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					INTERMEDIATE ACCOUNTING 321            JULY 27, 2010     TAD MILLER
CASH - ACCOUNTS RECEIVABLE - INVENTORY                                                             TEST 02. 2106


                                                       Cash
1. BANK RECONCILIATION        Calculate the correct cash balance.     Balance per Bank Statement    $9,040.00




.



2. BANK RECONCILIATION        Calculate the correct cash balance? Balance per the Gen. Led          $8,865.00




3. Bank Reconciliation Given the information in the previous problems, prepare the entry you would need
   to make as a result of the bank reconciliation.

       Cash               100
           Utility expense            100
       Utility expense     10
           Cash                        10
       Accounts Receivable170
           Cash                       170
       Bank expense        45
           Cash                        45
                                                Accounts Receviable
                                  th
4. TRADE DISCOUNTS On July 20 Peach Computers sold 100 ePeach tablets to SLO Computer Store. The
   units have a list price of $500 each, but SLO Computer Store was given a 40% Trade Discount. Prepare
   the entry to record the sale.

   Accounts receivable       30,000
      Sale                             30,000




RECEIVABLES – GROSS METHOD On July 5th we sold 20 units of merchandise having an invoice price of
   $20,000 (or $1,000 per unit) with terms 2/10 n/45. Prepare the following three entries
5. On July 5th to record the sale
6. On July 14th when we received a check from the customer to pay for 10 of the units having an invoice
   price of $10,000. (The check is not for $10,000)
7. On July 27th when the customer pays $8,000.00 on their account

              Accounts receivable               20,000.00
                      Sales                                  20,000.00
              Cash                                9,800.00
              Sales discount                        200.00
                      Accounts receivable                    10,000.00
              Cash                                8,000.00
                      Accounts receivable                     8,000.00
8. BAD DEBT EXPENSE / ALLOWANCE FOR DOUBTFUL ACCOUNTANTS OUR COMPANY ended the year with
   accounts receivable of $3,000 and a $60 credit balance in Allowance for Doubtful Accounts. Credit Sales
   totaled $36,000. Based on past experience, we estimate 1.2% of credit sales will prove uncollectible. What
   will be the balance in the Allowance for Doubtful Accounts after the adjusting entry?




9. WRITE OFF      Prepare the entry to write off George Orwell’s account which has a balance of $45.

              Allow for uncollect                  45.00
                     Accounts receivable             45.00




10. What effect does the entry to write off George Orwell’s account have on Total Current Assets?
                 What dollar effect does the entry have on Net Income?
Current Assets        $_____0___              increase       no effect on CA     decrease
Net Income            $____0____              increase       no effect on NI     decrease


11. BAD DEBT EXPENSE / ALLOWANCE FOR DOUBTFUL ACCOUNTS OUR COMPANY. had $360,000 credit
    sales. Accounts Receivable had a $54,000 debit balance and Allowance for Doubtful Accounts had an
    $400 debit balance, before adjustments. Prepare the entry to record Allowance for Doubtful Accounts if
    OUR COMPANY ages accounts receivables to estimate uncollectible accounts.
  amount       age    est % uncollectibe                 Bad debt expense      10,775
                                                           allow for uncollectible       10,775
    22,000    < 30         5.0%            1,100
    18,000    31-90       10.0%            1,800
    12,500   91-180       25.0%            3,125
     1,500    > 180       50.0%             750
    54,000                              6,775 requitred balance
                                        4,000 existing debit balance
                                       10,775 adjustment
   NOTES RECEIVABLE – On July 31st we sold merchandise to a customer for $60,000. In payment, we
   accepted a 6% note requiring the payment of interest and principle on March 31, 2011. Prepare the
   following three entries
12. On July 31st to record the note and the sale
13. On Dec 31st
14. On March 31, 2011.

7/31           Note receivable                 60,000.00
                       Sales                                  60,000.00
12/31          Interest receivable                 1,500.00
                       Interest income                         1,500.00

3/31           Interest receivable                  900.00
                       Interest income                          900.00
               Cash                            62,400.00
                       Note receivable                        60,000.00
                       Interest receivable                     2,400.00




NOTES RECEIVABLE – On June 30th we sold merchandise to a customer. In payment we agreed to accept a
$10,000 noninterest bearing note. The appropriate discount rate is 8%. The note requires a $10,000 payment
on March 31, 2011. Prepare the following entries
15. On June 30th to record the note and the sale
16. On Dec 31st

               Note receivable                 10,000.00
                      Discount on Note                           600.00
                      Sales                                    9,400.00
               Discount on Note                     400.00
                      Interest income                           400.00
               Discount on Note                     200.00
                      Interest income                           200.00
               Cash                            10,000.00
                      Accounts receivable                     10,000.00
      PURCHASES – GROSS METHOD – PERIODIC INVENTORY SYSTEM On May 31st, OUR COMPANY
         purchased merchandise with an invoice price of $40,000 having terms 3/15 n/30 fob shipping point,
         which the supplier shipped on July 2nd. We received the merchandise on July 4th. Prepare the following
         entries
17. Prepare the entry to record the purchase
18. On July 8th we returns goods having an invoice price of $6,000
19. On July 9th when we pay our account in full

5/2              Purchases                     40,000.00
                        Accounts payable                   40,000.00
5/8              Accounts payable               6,000.00
                        Purchase returns                    6,000.00
5/9              Accounts payable              34,000.00
                        Purchase discount                   1,020.00
                        Cash                               32,980.00




      PURCHASES – NET METHOD – PERPETUAL INVENTORY SYSTEM On July 13th, OUR COMPANY ordered
      merchandise with an invoice price of $70,000 having terms 3/15 n/30 fob shipping point, which the
      supplier shipped on July 15th and we received the merchandise on July 18th. Prepare the following entries
20. Prepare the entry to record the purchase AND indicate the date on which we should we record the
    purchase
21. On July 22nd when we write a $30,000 check to pay on our account
22. On Aug 9th when we write a check to pay the remaining balance in our account

5/18             Inventory                     67,900.00
                        Accounts payable                   67,900.00
5/22             Accounts payable              30,000.00
                        Cash                               30,000.00
8/09             Accounts payable              37,900.00
                 Purchase discount lost         1,172.17
                        Cash                               39,072.17
COST FLOW ASSUMPTIONS - PERIODIC OUR COMPANY. sold 40 units for $20 each. Use the following
   information for the next three problems
23. Prepare the closing entry, using Average Cost / Periodic to calculate Cost of Goods Sold and ending
    Inventory.
24. Use FIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.
25. Use LIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.
                      qty      cost                   average             FIFO                       LIFO
                                                                    sold         end          sold          end
7/1 beginning           10       15.00          150                    10                          0          10
7/14 purchase           35       13.00          455                    30            5            20          15
7/24 purchase           20       12.00          240                      0          20            20
       available        65                      845    $13.00
       sold             40                             520.00          540                      500
       inventory        25                             325.00                      305                       345


                    CoGS                    520.00
                    Inventory               325.00
                          Inventory                    150.00
                          Purchases                    695.00
COST FLOW ASSUMPTIONS - PERPETUAL Use the information presented below for the next two problems
26. FIFO - PERPETUAL. Calculate Cost of Goods Sold for the month using FIFO perpetual
               Purchases             Sales                                    average cost
            Qty Cost             qty    price
    1-Jul    10       15 150
    4-Jul                              5   20   5 @ $15      $75
   14-Jul    35       13 455
   15-Jul                          25      20    5 @ $15
   24-Jul    20       12 240                    20 @ $13    $335

   25-Jul                          10      20 10 @    $13   $130
                                                            $540




27. Use AVERAGE COST - PERPETUAL to prepare the entry for the July 15th sale of 25 units at $20/unit.
                  Cash (or Acc Rec)               500.00
                         Sales                              500.00
                  Cost of goods sold              331.25
                         Inventory                                   331.25
28. LOWER OF COST OR MARKET Calculate Market for each of the products in the following table
                            A1          A2           B11      B12          A1        A2       B11      B12
Replacement cost             23.00       65.00       54.00     35.00
Selling price                40.00      100.00        80.00    60.00
Direct selling costs         12.00       30.00       28.00     18.00         28.00    70.00    52.00    42.00 ceiling
Normal profit                 4.00       10.00        8.00      6.00         23.00    65.00    54.00    35.00 replace
                                                                             24.00    60.00    44.00    36.00 floor

MARKET (fill in)             24.00       65.00       52.00     36.00         24.00    65.00    52.00    36.00 market




              use this information for the next 2 Problems
                                             item x item                   total inventory
    part no     qty cost    mkt                 LoCM                      cost       market

     101         3 20.00 19.00               19.00         57.00            60.00         57.00

     201         5     9.00 10.00             9.00         45.00            45.00         50.00

     301         2 17.50 20.00               17.50         35.00            35.00         40.00

     401         1 35.00 33.00               33.00         33.00            35.00         33.00

                                    item x item          170.00             175.00     180.00
                                                     item x item       total inventory
.
29. LOWER OF COST OR MARKET Use the information in the above table to calculate Lower of Cost or Market
    on an item by item basis.




30. LOWER OF COST OR MARKET Use the information in the above table to calculate Lower of Cost or Market
    using the total inventory method.
Use this information to calculate ratios
for the following problems

                        12/31/09 12/31/08            average

Sales                    4,800.00   4,750.00            13.15068 /day           591.80 8.110848 turns
Cost of goods sold       2,880.00   3,000.00            7.890411 /day           480.00        6
Gross profit             1,920.00   1,750.00
Accounts receivable        600.00     583.60              591.80 average    13.15068 45.00146 days in
Inventory                  450.00     510.00              480.00 average    7.890411 60.83333



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.


Ave Acc Rec             (600.00 + 583.60 )/2 591.80                45.00 days in Acc Rec
Sales / day             4800 / 365 days            13.15 / day


Sales                   4,800                      4,800           8.11 turns
Ave Acc Rec             (600.00 + 583.60 )/2 591.80




Ave Inv         (450.00 + 510.00 )/2 480                    60.83 days in INV
CoGS            2,880 / 365 days           7.89 / day


CoGS            2,880                      2,880            6.00 turns
Ave Inv         (450.00 + 510.00 )/2 480
33. TRADE DISCOUNTS MILLER MOTOR CO. is a wholesale distributor for display tables. The tables have a
    $100.00 retail price. Retailers receive a trade discount from the retail price based on the quantity they
    purchase. Prepare the entry to record the sale of 9 tables to one of our retailers.
              quantity
    25.0%     < 5 tables                                  cash
    30.0%     6 - 10 tables              9       630        or
    37.5%     > 10 tables                                 Accounts receivable     630.00
                                                               Sales                         630.00




34. TRADE DISCOUNTS MILLER MOTOR CO. is a wholesale distributor for display tables. The tables have a
    $100.00 retail price. Retailers receive a trade discount from the retail price based on the quantity they
    purchase. Prepare the entry to record the sale of 9 tables to one of our retailers.
              quantity
    25.0%     < 5 tables                                  cash
    30.0%     6 - 10 tables              9       630        or
    37.5%     > 10 tables                                 Accounts receivable     630.00
                                                               Sales                         630.00
35. Bank Overdrafts OUR COMPANY has written paychecks that exceed the balance in the checking
    account it uses for payroll at National Bank. OUR COMPANY does not have any other accounts National
    Bank. How should we report the two accounts on our balance sheet?

       The overdraft in the payroll account would need to be reported as a Current Liability.




36. PETTY CASH OUR COMPANY maintains a $200 petty cash fund. The petty cash drawer contains the
    following items. Prepare the entry you would make to replenish the petty cash drawer:


       59.00 coin and currency                              74.00           ??? expense           74
       74.00 receipts for postage stamps                    65.00           ???? expense          65
       65.00 receipts for printer cartridges                 2.00           Over/Short (misc exp) 2
                                                                     141.00      Cash                141
      198.00
                                                OR         200.00           Petty cash           200
                                                                     200.00       Cash               200
                                                            59.00           Cash                  59
                                                            74.00           ??? expense           74
                                                            65.00           ????? expense         65
                                                             2.00           Over/Short (misc exp) 2
                                                                     200.00       Petty cash         200

				
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