INTERMEDIATE ACCOUNTING ASSIGNMENT
EXERCISE ONE
1. Benzton Inc.had sales of $1,200,000 during 2015. Twenty-five percent of these were cash sales. In addition to the 2015 cash sales, $569,400 of the 2015 credit sales were collected during the year. $30,000 of accounts receivable were written off as being uncollectible during 2015. The December 31, 2014 Allowance for Doubtful Accounts was $16,400 credit balance. Also, the December 31, 2014 balance in the general ledger accounts receivable was $286,500; all of which was collected during 2015. In addition, $18,036 of the accounts that were written off during 2014 were unexpectedly collected during 2015. On December 31, 2015 Benzton completed an accounts receivable aging schedule. The following schedule provides the percent of the total accounts receivable by the category number of days
|
Category Age (days)
|
Accounts Receivable Percentage
|
|
1-30
|
40
|
|
31-60
|
20
|
|
61-90
|
10
|
|
91-120
|
24
|
|
Over 120
|
6
|
|
Total
|
100
|
NOTE: You will need to determine the accounts receivable December 31, 2015 balance and then you multiply the total accounts receivable amount by the above percentages.
Also, Benzton, based on 5 years of historical data, estimated the following percentages for each category that would be uncollectible at December 31, 2015:
|
Category Age (days)
|
Estimated Loss percentage
|
|
1-30
|
2.5%
|
|
31-60
|
3.0%
|
|
61-90
|
4.25%
|
|
91-120
|
9%
|
|
Over 120
|
45%
|
Required: NOTE: WHEN APPLICABLE ROUND ALL CALCULATIONS AND FINAL ANSWERS TO THE NEAREST WHOLE DOLLAR!
1) Prepare journal entries to record the following 2015 transactions:
a. The write-off of $30,000
b. The recovery of $16,400
2) Recalculate the balance in the Allowance for Doubtful Accounts general ledger account at December 31, 2015.
3) Prepare the doubtful account adjusting entry to be recorded on December 31, 2015 for the accounts receivable that are estimated to be written-off during 2016.
2. A company had the following bank reconciliation at June 30, 2016:
Balance per bank statement, 6/30/16 $151,125
Add deposit in transit 33,475
184,600
Less outstanding checks 40,950
Balance per books, 6/30/16 $143,650
Data per bank for the month of July2016 follow:
Deposits$189,800
Disbursements $161,525
All reconciling items at June 30, 2016, cleared the bank in July. Outstanding checks at July 31, 2016, totaled $22,750. There were no deposits in transit at July 31, 2016. What is the cash balance per books at July 31, 2016?
3. A company had a beginning accounts receivable balance of $62,000, had cash receipts from customers of $650,000 and an ending accounts receivable balance of $70,000. What is the amount for sales?
4. Dentz Inc. worksheet for the preparation of its 2016 statement of cash flows included the following:
|
|
2016
|
|
|
December 31
|
January 1
|
|
Accounts receivable
|
$36,000
|
$28,125
|
|
Allowance for uncollectible accounts
|
1,238
|
990
|
|
Prepaid rent expense
|
10,148
|
15,345
|
|
Accounts payable
|
22,688
|
24,008
|
Dentz's 2016 net income is $185,625. What amount should Dentz include as net cash provided by operating activities in the statement of cash flows?
5. ABC Co. borrowed $750,000 on January 1, 2010 to purchase new machines. The interest rate of 8% is compounded semiannually to be repaid January 1, 2020. To repay this ABC will start making six equal annual deposits into fund that earns 6% annum on January 1, 2014.
Required:
What is the amount of the six annual deposits that ABC needs to make?
6. Determine the market price of a $2,000,000, nine-year, 9% (pays interest semiannually) bond issue sold to yield an effective interest rate of 10%.
EXERCISE TWO
1. Andrea Sampri Sporting Goods Store purchases sporting goods merchandise on account from various vendors
The terms of the purchase are 2/10, n/30. The delivery date and invoice date is May 15, 2015. The amount of the total amount of the invoice is $12,000.
Andrea uses the periodic inventory system and the gross method of recording.
Required:
1) Record the invoice on May 15, 2015.
2) Record the payment if payment is made on May 20, 2015.
3) Record the payment is payment is made on May 30, 2015.
2. Partial information follows about net sales, net purchases, cost of goods sold, gross profit, total expenses and net income for Jensen Company. Compute the missing values.
Net Sales
Sales $2,500,000
Sales discounts 62,000
Sales returns & allowances ?
Net sales $2,305,000
Net Purchases
Purchases $1,500,000
Freight-in 65,000
Purchase discounts ?
Purchase returns & allowances 8,000
Net purchases $1,475,000
Cost of Goods Sold
Beginning inventory $ 256,300
Ending inventory 223,600
Cost of goods sold ?
Gross Profit
Gross profit ?
Total Expenses
Rent $ 108,100
Salaries 437,200
Utilities 37,000
Freight-out ?
Other 72,500
Total expenses $ 726,900
Net Income
Net income ?
3. Jill Hansen owns Interior Designs, a furniture store. One of her most popular items is a leather recliner.
Following is the recliner inventory activity for August. The recliners on hand at August 1 had a unit cost of $280.
|
Date
|
Purchases
|
Sales
|
Units on Hand
|
|
8/1
|
Balance fwd
|
|
80
|
|
8/4
|
120 units @ $300
|
'
|
200
|
|
8/20
|
|
140 units @ $510
|
60
|
|
8/25
|
180 units @ $340
|
|
240
|
|
8/29
|
|
110 units @ $590
|
130
|
Required:
1) If Interior Designs uses the first-in, first-out (FIFO) inventory method and periodic approach, what values would be assigned to ending inventory, cost of goods sold and gross profit?
2) If Interior Designs uses the last-in, first-out (LIFO) inventory method and periodic approach, what values would be assigned to ending inventory, cost of goods sold and gross profit?
3) If Interior Designs uses the weighted-average inventory method and periodic approach, what values would be assigned to ending inventory, cost of goods sold and gross profit?
4. Maverick Equipment Rental was burglarized on 2/15/15. It is unclear how many items were stolen. Maverick and its insurance company are currently working to estimate the dollar value of the stolen goods in order to reach a financial settlement under the existing property insurance policy.
Maverick's tax return prepared at the end of 2014 revealed that the ended 2014 with a total inventory of $600,000. Maverick uses the same inventory account methods for tax and accounting purposes.
The insurance company has contacted Maverick's suppliers and confirmed Maverick's claim that purchases for 2015, prior to the date of the burglary, were $1,200,000. All inventory was purchased, FOB destination.
2015 sales taxes collected by Maverick and remitted to the state, prior to the date of the theft, were $135,000. The sales tax rate is 7% of sales.
An inventory was taken immediately after the burglary and the cost of equipment in stock was $370,000.
Maverick consistently sells equipment at a gross profit margin of 30%.
Required: Use the gross profit method to estimate the dollar value of stolen property.
5. Determine the missing amounts assuming that this company uses the periodic inventory system.
|
|
2014
|
2015
|
2016
|
|
Sales
|
$290,000
|
$ ?
|
$410,000
|
|
Sales returns & allowances
|
11,000
|
13,000
|
?
|
|
Net sales
|
?
|
347,000
|
?
|
|
Beginning inventory
|
20,000
|
32,000
|
?
|
|
Ending inventory
|
?
|
?
|
?
|
|
Purchases
|
?
|
260,000
|
298,000
|
|
Purchase returns & allowances
|
5,000
|
8,000
|
10,000
|
|
Freight-in
|
8,000
|
9,000
|
12,000
|
|
Cost of goods sold
|
233,000
|
?
|
293,000
|
|
Gross profit
|
46,000
|
91,000
|
97,000
|
6. International Paper adopted the dollar-value LIFO method on January 1, 2015. It's inventory on January 1, 2015 was $160,000. On December 31, 2015, the inventory at prices existing on that date amounted to $140,000. The price level at January 1, 2015 was 100 and the price level at December 31, 2015 was 112.
Required. Compute the amount of the inventory at December 31, 2015, under the dollar-value LIFO method.
7. Determine the effect on net income for the following situations:
1) Ending inventory overstated $5,000
2) Ending inventory understated $5,000
3) Beginning inventory overstated $5,000
4) Beginning inventory understated $5,000.