Problem 5.8 Interiors
With Oohs and Aahs sells custom home décor.
Following is the corporation’s income statement. Use this statement to prepare closing
entries. No dividends were declared
during the period.
INTERIORS WITH OOHS AND AAHS
Income Statement
For the Year Ending December 31, 20X4
Revenues
Sales $8,87,654
Less: Sales
discounts $4,667
Sales returns and allowances 9,880 14,547
Net sales $8,73,107
Cost of goods sold
Beginning inventory, Jan. 1 $1,82,343
Add: Purchases $5,93,356
Freight-in 21,090
$6,14,446
Less: Purchase discounts $3,501
Purchase returns & allowances 19,009 22,510
Net purchases 5,91,936
Goods available for sale $7,74,279
Less: Ending inventory, Dec. 31 1,99,055
Cost of goods sold 5,75,224
Gross profit $2,97,883
Expenses
Salaries $1,88,000
Insurance 9,152
Utilities 7,760
Freight-out 2,434
Depreciation 13,773 2,21,119
Net income $76,764
Problem 5.03 Hanna
Sports is a retailer that specializes in athletic equipment. The corporate strategy is to focus on towns
with a population of less than 25,000 people, thereby avoiding head-to-head
competition with large retail chains.
Following is Hanna’s adjusted trial balance for the year 20X7. Hanna’s ending inventory is $525,525.
HANNA
SPORTS CORPORATION
Adjusted
Trial Balance
As of
December 31, 20X7
Debits Credits
Cash $6,44,909 $-
Accounts receivable 3,33,654 –
Inventory, Jan. 1 4,33,477 –
Equipment 4,88,765 –
Accumulated depreciation – 1,44,895
Accounts payable – 1,11,888
Loan payable – 5,00,900
Capital stock – 2,50,000
Retained earnings, Jan. 1 – 3,22,433
Dividends 25,000 –
Sales – 36,65,667
Sales discounts 23,112 –
Sales returns and allowances 1,44,367 –
Purchases 21,98,560 –
Purchase discounts – 1,14,432
Purchase returns and allowances – 26,341
Freight-in 73,091 –
Selling expenses 1,85,312 –
Rent expense 2,62,000 –
Interest expense 60,400 –
Salaries expense 2,00,700 –
Depreciation expense 63,209 –
$51,36,556 $51,36,556
(a) Prepare a
comprehensive income statement.
(b) Prepare
closing entries.
Problem 5.01 “Tic
Toc Clock Shop reported the following merchandising-related transactions during
June. Tic Tock Clock Shop records all
purchases “”gross,”” and credit terms are precisely
followed on both purchases and sales.
Prepare journal entries to record each transaction.”
03-Jun Purchased $4,000
of clocks on account from Swiss Time, F.O.B. destination, terms 1/10, n/30.
05-Jun Sold a $1,500
clock to Janci Holgren on account, terms 2/10, n/eom. The customer picked up the clock from the
shop.
09-Jun Paid the
amount due for the purchase of June 3.
11-Jun Purchased
$8,000 of clocks on account from Melbourne Clockworks, F.O.B. shipping point,
terms 2/10, n/30. Freight charges of
$460 were prepaid by Melbourne and added to the invoice. No discount is permitted on the freight
charges.
19-Jun Sold a $3,500
clock on account, terms 2/10, n/eom. Tic
Toc sold the clock F.O.B. destination, and paid the freight charges of $330.
23-Jun The customer
of June 19 called to report that the clock was received damaged. An agreement was reached to reduce the invoice
by 20%.
27-Jun Paid Melbourne
Clockworks for the purchase of June 11.
27-Jun Janci Holgren
paid for the purchase of June 5.
28-Jun The customer
of June 19 paid the balance due.
Problem 6.03 Dine-Corp
International publishes ratings and reviews of the world’s finest
restaurants. Following are facts you
need to prepare Dine-Corp’s March bank reconciliation:
Balance per company records at end of month $72,644.12
Bank service charge for the month 44.00
NSF check returned with bank statement 1,440.66
Note collected by the bank during the month 45,000.00
Outstanding checks at month end 31,553.57
Interest on note collected during the month 4,500.00
Balance per bank at end of month 1,44,223.99
Deposit in transit at month end 7,989.04
Problem 6.04 Daniel
Scott is an audit manager with the accounting firm of Nelson & Riley,
CPAs. As part of the routine audit
procedures for one of the firm’s clients, Daniel instructed Wanda Mullins, a
newly hired staff auditor, to obtain a bank statement directly from the
client’s bank and prepare an independent reconciliation of the Cash
account. Wanda did a great job and
presented Daniel with the following reconciliation. Daniel has now forwarded this document
directly to you, with a request that you prepare proposed adjusting entries
that need to be recorded by the client.
Ending
balance per bank statement
$67,700.98
Add:
Deposits in transit 13,444.12
Deduct:
Outstanding checks
#12221 $16,887.34
#12327 8,550.50
#12329 132.74 (25,570.58)
Correct
cash balance
$55,574.52
Problem 6.05 Biscay Bay Boats established a petty cash fund
for minor day-to-day expenses. Following
are activities related to this fund.
Prepare the necessary journal entries for petty cash.
(1) Established
a $500 petty cash fund by writing a check to “cash,” cashing the
check, and placing the proceeds in a petty cash box entrusted to Herman Jones
as custodian.
(2) At the end
of the month, the petty cash fund contained remaining cash of $127, and
receipts for $65 postage, $123 office supplies, and $180 gasoline for company
vehicles. Herman is not sure why the
fund is short $5. A check payable to
cash in the amount of $373 was prepared, and the funds were placed into the
box.
(3) At the end
of the next month, the petty cash fund contained remaining cash of $35, and
receipts for $265 postage, $160 office supplies, and $40 gasoline for company
vehicles. A check payable to cash in the
amount of $715 was prepared, and the funds were placed into the box. This amount reimburses the fund and increases
its balance to $750.
Problem 7.05 Wiggins Corporation utilizes an accounting
software package that is capable of producing a detailed aging of outstanding
accounts receivable. Following is the
aging schedule as of December 31, 20X2.
AGE AMOUNT OUTSTANDING
0
to 30 days
$12,00,000
31
to 60 days 7,00,000
61
to 120 days 2,00,000
Over
120 days 25,000
Casper Wiggins has owned and operated Wiggins Corporation
for many years and has a very good sense of the probability of collection of
outstanding receivables, based on an aging analysis. The following table reveals the likelihood of
collection:
AGE PROBABILITY OF COLLECTION
0
to 30 days 98%
31
to 60 days 90%
61
to 120 days 75%
Over
120 days 50%
(a) Prepare an
aging analysis and show how accounts receivable and the related allowance for
uncollectibles should appear on the balance sheet at December 31.
(b) Prepare
the necessary journal entry to update the allowance for uncollectibles,
assuming the balance prior to preparing the aging was a $15,000 credit.
(c) Prepare
the necessary journal entry to update the allowance for uncollectibles,
assuming the balance prior to preparing the aging was a $5,000 debit. How could the allowance account have
contained a debit balance?
Problem 7.03 Wangming Lu Energy Company builds specially
designed blades for generators used in wind energy farming operations. The company started the year with the
following accounts receivable position:
Accounts
receivable
$105,00,000
Less: Allowance for uncollectibles (3,20,500) $101,79,500
During the year, a customer, Windy Point Power Company, was
devastated by an unusually severe storm.
At that time, Wangming concluded that it was highly unlikely that Windy
Point would ever be able to pay its outstanding balance of $150,000. This account was written off against the
allowance account. Much later in the
year, Windy Point was rescued by a group of investors who offered to pay
$90,000 toward the unpaid balance, provided Wangming would permanently forgive
the other $60,000 and resume selling product to Windy Point. Wangming agreed, and has since resumed doing
business with Windy Point.
During the year, sales on account amounted to
$25,689,000. Collections on account
totaled $21,300,500 (excluding the Windy Point collection).
During the year, accounts written-off (not including the
Windy Point transaction) were $123,000.
At year’s end, a detailed analysis of accounts receivable was performed,
and it was concluded that the allowance account should contain a balance of
$475,000.
(a) Prepare
summary journal entries:
To
record the write-off of the Windy Point receivable
To
restore the portion of the Windy Point receivable that was collected
To
record the collection of the Windy Point receivable
To
record sales on account
To
record collections on account
To
record the write-off of accounts
To
establish the correct balance in the allowance for uncollectibles
(b) Prepare a
table including column headings for Accounts Receivable, Allowance for
Uncollectibles, Net Realizable Value, and Uncollectible Accounts Expense. Show how each entry from part (a) impacts
these components. The first one is done
as an example on the preprinted worksheet.
Problem 8.04 “Patti Devine owns Devine Decorating. One of her most popular items is the
Remind-a-Chime digital clock. This
programmable clock issues “”voice-based”” reminders of
important events like birthdays, anniversaries, etc.
”
Following is the Remind-a-Clock inventory activity for
January. The clocks on hand at January 1
had a unit cost of $140.
Date Purchases Sales Units on Hand
01-Jan
40
05-Jan 60 units @ $150 each 100
16-Jan 70
units @ $255 each 30
23-Jan 90 units @ $170 each 120
28-Jan 55
units @ $295 each 65
(a) If Devine
uses the first-in, first-out (FIFO) inventory method (periodic approach), what
values would be assigned to ending inventory and cost of goods sold? How much is gross profit?
(b) If Devine
uses the last-in, first-out (LIFO) inventory method (periodic approach), what
values would be assigned to ending inventory and cost of goods sold? How much is gross profit?
(c) If Devine
uses the weighted-average inventory method (periodic approach), what values
would be assigned to ending inventory and cost of goods sold? How much is gross profit?
Problem 8.06 “B. J. Stewart Furniture Company had the
following transactions relating to the purchase and sale of leather sofas. There was no beginning inventory.
“Purchased
100 units on account at $1,000 per unit
Sold 75 units for cash at $2,000 per unit
Customers returned 3 defective units for cash refunds
Stewart returned the 3 defective units to its supplier for
credit on account”
(a) Assuming
Stewart uses a periodic inventory system, what journal entries would be needed to
record the preceding activity?
(b) Assuming
Stewart uses a periodic inventory system, show the calculation of gross
profit. You may assume that Stewart
conducted a physical count of ending inventory and confirmed that 25 were still
on hand.
(c) Assuming
Stewart uses a perpetual inventory system, what journal entries would be needed
to record the preceding activity?
(d) Assuming
Stewart uses a perpetual inventory system, show the calculation of gross
profit. If Stewart uses a perpetual
system, would there be any need to perform a periodic physical count of leather
sofas on hand?
Problem 8.08 “Carson’s Camera Store has a number of
video recording cameras in stock. All
units are priced to provide a normal profit margin of $150. Some of these units are quite old. Carson’s has concluded that some
“”lower-of-cost-or-market”” adjustments may be needed, and
has gathered the following unit pricing data:
“Beta
CamCorder, $900 cost, $950 replacement cost, $300 selling price
VHS CamCorder, $800 cost, $250 replacement cost, $500
selling price
DVD CamCorder, $400 cost, $375 replacement cost, $400
selling price
Blu-Ray CamCorder, $600 cost, $750 replacement cost, $800
selling price”
(a) What unit
value should be attached to each type of camera, assuming item-by-item
application of the lower-of-cost-or-market rule?
(b) Assuming
an item-by-item application of the lower-of-cost-or-market rule, what journal
entry is needed to reduce the Beta CamCorder?
11 such units remain in stock.
(c) As a
general rule, is the item-by-item approach required? Is the item-by-item approach the most
“conservative?”
(d) If an item
of inventory is written down, but subsequently recovers in value during a
subsequent year, can it be written back up?
Problem 8.09 “Aurora Wedding Gowns was burglarized in
May of 20X5. It is unclear how many
dresses were stolen. Aurora 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
Aurora’s tax return prepared at the end of 20X4 revealed
that the company ended 20X4 with a total inventory of $189,000. Aurora uses the same inventory accounting
methods for tax and accounting purposes.
The insurance company has contacted Aurora’s suppliers and
confirmed Aurora’s claim that purchases for 20X5, prior to the date of the
burglary, were $376,000. All inventory
was purchased, FOB destination.
20X5 Sales taxes collected by Aurora and remitted to the state,
prior to the date of the theft, were $48,000.
The sales tax rate is 6% of sales.
An inventory was taken immediately after the burglary and
the cost of dresses in stock was $123,000.
Aurora consistently sells dresses at a gross profit margin
of 45%.
Use the gross profit method to estimate the dollar value of
stolen dresses.
Problem 8.10 “The Quilting Pad is a retail store that
sells materials for custom quilts. The
store has a quilting room where quilters gather to sew and visit.
The store’s inventory consists of bolts of fabrics, spools
of thread, and trays of various batting and backing material. Customers generally select what they need,
and pay for what they use. The retail
price of goods is clearly marked on the bolts, spools, and trays. The Quilting Pad has virtually no problem with
theft or shortages of inventory.
It is virtually impossible to track inventory in any
detailed fashion. The store simply marks
up all goods by a constant percentage.
The mark up formula has been consistently applied to all items in
inventory for many years.
The Quilting Pad uses the retail inventory technique. Following is information for 20X7:
Beginning inventory at cost
$46,800
Beginning inventory at retail 78,000
Cost of purchases of inventory during the year 2,30,000
At the end of the
year, the Quilting Pad’s inventory was physically counted and it was determined
that $100,000 was the retail value of goods on hand.
Calculate the cost to retail percentage by analyzing the
beginning inventory data. Apply the
retail method to estimate the sales and gross profit for 20X7.
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.