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Not all visitors to a certain company's website are customers or potential customers. In fact, the company's executives estimate that about 12% of all visitors to the website are looking for other websites. Assume that this estimate is correct and that a random sample of 40 visitors to the website is taken.

Estimate the number of visitors in the sample who actually are looking for the company's website by giving the mean of the relevant distribution (that is, the expectation of the relevant random variable). Do not round your response.

Quantify the uncertainty of your estimate by giving the standard deviation of the distribution. Round your response to at least three decimal places.

pistons is estimated to produce a defective piston 1% of the time. Suppose that this estimate is correct and that a random sample of 90 pistons produced by this machine is taken.

Estimate the number of pistons in the sample that are defective by giving the mean of the relevant distribution (that is, the expectation of the relevant random variable). Do not round your response.

Quantify the uncertainty of your estimate by giving the standard deviation of the distribution. Round your response to at least three decimal places.

(If necessary, consult a list of formulas.)

Her company just finished

a year in which a large amount of borrowed funds was invested in a new building addition as

well as in equipment and fixture additions. Choi’s banker requires her to submit semiannual financial

statements so he can monitor the financial health of her business. He has warned her that if profit

margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk

from the bank’s point of view. Choi knows profit margin is likely to decline this year. As she prepares

year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions

are considered to be in use on the first day of the following month. (The previous rule assumed

assets are in use on the first day of the month nearest to the purchase date.)

Required

1. Identify decisions that managers like Choi must make in applying depreciation methods.

2. Is Choi’s rule an ethical violation, or is it a legitimate decision in computing depreciation?

3. How will Choi’s depreciation rule affect the profit margin of her business?

a. After all posting is complete on July 31, the company’s Cash account has a $26,193 debit balance,

but its July bank statement shows a $28,020 cash balance.

b. Check No. 3031 for $1,380 and Check No. 3040 for $552 were outstanding on the June 30 bank

reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is

not. Also, Check No. 3065 for $336 and Check No. 3069 for $2,148, both written in July, are not

among the canceled checks on the July 31 statement.

c. In comparing the canceled checks on the bank statement with the entries in the accounting records,

it is found that Check No. 3056 for July rent was correctly written and drawn for $1,250 but was

erroneously entered in the accounting records as $1,230.

d. A credit memorandum enclosed with the July bank statement indicates the bank collected $9,000

cash on a noninterest-bearing note for Clark, deducted a $45 collection fee, and credited the remainder

to its account. Clark had not recorded this event before receiving the statement.

e. A debit memorandum for $805 lists a $795 NSF check plus a $10 NSF charge. The check had

been received from a customer, Jim Shaw. Clark has not yet recorded this check as NSF.

f. Enclosed with the July statement is a $15 debit memorandum for bank services. It has not yet

been recorded because no previous notification had been received.

g. Clark’s July 31 daily cash receipts of $10,152 were placed in the bank’s night depository on that

date, but do not appear on the July 31 bank statement.

Required

1. Prepare the bank reconciliation for this company as of July 31, 2005.

2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity

with the reconciled cash balance as of July 31, 2005.

Analysis Component

3. Assume that the July 31, 2005, bank reconciliation for this company is prepared and some items

are treated incorrectly. For each of the following errors, explain the effect of the error on (i) the

adjusted bank statement cash balance and (ii) the adjusted cash account book balance.

a. The company’s unadjusted cash account balance of $26,193 is listed on the reconciliation as

$26,139.

b. The bank’s collection of the $9,000 note less the $45 collection fee is added to the bank statement

Feb. 2 Wrote a $300 check, cashed it, and gave the proceeds and the petty cashbox to Bo Brown,

the petty cashier.

5 Purchased bond paper for the copier for $10.13 that is immediately used.

9 Paid $22.50 COD shipping charges on merchandise purchased for resale, terms FOB

shipping point. Metro uses the perpetual system to account for merchandise inventory.

12 Paid $9.95 postage to express mail a contract to a client.

14 Reimbursed Alli Buck, the manager, $58 for business mileage on her car.

20 Purchased stationery for $77.76 that is immediately used.

23 Paid a courier $18 to deliver merchandise sold to a customer, terms FOB destination.

25 Paid $15.10 COD shipping charges on merchandise purchased for resale, terms FOB

shipping point.

27 Paid $64 for postage expenses.

28 The fund had $21.23 remaining in the petty cash box. Sorted the petty cash receipts by accounts

affected and exchanged them for a check to reimburse the fund for expenditures.

The fund amount is also increased to $400.

Required

1. Prepare the journal entry to establish the petty cash fund.

2. Prepare a petty cash payments report for February with these categories: delivery expense, mileage

expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense.

Sort the payments into the appropriate categories and total the expenditures in each category.

3. Prepare the journal entries for part 2 to both (a) reimburse and (b) increase the fund amount.

Ernst Equipment Co. wants to prepare interim financial statements for the first quarter. The company?

The company

wishes to avoid making a physical count of inventory. Ernst’s gross profit rate averages 30%. The

following information for the first quarter is available from its records:

January 1 beginning inventory . . . . . . . $ 752,880

Cost of goods purchased . . . . . . . . . . . 2,159,630

Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3,710,250

Sales returns . . . . . . . . . . . . . . . . . . . . 74,200

The company

wishes to avoid making a physical count of inventory. Ernst’s gross profit rate averages 30%. The

following information for the first quarter is available from its records:

January 1 beginning inventory . . . . . . . $ 752,880

Cost of goods purchased . . . . . . . . . . . 2,159,630

Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3,710,250

Sales returns . . . . . . . . . . . . . . . . . . . . 74,200

January 1 beginning inventory . . . . . . . $ 0

Cost of goods sold . . . . . . . . . . . . . . . 14,052

March 31 ending inventory . . . . . . . . . 704

Check Estim.

Use the gross profit method to estimate the company’s first quarter ending inventory

January 1 beginning inventory . . . . . . . $ 81,670 $114,610

Cost of goods purchased . . . . . . . . . . . 492,250 751,730

Sales . . . . . . . . . . . . . . . . . . . . . . . . . 786,120

Sales returns . . . . . . . . . . . . . . . . . . . . 4,480

1. Use the retail inventory method to estimate the company’s year-end inventory.

2. A year-end physical inventory at retail prices yields a total inventory of $78,550. Prepare a calculation

showing the company’s loss from shrinkage at cost and at retail

Purchases and sales transactions:

Alternative cost flows—perpetual

Jan. 1 Beginning inventory . . . . . . . 600 units @ $44/unit

Feb. 10 Purchase . . . . . . . . . . . . . . . 200 units @ $40/unit

Mar. 13 Purchase . . . . . . . . . . . . . . . 100 units @ $20/unit

Mar. 15 Sales . . . . . . . . . . . . . . . . . . 400 units @ $75/unit

Aug. 21 Purchase . . . . . . . . . . . . . . . 160 units @ $60/unit

Sept. 5 Purchase . . . . . . . . . . . . . . . 280 units @ $48/unit

Sept. 10 Sales . . . . . . . . . . . . . . . . . . 200 units @ $75/unit

Totals . . . . . . . . . . . . . . . . . 1,340 units 600 units

1. Compute cost of goods available for sale and the number of units available for sale.

2. Compute the number of units in ending inventory.

3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) specific identification

(Note: The units sold consist of 500 units from beginning inventory and 100 units from the

March 13 purchase), and (d) weighted average.

4. Compute the gross profit earned by the company for each of the four costing methods in part 3.

Analysis Component

5. If the company’s manager earns a bonus based on a percent of gross profit, which method of inventory

costing will the manager likely prefer?

Check (3) Ending inventory: FIFO,

$33,040; LIFO, $35,440;WA, $34,055;

(4) LIFO gross profit, $21,000

Merchandise inventory . . . . . . . . . . . . $ 31,000

Other (noninventory) assets . . . . . . . . 120,400

Total liabilities . . . . . . . . . . . . . . . . . . $ 35,000

N. Kidman, Capital . . . . . . . . . . . . . . . 101,650

N. Kidman, Withdrawals . . . . . . . . . . . 8,000

Sales . . . . . . . . . . . . . . . . . . . . . . . . . 212,000

Sales discounts . . . . . . . . . . . . . . . . . 3,250

Sales returns and allowances . . . . . . . 14,000

Cost of goods sold . . . . . . . . . . . . . . 82,600

Sales salaries expense . . . . . . . . . . . . 29,000

Rent expense—Selling space . . . . . . . 10,000

Store supplies expense . . . . . . . . . . . . 2,500

Advertising expense . . . . . . . . . . . . . . 18,000

Office salaries expense . . . . . . . . . . . . 26,500

Rent expense—Office space . . . . . . . 2,600

Office supplies expense . . . . . . . . . . . 800

Totals . . . . . . . . . . . . . . . . . . . . . . . . $348,650 $348,650

On August 31, 2004, merchandise inventory was

Provide one example for a large company and one example for a small company of necessary changes resulting from these growing technology demands.