Exercise No 1
Company had an Accounts Receivable balance of 320000 USD and a credit balance in Allowance for Uncollectible Accounts 16700 USD at January 1, 2014. During the year, the company recorded the following transactions:
- Sales 1052000 USD
- Sales returns and allowances by credit customers 53400 USD
- Collections from customers 993000 USD
- Worthless accounts written off 19800 USD
The company's past history indicates that 2.5% of its net credit sales will not be collected.Required:
1. Prepare T accounts. Enter the beginning balances, and show the effects on these accounts of the items listed above, summarizing the year's activity. Determine the ending balance of each account.
2. Compute Uncollectible Accounts Expense and determine the ending balance of Allowance for Uncollectible Accounts under the percentage net sale method.
Exercise No 2
During its first year of operation, Company purchased 5600 units of products at 21 USD per unit. During the second year, it purchased 6000 units of the same product at 24 USD per unit. During the third year, it purchased 5000 units at 30 USD per unit.
Company managed to have an ending inventory each year of 1000 units. The company uses the periodic inventory system.
Required:
Prepare costs of goods sold statement that compare the value of ending inventory and the costs of goods sold for each of the three years using the FIFO inventory costing method and the LIFO method. From the resulting data, what conclusions can you draw about relationships between changes in unit price and changes in the value of ending inventory?
Exercise No 3
McDougal Company merchandises a single product called Gailen. The following data represent beginning inventory and purchases of Gailen during 2014:
January 1 inventory 68000 units at 11.00 USD
February purchases 80000 units at 12.00 USD
March purchases 160000 units at 12.40 USD
May purchases 120000 units at 12.60 USD
July purchases 200000 units at 12.80 USD
September purchases 160000 units at 12.60 USD
November purchases 60000 units at 13.00 USD
Sales of Gailen total 786000 units at 20 USD per unit. Selling and administrative costs total 5102000 USD for the year. McDougal Company uses the periodic inventory system.
Required:
1. Prepare a schedule to compute the cost of goods available for sale.
2. Compute income before income tax under each of the following inventory cost flow assumptions:
a. The average-cost method
b. The FIFO method
3. Compute inventory turnover and average days' inventory on hand under each of the inventory cost flow assumptions listed in 2
Exercise No 4
Avioni Fashon Store uses the accounts receivable (A/R) aging method to estimate uncollectible accounts. On January 1, 2014, the balance of the A/R was a debit of 446341 USD, and balance of Allowance for Uncollectible Accounts was a credit of 43000 USD. During the year, the store had sales on account of 3724000 USD, sales returns of 63000 USD, worthless accounts written off of 44300 USD and collections from customers of 3214000 USD. As part of the end-of-year procedures, an aging analysis of A/R is prepared. The total of the analysis, which is partially complete, follow:
|
Customer Account
|
Total
|
Not Yet Due
|
1-30 days past due
|
31-60 days past due
|
61-90 days past due
|
Over 90 days past due
|
|
Balance Forward (USD)
|
793791
|
438933
|
149614
|
106400
|
57442
|
41402
|
To finish the analysis, the following accounts need to be classified:
|
Account
|
Amount USD
|
Due Date
|
|
B.Sunni
|
10977
|
January 15
|
|
S. Hoffman
|
9314
|
February 15 (next year)
|
|
D.Ywahoo
|
8664
|
December 20
|
|
P. Blaine
|
780
|
October 1
|
|
K.Matson
|
14810
|
January 4
|
|
J.Labergo
|
6316
|
November 15
|
|
A.Minta
|
4389
|
March 1 (next year)
|
From the experience, the company has found that the following rates are realistic for estimating uncollectible accounts:
|
Time
|
% Considered Uncollectible
|
|
Not yet due
|
2
|
|
1-30 days past due
|
5
|
|
31-60 days past due
|
15
|
|
61 -90 days past due
|
25
|
|
Over 90 days past due
|
50
|
Required:
1. Complete the aging analysis of accounts receivable
2. Compute the end- of- year balances of A/R and Allowance for Uncollectible Accounts.