1. McMillan Company uses the periodic inventory system.

It has compiled the following

information in order to prepare the financial statements at December 31, 2009:

Calculate (A.) Goods available for sale (B.) Cost of goods sold and (C.) Gross margin on sales.
Answer:
A. $100,000 + $750,000 = $850,000
B. $850,000 $120,000 = $730,000
C. $2,000,000 $50,000 $730,000 = $1,220,000
2. The inventory records of Martin Corporation reflected the following information for the month
of August:

A. Determine the amount of the ending inventory and cost of goods sold under each of the
following methods assuming the periodic inventory system.
METHOD
a. Weighted average

ENDING INVENTORY

COGS

b. FIFO
Answer

3. Beckworth Company purchased a truck on January 1, 2009, at a cash cost of $10,600. The
estimated residual value was $400 and the estimated useful life was 4 years. The company uses
straight-line depreciation computed monthly. On July 1, 2012, the company sold the truck for
$1,700 cash. A. What was the depreciation expense amount per month? B. What was the amount
of accumulated depreciation at July 1, 2012? C. Give the required journal entries on the date of
disposal, July 1, 2012. (Assume no 2012 depreciation had yet been recorded).
Answer:
A. ($10,600 $400) 48 = $212.50 per month
B. 212.50 x 6 months = $1,275
C.

4. On January 1, 2009 Gordon Company purchased a patent for $420,000 from an inventor who
had developed a new manufacturing process. At the time of the purchase, the patent had a
remaining legal life of 10 years. Required:
A. Prepare the journal entry to record Gordon Company's purchase of the patent.
B. Prepare the journal entry to record amortization of the patent on December 31, 2009 assuming
that no contra account is used.
C. At the end of 2012 after amortization had been recorded through December 31, 2011, Gordon
Company concluded that the estimated future cash flows from the patent to be $200,000 as
required to test for impairment. Record the impairment if necessary.
Answer:

5. Chicago Company has hired you to reconcile its bank statement and cash account. For June, the
Cash account showed the following:

There were neither outstanding checks nor deposits in transit at May 31.
A. Prepare the bank reconciliation.
B. Prepare the adjusting journal entries needed due to the bank reconciliation.
C. What is the June 30 ending cash balance?
Answer: