The following information is for Benitez Company for the current year: $\begin{array}{ll} \text { Beginning inventory }& 300 \text { units @ } \$ 25 \\ \text { Purchase April } 8 &150 \text { units }@ \$ 30 \\ \text { Purchase September } 12 & 250 \text { units @ } \$ 34 \\ \text { Sales } &590 \text { units @ }\$50 \\ \end{array}$ Required:Assuming that Benitez uses the FIFO cost flow method,How much product cost would be allocated to Cost of Goods Sold?How much product cost would be allocated to Merchandise Inventory at the end of the year?

$16,760$3,740Under FIFO, the cost of the

Exam 5: Accounting for Receivables and Inventory Cost Flow

During December Year 1, Crowe Company sold 125 units @ $225 each. Cash selling and administrative expenses for the year were $11,000. All transactions were cash transactions. The following information is also available: Beginning inventory 60 units @ \ 100 April 18 purchase 90 units @ \ 115 August 5 purchase 30 units @ \ 120 The company's income tax rate is 30%. Required:Prepare an income statement for Crowe Company for Year 1 assuming: FIFO inventory cost flow LIFO inventory cost flowPrepare the operating activities section of the statement of cash flows for Year 1 assuming: FIFO inventory cost flow LIFO inventory cost flow

Free

(Essay)

4.9/5

(35)

Question 1

Correct Answer:

Verified

$\begin{array}{rrrr}&& \text { FIFO}&&& \text {LIFO}\\60 & \text { @ } \$100& & \$ 6,000 & 30 \text { @ } \$ 120 &&\$3,600\\65 & @\$ 115& &7,475 & 90@ \$ 115&&\underline{10,350}\\\text {Total} &&&\underline{\$13,475}&5@\$100&&\underline{500} \\&&&&\text {Total}&&\underline{\$14,450}\end{array}$
a.1.
$\begin{array}{c}\text {FIFO}\\\text { Income Statement }\\\begin{array}{lr}\text { Sales (125 @ \$225) } & \$ 28,125 \\\text { Cost of goods sold } & 13,475 \\\text { Gross margin } & 14,650 \\\text { Selling and administrative expense } & 11,000\\\text { Net income before taxes } & 3,650 \\\text { Income taxes } & 1,095 \\\text { Net income } & \$ 2,555\end{array}\end{array}$ 2.
$\begin{array}{c}\text {FIFO}\\\text { Income Statement }\\\begin{array}{lr}\text { Sales (125 @ \$225) } & \$ 28,125 \\\text { Cost of goods sold } & 14,450 \\\text { Gross margin } & 13,675 \\\text { Selling and administrative expense } & 11,000\\\text { Net income before taxes } &2,675 \\\text { Income taxes } & 803 \\\text { Net income } & \$1,872\end{array}\end{array}$ b.1.
$\begin{array}{c}\text { FIFO}\\\text { Cash Flow from Operating Activities }\\\begin{array}{lr}\text { Cash received from sales } & \$ 28,125 \\\text { Cash payment for inventory } & (13,950) \\\text { Cash payment for selling and administrative expense } & (11,000) \\\text { Cash payment for income tax expense } & \underline{(1,095) }\\\text { cash flow from operating activities } & \underline{ \$ 2,080}\end{array}\end{array}$ 2.
$\begin{array}{c}\text { FIFO}\\\text { Cash Flow from Operating Activities }\\\begin{array}{lr}\text { Cash received from sales } & \$ 28,125 \\\text { Cash payment for inventory } & (13,950) \\\text { Cash payment for selling and administrative expense } & (11,000) \\\text { Cash payment for income tax expense } & \underline{(803) }\\\text { cash flow from operating activities } & \underline{ \$ 2,372}\end{array}\end{array}$

Vincent Company accepted a 12-month, 7% promissory note from a customer, Graves Company, on September 1, Year 1, in exchange for $24,000 of services that Vincent performed. What amount will be collected on August 31, Year 2?

Free

(Essay)

4.9/5

(34)

Question 2

Correct Answer:

Verified

$25,680
Interest revenue = $24,000 × 7% × 12/12 = $1,680Cash received = $24,000 principal of note + $1,680 interest = $25,680

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 March 1, Year 2, King Company collected a note receivable and related interest from Havilland Company The note had been issued one year earlier. Indicate the effects of this event on the elements of King's financial statements.

Free

(Essay)

4.9/5

(29)

Question 3

Correct Answer:

Verified

Collecting the note on March 1 increases assets (cash) by the amount of the principal, plus all interest, decreases (interest receivable) by the amount of interest that had been accrued at the end of Year 1, and increases revenue (interest revenue) by the amount of interest earned in Year 2, which increases net income and stockholders' equity. The cash received on the principal is reported as a cash inflow from investing activities, and the cash received from interest is reported as a cash inflow from operating activities.

What type of transaction (that is, asset source, asset use, asset exchange, or claims exchange) is the write-off of an uncollectible account using the allowance method?

(Essay)

4.9/5

(34)

Question 4

What type of account is Allowance for Doubtful Accounts?

(Essay)

4.8/5

(30)

Question 5

Blake Company loaned Jimenez Corporation $18,000 on October 1, Year 1. The 8-month note carried a 6% rate of interest. Required:How will Blake report the note and interest on its Year 1 income statement, balance sheet, and statement of cash flows?How will Blake report the note and interest on its Year 2 income statement and statement of cash flows?

(Essay)

4.8/5

(29)

Question 6

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. Stan's Surf Shack uses the FIFO inventory cost flow method. When its income tax is paid with cash, what is the effect of the entry on the financial statements? Note that no tax liability had been accrued.

(Essay)

4.8/5

(29)

Question 7

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 = NAGarrison Company uses the allowance method to account for uncollectible accounts. Show how the adjusting entry to recognize uncollectible accounts expense would affect the elements of Garrison's financial statements.

(Essay)

4.8/5

(37)

Question 8

What is meant by the net realizable value for accounts receivable?

(Essay)

4.9/5

(39)

Question 9

In relation to inventory, differentiate between the flow of cost and the physical flow of goods.

(Essay)

4.9/5

(28)

Question 10

Vailes Services Company loaned $6,000 on August 1, Year 1, to an individual who issued Vailes a promissory note with 6% interest. The issuer of the note repaid the principal and interest on July 30, Year 2. How did the August 1, Year 1, event affect Vailes's statement of cash flows? How did the July 30, Year 2 event affect it?

(Essay)

4.9/5

(38)

Question 11

In a world with inflation, but no income tax, how does the choice between LIFO and FIFO affect a company's cash flows? Would the presence of an income tax system cause a difference in the amount of cash outflow when using FIFO versus LIFO?

(Essay)

4.9/5

(52)

Question 12

Perez Company began Year 2 with a balance of $148,000 in accounts receivable and $8,600 in allowance for doubtful accounts. During the year, the company recognized $656,000 of service earned on account and collected $580,000 cash from accounts receivable. Perez wrote off $6,500 of uncollectible accounts during Year 2. At the end of the year, the company prepared an aging schedule and adjusted its accounts based on the estimate that $12,600 of receivables would not be collected.Required:What was the net realizable value of Perez accounts receivable at the end of Year 2?

(Essay)

4.8/5

(27)

Question 13

Singh Company sold 75 units @ $350 each on October 31, Year 1. The following information is also available: Beginning inventory 25 units @ \ 175 February 2 purchase 20 units@ \ 180 June 1.5 purchase 45 units@ \ 200 october 1 purchase 30 units@ \ 220 Required:Determine the amount of cost of goods sold using: FIFO LIFO Weighted Average Determine the amount of ending inventory using: FIFO LIFO Weighted Average

(Essay)

4.9/5

(35)

Question 14

Vancouver Company began Year 2 with balances in accounts receivable and allowance for doubtful accounts of $92,800 and $9,280, respectively. The company reported credit sales of $875,550 during the year, collected $870,200, and wrote off $6,800 of uncollectible accounts. Vancouver estimates that 10% of its accounts receivable balance will be uncollectible.Required:What will Vancouver report as its allowance for doubtful accounts on December 31, Year 2?What is Vancouver's net realizable value of accounts receivable on December 31, Year 2?What is Vancouver's uncollectible accounts expense for Year 2?

(Essay)

4.8/5

(31)

Question 15

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, Ruiz Company loaned $10,000 to Alpha company. Show the effect of the December 31, Year 1 adjusting entry to accrue interest on Ruiz's financial statements.

(Essay)

4.9/5

(34)

Question 16

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $235,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

(Essay)

4.8/5

(40)

Question 17

Geary, Incorporated had the following sales during Year 2: Cash sales \ 240,000 Credit sales 1,200,000 Credit card sales 4,000,000 Geary also had the following beginning and ending balances in its receivables accounts: Beginning Ending Credit sales \ 240,000 \ 180,000 Credit card sales 800,000 840,000 Geary, who uses the allowance method of accounting for uncollectible accounts, estimated that 3% of the credit sales will go uncollected. The credit card company charges Geary a 4% service charge.Required:How will Geary's year-end adjusting entry for uncollectible accounts expense affect the company's financial statements? $Geary, Incorporated had the following sales during Year 2: \begin{array}{ll} \text { Cash sales } & \$ 240,000 \\ \text { Credit sales } & 1,200,000 \\ \text { Credit card sales } & 4,000,000 \end{array} Geary also had the following beginning and ending balances in its receivables accounts: \begin{array}{lrr} &\text { Beginning}&\text { Ending}\\ \text { Credit sales } & \$ 240,000 & \$ 180,000 \\ \text { Credit card sales } & 800,000 & 840,000 \end{array} Geary, who uses the allowance method of accounting for uncollectible accounts, estimated that 3% of the credit sales will go uncollected. The credit card company charges Geary a 4% service charge.Required:How will Geary's year-end adjusting entry for uncollectible accounts expense affect the company's financial statements? How will the entry to record the credit card sales affect the company's financial statements? What is Geary's cash flow from customers for the year?$ How will the entry to record the credit card sales affect the company's financial statements? $Geary, Incorporated had the following sales during Year 2: \begin{array}{ll} \text { Cash sales } & \$ 240,000 \\ \text { Credit sales } & 1,200,000 \\ \text { Credit card sales } & 4,000,000 \end{array} Geary also had the following beginning and ending balances in its receivables accounts: \begin{array}{lrr} &\text { Beginning}&\text { Ending}\\ \text { Credit sales } & \$ 240,000 & \$ 180,000 \\ \text { Credit card sales } & 800,000 & 840,000 \end{array} Geary, who uses the allowance method of accounting for uncollectible accounts, estimated that 3% of the credit sales will go uncollected. The credit card company charges Geary a 4% service charge.Required:How will Geary's year-end adjusting entry for uncollectible accounts expense affect the company's financial statements? How will the entry to record the credit card sales affect the company's financial statements? What is Geary's cash flow from customers for the year?$ What is Geary's cash flow from customers for the year?

(Essay)

4.8/5

(28)

Question 18

The following information is for Benitez Company for the current year: Beginning inventory 300 units @ \ 25 Purchase April 8 150 units @\ 30 Purchase September 12 250 units @ \ 34 Sales 590 units @ \5 0 Required:Assuming that Benitez uses the FIFO cost flow method,How much product cost would be allocated to Cost of Goods Sold?How much product cost would be allocated to Merchandise Inventory at the end of the year?

(Essay)

5.0/5

(26)

Question 19

How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?

(Essay)

4.9/5

(33)

Question 20

Showing 1 - 20 of 57

Vincent Company accepted a 12-month, 7% promissory note from a customer, Graves Company, on September 1, Year 1, in exchange for $24,000 of services that Vincent performed. What amount will be collected on August 31, Year 2?

What type of transaction (that is, asset source, asset use, asset exchange, or claims exchange) is the write-off of an uncollectible account using the allowance method?

What type of account is Allowance for Doubtful Accounts?

What is meant by the net realizable value for accounts receivable?

In relation to inventory, differentiate between the flow of cost and the physical flow of goods.

In a world with inflation, but no income tax, how does the choice between LIFO and FIFO affect a company's cash flows? Would the presence of an income tax system cause a difference in the amount of cash outflow when using FIFO versus LIFO?

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $235,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters