Exam #2

-Jun 1: on hand, 50 units at $18.00 each = $900.00 -Jun 4: purchased 115 units at $18.20 each = $2,093.00 -Jun 5: sold 100 units -Jun 10: purchased 75 units at $18.25 each = $1,368.75 -Jun 24: sold 40 units/total cost of goods available for sale = $4,361.75 -Jun 30: on hand, 1000 units If the company uses the LIFO inventory costing method, ending inventory at June 30th is:

$1,811.75 *see handout for steps

-Jun 1: on hand, 50 units at $18.00 each = $900.00 -Jun 4: purchased 115 units at $18.20 each = $2,093.00 -Jun 5: sold 100 units -Jun 10: purchased 75 units at $18.25 each = $1,368.75 -Jun 24: sold 40 units/total cost of goods available for sale = $4,361.75 -Jun 30: on hand, 1000 units If the company uses the (moving Average Cost inventory costing method, ending inventory at June 30th is:

$1,820.00 *see handout for steps

-Jun 1: on hand, 50 units at $18.00 each = $900.00 -Jun 4: purchased 115 units at $18.20 each = $2,093.00 -Jun 5: sold 100 units -Jun 10: purchased 75 units at $18.25 each = $1,368.75 -Jun 24: sold 40 units/total cost of goods available for sale = $4,361.75 -Jun 30: on hand, 1000 units If the company uses the FIFO inventory costing method, the amount of ending inventory reported on the balance sheet is:

$1,823.75 *see handout for steps

-sales = $250,000 -purchases = $112,500 -beginning inventory = $8,000 -ending inventory = $15,000 -operating expenses = $74,000 -income tax expense - $5,000 -beginning retained earnings = $26,500 -dividends = $7,500 Calculate gross margin.

$144,500 -Beg Inventory + Net Purchase - Ending Inventory = COGS 8,000 + 112,500 - 15,000 = 105,500 -Net Sales - COGS = Gross Margin 250,000 - 105,500 = 144,500

-cash balance according to the general ledger = ? -bank statement balance = $18,500 -outstanding checks = $2,700 -bank service charges = $100 -deposits in transit = $1,000 -interest earned on the checking account = $60 Determine the amount of the company's adjusted cash balance.

$16.800 COMPANY: $18,500 - $2,700(-outstanding check) = $15,800 $15,800 + $1,000(+deposits in transit) = $16,800

All Star Auto has an accounts receivable balance after posting net collections from customers for 2013 of $180,000. The customers took advantage of sales discounts of $15,000. Management aged the accounts receivable and estimate for uncollected account percentages as follows: -$90,000, current at 2% -$50,000, 1-30 days past due at 5% -$30,000, 31-60 days past due at 10 % -$10,000, 60+ days past due at 25% The net realizable value of the accounts receivable is

$170,200 % of credit sale --> bad debt exp aging --> ending AFDA 90,000*0.02 = 1,800 50,000*0.05 = 2,500 30,000*0.10 = 3000 10,000*0.25 = 2500 TOTAL = 9,800 ending AFDA 180,000 - 9,800 = $170,200

The company sold merchandise to a customer on December 1, 2019, for $120,000. The company accepted a promissory note as payment. The note has a term of three months and an annual interest rate of 10%. The company's accounting period ends on December 31. What amount should the company recognize as interest revenue in 2020?

$2,000 12/01/19 - 2/28/20 INTEREST 12/01/19 - 12/31/19 --> 1 m. in 2019 1/01/20 - 2/28/20 --> 2 m. in 2020 $120,000 x 10% x 2/12 = $2,000 in 2020

-Jun 1: on hand, 50 units at $18.00 each = $900.00 -Jun 4: purchased 115 units at $18.20 each = $2,093.00 -Jun 5: sold 100 units -Jun 10: purchased 75 units at $18.25 each = $1,368.75 -Jun 24: sold 40 units/total cost of goods available for sale = $4,361.75 -Jun 30: on hand, 1000 units If the company uses the FIFO inventory costing method, cost of goods sold for the month of June is:

$2,538.00 *see handout for steps

-Jun 1: on hand, 50 units at $18.00 each = $900.00 -Jun 4: purchased 115 units at $18.20 each = $2,093.00 -Jun 5: sold 100 units -Jun 10: purchased 75 units at $18.25 each = $1,368.75 -Jun 24: sold 40 units/total cost of goods available for sale = $4,361.75 -Jun 30: on hand, 1000 units If the company uses the (moving) Average Cost inventory costing method, cost of goods sold for the month of June is:

$2,542.00 *see handout for steps

-Jun 1: on hand, 50 units at $18.00 each = $900.00 -Jun 4: purchased 115 units at $18.20 each = $2,093.00 -Jun 5: sold 100 units -Jun 10: purchased 75 units at $18.25 each = $1,368.75 -Jun 24: sold 40 units/total cost of goods available for sale = $4,361.75 -Jun 30: on hand, 1000 units If the company uses LIFO inventory costing method, cost of goods sold for the month of June is:

$2,550.00 *see handout for steps

-company's balance according to the general ledger = $23,100 -outstanding checks = $550 -interest earned on the checking account = $100 -a customer's NSF check returned by the bank = $1,000 In the process of preparing the reconciliation, the accountant discovered an error in a customer's check; the amount was incorrectly recorded on the books as a cash receipt of $600, while the bank correctly recorded the amount as $650. What is the company's adjusted cash balance on February 28th?

$22,250 COMPANY: 23,100 +/- 550(ignore b/c it belongs to the bank) = $23,100 23,1000 + 100(+int rev) = $23,200 23,200 - 1,000(-nsf) = $22,200 22,200 + 50(error: cash receipt understated -> cash understated +) = $22,250 ERRORS: -CASH RECEIPT UNDERSTATED -> CASH UNDERSTATED (+) -CASH RECEIPT OVERSTATED -> CASH OVERSTATED (-) -CASH PAYMENT UNDERSTATED -> CASH OVERSTATED (-) -CASH PAYMENT OVERSTATED -> CASH UNDERSTATED (+)

-accounts receivable(jan 1) = $455,000 -credit sales during the year = $900,000 -collections from credit customers during the year = $825,000 -customer accounts written off as uncollected during the year = $15,000 -allowance for doubtful accounts (after write off of uncollected accounts) = $2,100 -estimated uncollected accounts based on an aging analysis = $29,200 If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense?

$27,100 Beg AFDA - Write off = 2,100 + Bad Debt Exp = 29,000 29,000 - 2,100 = $27,100

-cash balance per company records = $35,900 -outstanding checks = $12,050 -interest earned on the checking account = $75 -customer's nsf check returned by the bank = $325 There was also an error in the accounting records whereby a customer's check for $101 was recorded as $110. What is the company's adjusted cash balance on January 31st?

$35,659 COMPANY: cash payment overstated --> cash understated (+) + $9 to $35,900(cash balance per company records) = $35,909 $35,909 +/- $12,050(nothing b/c bank side) = $35,909 $35,909 +/- $75(int rev.) = $35,984 $35,984 - $325(nsf) = $35,659

On December 15, the accounts receivable balance was $50,000 and the balance in the allowance for doubtful accounts was $5,000. That morning, a $1,000 uncollected account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

$45,000 -Beg AR + Credit Sales (net) - Cash Collection - Write off = Ending AR 50,000 - 1,000 = 49,000 -Beg AFDA (cr) + Bad Debt Exp - Write off = Ending AFDA 5,000 - 1,000 = 4,000 -Ending AR - Ending AFDA = Net Realizable Value (nrv) 49,000 - 4,000 = 45,000

The company received a promissory note from a customer on March 1, 2019. The principle amount of the note is $20,000; the terms are 3 months and 9% annual interest. What is the total amount of interest the company will receive when the note is collected?

$450 20,000 x 9% x 3/12 = 450

-accounts receivable(jan 1) = $455,000 -credit sales during the year = $900,000 -collections from credit customers during the year = $825,000 -allowance for doubtful accounts(after write off of uncollected accounts) = $2,100 -estimated uncollected accounts based on an aging analysis = $29,200 What is the balance of Accounts Receivable at December 31?

$515,000 Beg AR + Credit Sales - Cash Collection - Write-off = Ending AR 455,000 + 900,000 - 825,000 - 15,000 = $515,000

-sales(100% on credit) = $2,100,000 -sales returns = $150,000 -accounts receivable(dec 31) = $420,000 -allowance for doubtful accounts(before adj. at dec 31) = $25,000 -estimated amount of uncollected accounts based on an aging analysis = $75,000 If the company uses the aging of accounts receivable method is estimate its bad debts, what amount will be reported as bad debt expense?

??

During a period of increasing purchase prices, which inventory costing method will yield the lowest cost of goods sold? a) FIFO b) any method in which the company uses a periodic system c) weighted average cost d) LIFO

a) FIFO

Which inventory cost flow method assigns the cost of the most recent items purchased to ending inventory? a) FIFO b) weighted average cost c) LIFO d) specific identification

a) FIFO

If a company uses the direct write-off method of accounting for bad debts, a) It establishes an estimate for the allowance for doubtful accounts. b) It will record bad debt expense only when an account is determined to be uncollected. c) It will reduce the accounts receivable account at the end of the accounting period for estimated uncollected accounts. d) When an account is written off, total assets will stay the same.

b) It will record bad debt expense only when an account is determined to be uncollected.

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance? a) outstanding checks b) deposits in transit c) bank service charges d) interest earned on the bank account

b) deposits in transit BANK: - Outstanding Checks + Deposit in Transit COMPANY: - Debit Memo (cash payment) + Credit Memo (cash receipt) - NSF (bad checks) - Service Charge from Bank + Interest Revenue on Checking Account

A petty cash custodian maintains a $250 petty cash fund. At the end of each month, the custodian tallies the records of the petty cash transactions and presents them for reimbursement. April 4: U.S. Post Office (postage) = $48 April 21: Callabaugh Supply (office supplies) = $146 April 25: Speedy Delivery (package delivery) = $35 Which of the following entries is necessary for recording the replenishment of the fund? a) DEBIT cash (229); CREDIT petty cash fund (229) b) DEBIT postage expense (48), office supplies expense (146), delivery expense (35); CREDIT petty cash (229) c) DEBIT postage expense (48), office supplies expense (146), delivery expense (35); CREDIT cash (229) d) DEBIT postage expense (48), office supplies expense (146), delivery expense (35); CREDIT petty cash fund (250)

c) DEBIT postage expense (48), office supplies expense (146), delivery expense (35); CREDIT cash (229) DEBIT postage expense (48), office supplies expense (146), delivery expense (35); CREDIT petty cash (229) DEBIT petty cash (229); CREDIT cash (229)

Which inventory costing method results in the highest inventory balance during a period of rising purchase prices? a) weighted average cost b) LIFO c) FIFO d) both FIFO and LIFO result in the same inventory balance.

c) FIFO

Which inventory cost flow method assigns the cost of the most recent items purchased to cost of goods sold? a) specific identification b) FIFO c) LIFO d) weighted average cost

c) LIFO

A company uses the direct write-off method to account for bad debts. What are the effects on the accounting equation of the entry to record the write-off of a customer's account balance? a) assets and liabilities decrease b) stockholders' equity and liabilities decrease c) assets and stockholders' equity decrease d) assets increase and stockholders' equity decrease

c) assets and stockholders' equity decrease

Which of the following best describes "cost of goods available for sale"? a) Cost of goods available for sale is an expense account. b) Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period. c) Cost of goods available for sale is subtracted from net sales to arrive at the gross margin. d) Cost of goods available for sale is allocated into cost of ending inventory and cost of goods sold.

d) Cost of goods available for sale is allocated into cost of ending inventory and cost of goods sold.

A customer's check for $25 that had been deposited into the company's checking account the previous month was stamped "NSF" by the bank. Which of the following journal entries is required? a) DEBIT cash (25); CREDIT accounts receivable (25) b) DEBIT cash (25); CREDIT accounts payable (25) c) DEBIT accounts receivable (25); CREDIT petty cash (25) d) DEBIT accounts receivable (25); CREDIT cash (25)

d) DEBIT accounts receivable (25); CREDIT cash (25) cash 25; AR 25 --> (nsf) --> AR 25; cash 25