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Units
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Unit Cost
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Total Cost
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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LIFO
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(1) Ending Inventory
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(2) Cost of Goods Sold
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Date
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Units
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Unit Cost
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Total Cost
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Cost of goods available for sale
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Amount
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Amount
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Amount
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Less: ending inventory
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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Cost of Goods Sold
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Amount
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Proof of Cost of Goods Sold (LIFO)
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Date
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Units
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Unit Cost
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Total Cost
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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AVERAGE COST (Round to the nearest decimal, i.e., $1.01)
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(1) Ending Inventory
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(2) Cost of Goods Sold
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Units
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Unit Cost
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Total Cost
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Cost of goods available for sale
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Amount
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Amount
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Amount
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Less: ending inventory
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Amount
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Total
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Amount
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Total
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Amount
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Cost of Goods Sold
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Amount
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(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?
Problem 5
a) Determine the Cost of Goods Available for Sale
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Date
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Explanation
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Units
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Unit Cost
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Total Cost
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Total
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(b) Determine the ending inventory and the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO and average-cost). Prove the accuracy of the cost of goods sold under each method.
FIFO
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(1) Ending Inventory
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(2) Cost of Goods Sold
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Date
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Units
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Unit Cost
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Total Cost
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Cost of goods available for sale
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Amount
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Amount
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Amount
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Less: ending inventory
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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Cost of Goods Sold
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Amount
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Proof of Cost of Goods Sold (FIFO)
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Date
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Units
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Unit Cost
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Total Cost
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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LIFO
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(1) Ending Inventory
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(2) Cost of Goods Sold
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Date
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Units
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Unit Cost
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Total Cost
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Cost of goods available for sale
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Amount
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Amount
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Amount
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Less: ending inventory
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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Cost of Goods Sold
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Amount
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Proof of Cost of Goods Sold (LIFO)
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Date
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Units
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Unit Cost
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Total Cost
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Amount
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Total
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Amount
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Total
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Amount
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AVERAGE COST (Round to the nearest decimal, i.e., $1.01)
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(1) Ending Inventory
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(2) Cost of Goods Sold
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Units
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Unit Cost
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Total Cost
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Cost of goods available for sale
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Amount
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Amount
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Amount
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Less: ending inventory
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Amount
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Total
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Amount
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Total
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Amount
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Cost of Goods Sold
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Amount
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(c) Which cost flow method results in the lowest inventory amount for the balance sheet? The lowest cost of goods sold for the income statement?