Exam 5: Accounting for Receivables and Inventory Cost Flow

In the first year of operations, John's Repair Service recognized $220,000 of service revenue on account. The ending accounts receivable balance was $15,100. Jake estimates that 3% of sales on account will not be collected; no accounts receivable had been written off by year end. Assume there were no other transactions affecting accounts receivable. Required:What amount of cash was collected in Year 1?What amount of uncollectible accounts expense was recognized in Year 1?

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $225,000, Uncollectible Accounts Expense for the year was $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

If Bowman Company is using FIFO, how would the accountant compute cost of goods sold when recording a sale under the perpetual inventory system?

The following information is for Poole Company for the current year: Beginning inventory 200 units @ \ 110 Purchase May 12 100 units @ \ 120 Purchase October 9 150 units @ \ 125 Seles 360 units @ \ 180 Required:Assuming that Poole uses the LIFO cost flow method, determine how much product cost would be allocated to Cost of Goods Sold, and how much to Merchandise Inventory at the end of the year. Show all calculations.Assuming that Poole uses the FIFO cost flow method, determine how much product cost would be allocated to Cost of Goods sold, and how much to Merchandise Inventory at the end of the year. Show all calculations.Compare your results from parts a and b. Do LIFO and FIFO give the same results for inventory turnover? Which is higher, and why?

On January 1, Year 2, Burton Company had a balance in Accounts Receivable of $90,000 and a balance in the Allowance for Doubtful Accounts account of $2,400. During Year 2, Burton recognized $244,000 of service revenue earned on account and ended the year with a balance in Accounts Receivable of $48,000. During Year 2, Burton also wrote off $1,100 of receivables. Burton uses the allowance method for uncollectible accounts and assumes that 2% of the sales on account will not be collected. Required:After adjusting entries on December 31, Year 2, what will be the balance in the Allowance for Doubtful Accounts?By what amount did net realizable value of accounts receivable decrease in Year 2 due to the write-off of the receivable?What amount of cash was collected from customers during Year 2?

Sierra Company uses the weighted average inventory cost flow method. How would Sierra's accountant compute cost of goods sold when recording a sale under the perpetual inventory system?

The following information is for Choi Company for Year 1:Beginning inventory 120 units @ $100Units purchased 180 units @ $112Choi sold 250 units for $190 each Required:Calculate gross margin assuming Choi uses FIFO, LIFO, Weighted average.Disregarding the effect of income taxes, what would be the dollar amount of difference in net income between FIFO and LIFO?Calculate the Year 1 cash flow from operating activities assuming that Choi uses LIFO, FIFO. Again, disregard the effect of income taxes.

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = D Not Affected = NA Stan's Surf Shack purchased 5 surfboards for $200 each. Later it purchased 2 more surfboards for $250 each. Stan's uses the perpetual inventory system. Assume that 6 surfboards were sold during the period for $350 cash each. How would the sale of the six surfboards affect the financial statements if Stan's Surf Shack uses the FIFO inventory cost flow method? Assume the surfboards were sold to customers for more than their original cost.

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = D Not Affected = NA Stan's Surf Shack purchased 5 surfboards for $200 each. Later it purchased 2 more surfboards for $250 each. Stan's uses the perpetual inventory system. Assume that 6 surfboards were sold during the period for $350 cash each. How would the sale of the six surfboards affect the financial statements if Stan's Surf Shack uses the LIFO inventory cost flow method? Assume the surfboards were sold to customers for more than their original cost.

In an inflationary period, which cost flow method, LIFO or FIFO, results in the larger dollar amount of assets on the balance sheet?

Li Company has the following account balances: cash \2 5,000 Accounts receivable 76,000 Allowance for doubtful accounts 5,100 Uncollectible accounts expense 6,200 Credit sales 115,000 Compute the net realizable value of Li's accounts receivable.

Curtis Company had the following transactions for the month of January: 1 -January Beginning inventory 30 units @ \ 150 6-January Purchase 40 units @ \ 160 8-January Sales 50 units @\ 260 19-January Purchase 20 units @\ 164 22 -January Sales 30 units @\ 260 30-January Purchase 15 units @\ 156 Assume that Curtis uses the perpetual inventory method and that all transactions were for cash. Required:Determine the amount of ending inventory using the FIFO cost flow method.

Chopin Company sells product A. The beginning inventory for product A was 70 units @ $240 per unit. During the year, Chopin purchased 110 units of product A at $216 per unit. The company sold 140 units of product A @ $400 per unit at the end of the year.Required:Determine the amount of product cost that would be allocated to cost of goods sold and ending inventory using (1) FIFO, (2) LIFO, and (3) weighted average.

Curtis Company uses the FIFO cost flow method in a perpetual inventory system. The company's inventory records reflect the following for the month of October: October 1 Beginning inventory 950 units @ \ 17.00 October 12 First purchase 800 units @ \ 19.00 October 18 Cash sales 1,500 units @ \ 36.00 October 21 Second purchase 600 units @ \ 16.40 October 25 Third purchase 300 units @ \ 17.40 October 31 Cash sales 1.000 units @\ 38.00 Required:Calculate the cost of goods sold and the ending inventory for the month ending October 31.

Larsen Company began Year 2 with balances in accounts receivable and allowance for doubtful accounts of $45,700 and $1,280, respectively. The company reported credit sales of $475,250 during the year, collected $480,200, and wrote off $800 of uncollectible accounts. Larsen Company estimates that 12% of its accounts receivable balance will be uncollectible. Required:Calculate Larsen Company's uncollectible accounts expense for Year 2.What will Larsen report as its allowance for doubtful accounts on December 31, Year 2?Calculate Larsen's net realizable value of accounts receivable on December 31, Year 2.

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn September 1, Year 1, Diaz Company loaned $10,000 to Ace company. Show the effect of this transaction on Diaz's financial statements.

Maynard Company started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first unit cost $1,100 and the second, $1,200. One of the items was sold during the year. Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory, assuming use of each of the following methods:LIFOFIFOWeighted average