INTERMEDIATE ACCOUNTING 321
NOV. 16, 2015
CASH - ACCOUNTS RECEIVABLE - INVENTORY
TAD MILLER
TEST 03. 2158
Cash
1. CASH
Calculate the correct cash balance for cash and cash equivalents.
Checking account
$ 6,750
Cash on hand
405
Undeposited checks from customers
552
.$
9,207.00
US Treasury bill 90 day
US Treasury bills mature in 6 months
,
$ 1,500
3,000
2. BANK RECONCILIATION Calculate the correct cash balance? Balance per the Gen. Ledger
$35,276
in addition, you are given the following information
35,276.00
-80.00
120.00
-2,187.00
80.00 bank service charge
check #4217 was recorded as $300 when it was
actually $180, the check was for rent expense
3,985.00 Deposit in transit
2,187.00 NSF returned check
5,536.00 Outstanding checks
33,129.00
3. BANK RECONCILIATION
Calculate the correct cash balance.
Balance per Bank Statement
$34,680
in addition, you are given the following information
34,680.00
3,985.00
-5,536.00
80.00 bank service charge
check #4217 was recorded as $300 when it was
actually $180, the check was for rent expense
3,985.00 Deposit in transit
2,187.00 NSF returned check
5,536.00 Outstanding checks
33,129.00
.
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.
bank expense
80
cash
80
cash
120
rent expense
120
Accounts Receivable 2,187
Cash
2,187
Accounts Receviable
5. TRADE DISCOUNTS Prepare the entry to record the following sale. On Oct. 15th Tracy Co. sold 100 air
conditioners to SLO Cooling. The units have a list price of $600 each, but SLO Tracy Co. offered a 30%
Trade Discount. Each unit cost Tracy $300.
Accounts receivable
Sale
Cost of goods sold
Inventory
42,000
42,000
30,000
30,000
.
RECEIVABLES – NET METHOD On Oct. 5th we sold 60 units of merchandise having an invoice price of
$24,000 (or $400 per unit) with terms 1/15 n/30. Prepare the following three entries (round to the nearest
cent).
6. On Oct. 5th to record the sale (net method)
7. On Oct. 19th when we receive a $10,000 check from the customer
8. On Oct. 27th when the customer pays the remaining balance in their account
Accounts receivable
Sales
Cash
Accounts receivable
Cash
Interest income
Accounts receivable
23,760.00
23,760.00
10,000.00
10,000.00
13,898.99
138.99
13,760.00
9. BAD DEBT EXPENSE / ALLOWANCE FOR DOUBTFUL ACCOUNTANTS CCS ended the year with accounts
receivable of $574 and a $54 debit balance in Allowance for Doubtful Accounts. Credit Sales totaled
$2,620. Historically, 3% of credit sales have proven to be uncollectible. Prepare the adjusting entry for
Bad Debt Expense? What will be the Net Realizable Value of Accounts Receivable after this adjustment?
Bad debt expense
78.60
Allowance for uncollectible accounts
78.60
NRV = 78.60 – 54.00
10. BAD DEBT EXPENSE / ALLOWANCE FOR DOUBTFUL ACCOUNTS Prepare the entry to record Allowance for
Doubtful Accounts if MMC ages accounts receivables to estimate uncollectible accounts. Below are
several account balances:
$1,200,000
305,000
24,000
amount
credit sales
Accounts Receivable
Allowance for Doubtful Accounts
age
est % uncollectibe
Bad debt expense
1,500
allow for uncollectible
220,000
< 30
5.0%
11,000
50,000
60-90
10.0%
5,000
25,000
91-120
20.0%
5,000
10,000
> 120
45.0%
4,500
305,000
1,500
25,500 requitred balance
24,000 existing credit balance
1,500 adjustment
11. WRITE OFF
Prepare the entry to write off Kate Lancaster’s account which has a balance of $45.
Allow for uncollect
Accounts receivable
45.00
45.00
12. What effect does the previous entry have on Total Current Assets?
What dollar effect does the entry have on Net Income?
Current Assets
$________
increase
no effect on CA
decrease
Net Income
$________
increase
no effect on NI
decrease
NOTES RECEIVABLE – On July 1st 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, 2016. Prepare the following three
entries
13. On July 1st to record the note and the sale
14. On Dec. 31st
15. On Mar. 31, 2016.
7/1/15
12/31/15
3/31/16
Note receivable
Sales
Interest receivable
Interest income
Interest receivable
Interest income
Cash
Note receivable
Interest receivable
60,000.00
60,000.00
1,800.00
1,800.00
900.00
900.00
62,400.00
60,000.00
2,700.00
NON INTERESET BEARING 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, 2016. Prepare the following entries
16. On June 30th to record the note and the sale
17. On Dec 31st
Note receivable
Discount on Note
Sales
Discount on Note
Interest income
Discount on Note
Interest income
Cash
Accounts receivable
10,000.00
600.00
9,400.00
400.00
400.00
200.00
200.00
10,000.00
10,000.00
18. ASSIGNED ACCOUNTS RECEIVABLE Prepare the journal entry for the following transaction. On Oct. 1st
when STG CO. borrowed $500 and signed a promissory note at Local Bank. Interest is 10% and payable
monthly. STG CO. assigned $600 of its receivables as collateral for the loan. Local Bank charges a finance
fee equal to 1.5% of the accounts receivable assigned.
Accounts receivable – assigned
Accounts receivable
600
Cash
Bank expense
Note payable
491
6
600
500
19. FACTORING ACCOUNTS RECEIVABLE WITHOUT RECOURSE Prepare the journal entry for the following
transactions. On Oct 16th MMC factored accounts receivable having a book value of $600 to Factor Bank.
The sale was made without recourse. Factor Bank charges a fee equal to 4% of the amount factored. In
addition, to the fee Factor Bank retains 6% to provide a cushion for sales discounts and sales returns.
Factor Bank immediately pays MMC cash equal to 90% of the factored receivables.
Cash
Loss on sale
Receivable from Factor Bank
Accounts receivable
540
24
36
600
PURCHASES – GROSS METHOD – PERIODIC INVENTORY SYSTEM On Oct. 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 Nov. 2nd. We received the merchandise on Nov. 4th. Prepare the
following entries using the gross method to record purchases in a periodic inventory system.
20. Prepare the entry to record the purchase and include the appropriate date on which we should record
the purchase.
21. On Nov. 8th we returns goods having an invoice price of $6,000
22. On Nov. 9th when we pay our account in full
11/2
11/8
11/9
Purchases
Accounts payable
Accounts payable
Purchase returns
Accounts payable
Purchase discount
Cash
40,000.00
40,000.00
6,000.00
6,000.00
34,000.00
1,020.00
32,980.00
PURCHASES – NET METHOD – PERPETUAL INVENTORY SYSTEM On Oct. 13th, OUR COMPANY ordered
merchandise with an invoice price of $70,000 having terms 3/15 n/30 fob destination, which the supplier
shipped on Oct. 15th and we received the merchandise on Oct. 18th. Prepare the following entries using the
net method to record purchases in a perpetual inventory system.
23. Prepare the entry to record the purchase AND indicate the date on which we should we record the
purchase
24. On Oct. 22nd when we write a $30,000 check to pay on our account
25. On Nov. 9th when we write a check to pay the remaining balance in our account
10/18
10/22
11/09
Inventory
Accounts payable
Accounts payable
Cash
Accounts payable
Purchase discount lost
Cash
67,900.00
67,900.00
30,000.00
30,000.00
37,900.00
1,172.17
39,072.17
COST FLOW ASSUMPTIONS - PERIODIC OUR COMPANY. sold 40 units for $20 each. Use the following
information for the next three problems
26. Prepare the closing entry, using Average Cost / Periodic to calculate Cost of Goods Sold and ending
Inventory.
27. Use FIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.
28. Use LIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.
qty
10/1 beginning
10/14 purchase
10/24 purchase
10
35
20
available
sold
inventory
65
40
25
cost
15.00
13.00
12.00
CoGS
Inventory
Inventory
Purchases
average
sold
10
30
0
150.00
455.00
240.00
845.00
FIFO
$13.00
520.00
325.00
520.00
325.00
150.00
695.00
LIFO
end
5
20
540
sold
0
20
20
end
10
15
500
305
345
COST FLOW ASSUMPTIONS - PERPETUAL Use the information presented below for the next two problems
29. LIFO - PERPETUAL. Calculate Cost of Goods Sold for the month using LIFO perpetual
Qty
10/1
Purchases
Cost
10
15 150
35
13 455
20
12 240
10/4
10/14
5
10/15
10/24
10/29
Sales
price
qty
20
qty
5 @ $15
average cost
inv
CoGS
$75
75.00
40
25
15
20
20
0 @ $15
530.00
331.25
25 @ $13
$325
15 @
$180
$580
$12
FIFO
30. Use AVERAGE COST - PERPETUAL to prepare the entry for the Oct.15th sale of 25 units at $20/unit (only
the sale on Oct 15th).
Cash (or Acc Rec)
Sales
Cost of goods sold
Inventory
500.00
500.00
331.25
331.25
Use this information to calculate ratios
for the following problems
12/31/15 12/31/14
Sales
Cost of goods sold
Gross profit
Accounts receivable
Inventory
4,800.00
2,880.00
1,920.00
600.00
450.00
average
4,750.00
3,000.00
1,750.00
583.60
510.00
13.15068 /day
7.890411 /day
591.80 average
480.00 average
591.80 8.110848 turns
480.00
6
13.15068 45.00146 days in
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
Sales / day
4800 / 365 days
13.15 / day
Sales
4,800
4,800
Ave Acc Rec
(600.00 + 583.60 )/2 591.80
Ave Inv
(450.00 + 510.00 )/2 480
CoGS
2,880 / 365 days
7.89 / day
CoGS
2,880
2,880
Ave Inv
(450.00 + 510.00 )/2 480
45.00 days in Acc Rec
8.11 turns
60.83 days in INV
6.00 turns