Reference no: EM132890868

ACC 106 Accounting principles - Emirates College of Technology

LO 1: Prepare general journal entries for merchandize operations using periodic inventory systems.
LO 2: Compute the cost of inventory and cost of goods sold by using periodic systems using: First-In First-Out, Last-In First-Out, and Weighted Average and estimate the value of an inventory using the retail method and the gross profit method.
LO 3: Differentiate operations related to petty cash funds and create bank reconciliation statement.
LO 4: Determine the cost of plant assets and Compute depreciation by using straight line, declining balance and units of production depreciation methods.

Question 1:

XYZ Co uses the peridic inventory system. During June, the following transactions occurred for XYZ compagny :
1- Feb 1 Purchased 250 units of goods 30$ each one from Sami Co, terms 2/10, n/30.

2- Feb 3 Received credit of 1500 $ for the return of 50 units purchased on Feb 1 that were defective.

3. Feb 5, Paid freight on Feb 1 purchases for 300 $ cash FOB shipping point.

4- Feb 6, XYZ. sold goods 120 units at selling price 50 $ per unit to Sigma Co. on account 2/10 n, 30. FOB destination.

5- Feb 7 , XYZ Co. paid cash 150 $ freight expenses on Feb 6 sales. (FOB destination)

6- Feb 10, XYZ paid the net due to Sami Co.

7- Feb 20, received cash from Sigma Co.

8- Feb 28, XYZ Purchases additional 300 units from Ali totalling 12,000 $, terms 3/20, n/60).

Instructions: 1. Journalize the June transactions for XYZ company using the periodic inventory system.
2. Explain the importance of physical inventory operation at the year end.

Question 2:

XYZ Company uses the periodic inventory system to account for inventories. Information related to XYZ Company's inventory at December 31 is given below:

December 1    Beginning inventory                     300   units @ $10 =          $ 3,000

                  8    Purchase                                       200   units @ $11 =             2,200

                16    Purchase                                       400   units @ $12 =             4,800

                24    Purchase                                       150   units @ $13 =             1,950

                                Total units and cost           1,050   units                        $11,950

Instructions:
1. Show computations to value the ending inventory and cost of goods sold using the FIFO cost assumption if 550 units remain on hand at December 31.
2. Show computations to value the ending inventory and cost of goods sold using the weighted-average cost method if 550 units remain on hand at December 31.
3. Show computations to value the ending inventory and cost of goods sold using the LIFO cost assumption if 550 units remain on hand at December 31.

4. As an accounting student, indicate how companies choose between inventory valuation methods ?

Question 3:

The company XYZ suffers from numerous weaknesses in its internal control system. For each the below situations, you are required to identify the anomaly/risk related to this system and propose eventual solutions.

The financial department issues one copy of the sales bill that is shipped to the customer with the company driver.

The inventory custodian is the person who deliver the merchandise to the customer.

The person who keep the checks (issued and received) is the same who have access to the company accounting system.

Mr. A has now 9 years experience in the company. He is responsible to keep cash and checks. Since he joining XYZ , he has not claim any vacation.

The financial manager prepares the checks for the company suppliers and receive the merchandises ordered by the company.

The company XYZ has recently installed an ERP system to manage all its activities . Different staff have access to this system.

Mr X is working in the HR department. At the end of the month he is charged to prepare the salary statements for all employees, register them in the company books and pays them cash to each employee.

The petty cash fund is available for all staff. Each employee can expense from it without providing the invoice to the accountant.

The company XYZ uses the periodic inventory system. For the current year, the management decides to avoid physical inventory and he pretend that such procedure is a waste of time and money.

XYZ received every month the bank statement. However, the accounting department assumes that the bank reconciliation statement with the company books is irrelevant and a waste of time and money.

Question 4:

XYZ Company purchased a machine at a cost of $ 125,000 on 30/5/2020. The machine is expected to have a $20,000 salvage value at the end of its 5-year useful life.

Instructions:
Compute the depreciation rate.
Using the straight-line method, prepare a depreciation schedule, showing the annual depreciation expense for the machine over its 5-years life.
Record the depreciation expense on 31/12/2020 in the general journal.
What are the factors influencing the choice of the depreciation method of plant assets.

Attachment:- Accounting principles.rar