a) Tom Segal is the accountant for GHC detailing. He receives and opens all mail, follows company policies by separating customer checks from the remittance advices, and then deposits the checks at the bank and posts the payments indicated on the remittance advices to the customers' accounts in the subsidiary ledger. At the end of each day, Tom totals the amounts posted to the customers' accounts and compares the total to the bank deposit slip to ensure that all receipts are deposited in the bank. What are some of the internal control weaknesses in this scenario? What are some ways to strengthen the controls?
b) JMK Corp. had the following situations during the last 4 years of operation:
i. The Allowance for Uncollectible Accounts has a $2,100 credit balance prior to adjustment. Net credit sales during 2011 are $750,000, and 4% are estimated to be uncollectible. Accounts Receivable has a balance of $125,000 on Dec 31, 2011.
ii. The Allowance for Uncollectible Accounts has a $1,200 debit balance prior to adjustment. Based on an aging schedule of accounts receivable prepared on December 31, 2012, $18,500 of accounts receivable are estimated to be uncollectible. Accounts Receivable has a balance of $110,000 on Dec 31, 2012.
iii. The Allowance for Uncollectible Accounts has a $1,400 credit balance prior to adjustment. Based on an aging schedule of accounts receivable prepared on December 31, 2013, $25,000 of accounts receivable are estimated to be uncollectible. Accounts Receivable has a balance of $98,000 on Dec 31, 2013.
iv. The Allowance for Uncollectible Accounts has a $750 debit balance prior to adjustment. Net credit sales during 2014 are $800,000, and 3% are estimated to be uncollectible. Accounts Receivable has a balance of $135,000 on Dec 31, 2014.
Please prepare the adjusting journal entries:
c) Manito Company had the following inventory data for the current month.
|
Units
|
Unit Price
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Total
|
|
Inventory 12/1/11
|
15
|
$ 55
|
$ 825
|
|
Purchase
|
35
|
$ 60
|
$ 2,100
|
|
Purchase
|
20
|
$ 65
|
$ 1,300
|
|
Available for Sale
|
70
|
|
$ 4,225
|
|
Inventory 12/31/11
|
35
|
|
|
|
Quantity Sold
|
35
|
|
|
Compute cost of goods sold for each of the following methods:
i. Average cost
ii. First-in, first-out (FIFO)
iii. Last-in, first-out (LIFO)
d) On January 3, 2014, Matt's Excavating Company purchased a bulldozer for $100,000. In addition to the basic purchase price, the company paid sales tax of $2,000 and freight charges of $6,000. The bulldozer will be used for 36,000 machine hours. Matt estimates that the bulldozer will have a useful life of 5 years and no residual value.
Required:
I. Compute the cost of the asset.
II. Compute the depreciation expense for 2014 and 2015 using the
i. straight-line method;
ii. units-of production method assuming the bulldozer was used 5,000 machine hours in 2014 and 20,000 machine hours in 2015; and
iii. double declining balance method.
e) In the most recent year of operations, Bertha's Games sold merchandise costing $92,000 for $182,000. All merchandise was sold under a 1-year warranty. At the time of sale, Bertha estimated that warranty claims would amount to 6% of sales. During the year, she replaced defective merchandise for $4,500. All transactions were cash transactions.
i. Prepare journal entries to record all transactions related to the warranty.
ii. Based solely on the above information, determine Bertha's Games operating income for the year.