6. PR.05-03 BLANKSHEETALGO (Algorithnic) Sales-related and purchase-related tran

Question

6. PR.05-03 BLANKSHEETALGO (Algorithnic) Sales-related and purchase-related transactions using p al inventory system The following were selected from aong the transsctions comp eted by Babeock Compsny during November ofthe current year 3 Purenased merchandise on account from Moonight Co., list pree93,000, trade ciscount 25%, terms FOB cdeetination, 210, n30 Sold merchandse tor cash.34.100. The goal erthegoods sold was $22.08D Nov 4 5 Purchased merchandise on account from Papocse Creek Co., S3,650, enms FOR shicaina.Roin 210, n30, with prepaid freight of $750 added to the io ce. Resumed $15,000 1520 000 ist price less trace ciscount or 25%) of merchandise purchased on Novembar 3 from Monlght Co 6 Sald merchandse an acpaunt to Quinn Co, S15,270 with termsn'16. The cost af the goeds sold was 58,940 3 Paid Moonight Co onccount for purchase of November 3 la8 return of Novambar. Sald merchandse an VISA $229,800. The cost of the gcods seld was $153,500 15 Paid Papcose Creek Co. on account for purchase of November . 23 Received cash on acount from sae af Novemter8 to Quinn Co 24 Sold merchandise on account to Rabel Co., 851,300, lene 110, 30. The cost ofthe gcods sokl was $33 280 28 Paid MSA service fee af $3,410. 30 Paid un Co. a cash refund of S5,610 for returred ehandise from sale of Novemter 8. The cosl of he retumad merchandise was $3,180 Jomeze the irseactoia. Reter to theCAccouts fore dig ofaccount tes CHART OF ACCOUNTS Babcock Company General Ledger Chart of Accounts ASSETS REVENUE 110 Cash 121 Accounts Recelvable-Quinn Co 22 Accaunts Receivable-Ratel Co 125 Notes Receivable 130 Inventery 131 Estimated Retums Imventory 140 Omice Supplies 141 Sloe Suppis 142 Prepa d Irsurance 190 Land 192 Slore Equipment 410 Sales 610 Interest Revenue EXPENSES $10 Cost of Gcods Sold 521 Delivery Exeee 522 Advartaing Expensn 523 Salaries Experse 31 Rent Expensa 33 Insurance Exoense 34 Siora Supplias Expense 134 Office Equipment 9S Accumulated Depreciatian-Otice Equipment 535 Office Suppies Expene 533 Credit Card Expenee 530 Miscelaneous Excense 10 Interest Expense LIABILITIES 211 Accunts Payaale-Moonlight Co 212 Acunts Prynake-Papoas Creck C 218 Selaries Payable 218 Sales Tax Payable 218 Customer Relunds Payable 221 Notes Payable EQUITY 310 Common 51ock 311 Ratained Eamings 312 Dividends 313 Incorne Summary

Explanation / Answer

Answer 7.a

Asset Turnover = Sales / Average TotalAssets.

Year 1= 101650/53500 = 1.90

Year 2 = 97760/61100 = 1.60

Answer 7.b

Option 1

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