INTERMEDIATE ACCOUNTING 321 FEB 29, 2016 TAD MILLER CASH - ACCOUNTS RECEIVABLE - INVENTORY TEST 02. 2162 Cash 1. CASH Instead of cash, most companied report cash equivalents. Briefly describe what constitutes a cash equivalent. Also give two examples of financial instruments that would typically be classified as cash equivalents and one example of a type of investment that would never be classified as a cash equivalent. This information is to be used in the following problems 23 a) bank service charge 135 b) check #721 was recorded as $150 when it was actually written for $15, the check was for rent expense 452 c) Deposit in transit 1,090 d) Note Receivable collected by bank includes $90 interest earned 102 e) NSF returned check 713 f) Outstanding checks 2. BANK RECONCILIATION Use the information in the preceding table to calculate the correct cash balance? The Balance per the General Ledger is $1,891. 3. BANK RECONCILIATION Use the information in the preceding table to calculate the correct cash balance? The Balance per the Bank Statement is $3,252. 4. Bank Reconciliation Given the information in the two previous problems, prepare the entry you would need to make as a result of the bank reconciliation. 5. FINANCIAL STATEMENT PRESENTATION a. What effect does the previous Journal Entry have on the balance in Cash account? b. What effect does the previous Journal Entry have in Net Income? c. In which section(s) of the income statement will this be reported? Increase no effect Decrease Cash by what amount $_1,100 Increase no effect Decrease Net Income by what amount $ _ 202 This will be reported in which section of the Income Statement Operating Non Operating After Income Tax n/a
Accounts Receviable 6. TRADE DISCOUNTS Prepare the entry to record the following sale. On Feb. 29 th Patti s Plumbing Supply sold 10 furnaces to Deuce Hardware. The units have a list price of $50 each, but Patti s Plumbing offers the following Trade Discounts. The furnaces cost Patti s Plumbing $30 each. Quantity Discount 1 0% 2-5 10% 6-10 20% >10 25% RECEIVABLES NET METHOD On Feb. 5 th we shipped 10 units of merchandise f.o.b. destination. The goods have an invoice price of $240 (or $24 per unit) with terms 3/15 n/30. The goods arrived at the customers on Feb, 7 th. Prepare the following three entries (round to the nearest cent). 7. On what date would you record the sale? Prepare the journal entry to record the sale and indicate the proper date. 8. On Feb. 19 th when we receive a $100 check from the customer 9. On March 4 th when the customer pays the remaining balance in their account 10. BAD DEBT EXPENSE / ALLOWANCE FOR DOUBTFUL ACCOUNTS Prepare the entry to record Allowance for Doubtful Accounts if MMC ages accounts receivables (the balance sheet approach) to estimate uncollectible accounts. Below are several account balances: $6,700 credit sales 570 Accounts Receivable 2 DEBIT balance in Allowance for Doubtful Accounts amount age est % uncollectibe 400 < 30 1.0% 100 60-90 5.0% 50 91-120 20.0% 20 > 120 50.0% 570 11. WRITE OFF Prepare the entry to write off Patti Miller s account which has a balance of $4. 12. FINANCIAL STATEMENT PRESENTATION a. What effect does the previous Transaction have on the Net Realizable Value of Accounts Receivable? b. What effect does the previous Transaction have in Net Income? c. In which section(s) of the income statement will this be reported? Increase no effect Decrease NRV of Accounts Receivable $ Increase no effect Decrease Net Income by what amount $ This will be reported in which section of the Income Statement Operating Non Operating After Income Tax n/a
Purchases Sales Qty Cost qty price 13. BAD DEBT EXPENSE / ALLOWANCE FOR DOUBTFUL ACCOUNTS Prepare the entry to record Allowance for Doubtful Accounts if PATTI S PASTRIES uses the income statement approach to estimate uncollectible accounts. Historically, 2% of PATTI S PASTRIES sales have proven to be uncollectible. $13,200 credit sales 200 sales returns 1,100 Accounts Receivable 17 CREDIT balance in Allowance for Doubtful Accounts amount age est % uncollectibe 700 < 30 1.0% 250 60-90 5.0% 110 91-120 20.0% 50 > 120 50.0% 1,110 NOTES RECEIVABLE On May 31, 2015 we lent $1,000 to one of our suppliers. The provided a 8% note requiring the payment of interest and principle on February 29, 2016. Prepare the following three entries to the nearest cent. 14. To record the loan on May 31 st 15. On Dec 31 st 16. On February 29, 2016. NOTES RECEIVABLE On May 31, 2015 we lent money to a supplier who gave us a $1,000 noninterest bearing note. The appropriate discount rate is 9%. The note requires our supplier to pay us $1,000 payment on February 29, 2016. Prepare the following journal entries to the nearest cent. 17. On May 31 st to record the note receivable 18. On Dec 31 st PURCHASES GROSS METHOD PERIODIC INVENTORY SYSTEM On Jan. 31 st, OUR COMPANY ordered merchandise with an invoice price of $400 having terms 1%/15 n/30 fob shipping point, which the supplier shipped on Feb. 2 nd. We received the merchandise on Feb. 4 th. Prepare the following entries 19. On what date would you record the purchase? Prepare the entry to record the purchase and be sure to date the journal entry. 20. On Feb. 8 th we returns goods having an invoice price of $50 21. On Feb. 12 th when we send the supplier a check for $200 PURCHASES NET METHOD PERPETUAL INVENTORY SYSTEM On Dec, 28 th 2015, OUR COMPANY ordered merchandise with an invoice price of $800 having terms 1%/15 n/30 fob destination, which the supplier shipped on Dec. 30 th. We received the merchandise on Jan. 2 nd 2016. Prepare the following entries 22. On what date would you record the purchase? Prepare the entry to record the purchase and be sure to date the journal entry. 23. On Jan. 30 th when we write a check to pay the balance in our account. COST FLOW ASSUMPTIONS - PERPETUAL Use the information presented below for the next set of problems 1-Jan 15 6 90 7-Jan 10 12 11-Jan 35 7 245 15-Jan 18 12 22-Jan 10 8 80 27-Jan 11 12 24. Use AVERAGE COST - PERPETUAL to prepare the entry for the Jan. 15 th sale of 18 units for $12/unit. 25. FINANCIAL STATEMENT PRESENTATION a. What effect does the previous Journal Entry have on Current Assets? b. What effect does the previous Journal Entry have in Gross Profit? c. In which section(s) of the income statement will this be reported? Increase no effect Decrease Current Assets $ Increase no effect Decrease Gross Profit $ Statement Operating Non Operating After Income Tax n/a 26. Use LIFO - PERPETUAL to calculate Cost of Goods Sold and Ending Inventory as Jan. 31 st. 27. Use FIFO - PERPETUAL to calculate Cost of Goods Sold and Ending Inventory as of Jan. 31 st. COST FLOW ASSUMPTIONS - PERIODIC OUR COMPANY. sold 47 units for $15 each. Use the following information for the next three problems 28. Use Average Cost Periodic to PREPARE THE CLOSING ENTRY (or Adjusting Entry), to record Cost of Goods Sold. 29. Use FIFO - Periodic to calculate Cost of Goods Sold and ending Inventory. 30. Use LIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.
qty cost 1/1 beginning 20 7.00 140 1/17 purchase 30 8.00 240 1/1 purchase 10 9.00 90 available 60 470 sold inventory
Use this information to calculate ratios for the following problems 12/31/2015 12/31/2014 Sales 4,800.00 4,750.00 Cost of goods sold 2,880.00 3,000.00 Gross profit 1,920.00 1,750.00 Accounts receivable 600.00 583.60 Inventory 450.00 510.00 31. ACCOUNTS RECEIVABLE Calculate the 1) average collection period and 2) receivables turnover ratio. 32. INVENTORY Calculate the 1) average days in inventory and 2) inventory turnover ratio.