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BE5-1 Presented here are the components in Pedersen Companys

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BE5-1 Presented here are the components in Pedersen Company's income statement. Determine the missing amounts.

Sales Cost of Goods Sold Gross Profit Operating Expenses Net Income
$ 71,200 (b) $ 30,000 (d) $10,800
$108,000 $70,000 (c) (e) $29,500
(a) $71,900 $109,600 $46,200 (f)

Hint: Compute missing amounts in determining net income.
(SO 1, 4)

BE5-2 Prior Company buys merchandise on account from Wood Company. The selling price of the goods is $900 and the cost of the goods sold is $630. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.

Hint: Journalize perpetual inventory entries.
(SO 2, 3)

BE6-5 In its first month of operation, Maze Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. Explain why this amount is referred to as phantom profit. The company uses the periodic method.

Hint: Explain the financial statement effect of inventory cost flow assumptions.
(SO 3)

BE6-7 O'Connor Video Center accumulates the following cost and market data at December 31.

Inventory Categories Cost Data Market Data
Cameras $12,500 $13,400
Camcorders 9,000 9,500
DVDs 13,000 12,800

Compute the lower-of-cost-or-market valuation for O'Connor's inventory.

Hint: Determine the LCM valuation.
(SO 4)

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