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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372 Exercise 84
Recording Inventory Transactions, Making Accrual and Deferral Adjustments, and Preparing and Evaluating Financial Statements (Chapters 4, 6, and 7)
College Coasters is a San Antonio-based merchandiser specializing in logo-adorned drink coasters. The company reported the following balances in its unadjusted trial balance at December 1, 2012.
The company buys coasters from one supplier. All amounts in Accounts Payable on December 1 are owed to that supplier. The inventory on December 1, 2012, consisted of 1,000 coasters, all of which were purchased in a batch on July 10 at a unit cost of $0.50. College Coasters records its inventory using perpetual inventory accounts and the FIFO cost flow method.
During December 2012, the company entered into the following transactions. Some of these transactions are explained in greater detail below.
Ocher relevant information includes the following:
a. College Coasters has not yet recorded $200 of selling expenses incurred in December on account.
b. The company estimates that the equipment depreciates at a rate of $10 per month. One month of depreciation needs to be recorded.
c. Wages for the period from December 23-31 are $100 and will be paid on January 15, 2013.
d. The $600 of Prepaid Rent relates to a six-month period ending on May 31, 2013.
e. No shrinkage or damage was discovered when the inventory was counted on December 31, 2012.
f. The company did not declare dividends and there were no transactions involving contributed capital.
g. The company has a 30 percent tax rate and has made no tax payments this year.
Required:
1. Analyze the accounting equation effects of each transaction and any adjustments required at month-end.
2. Prepare journal entries to record each transaction and any adjustments required at month-end.
3. Summarize the journal entries in T-accounts. Be sure to include the balances on December 1, 2012, as beginning account balances.
4. Prepare the year-end Income Statement, Statement of Stockholders' Equity, and classified Balance Sheet, using the formats presented in Exhibits 6.11, 5.8, and 5.6.
5. Calculate to one decimal place the inventory turnover ratio and days to sell in 2012, assuming that inventory was $500 on January 1, 2012. Evaluate these measures in comparison to an inventory turnover ratio of 12.0 during the year ended December 31, 2011.
College Coasters is a San Antonio-based merchandiser specializing in logo-adorned drink coasters. The company reported the following balances in its unadjusted trial balance at December 1, 2012.
The company buys coasters from one supplier. All amounts in Accounts Payable on December 1 are owed to that supplier. The inventory on December 1, 2012, consisted of 1,000 coasters, all of which were purchased in a batch on July 10 at a unit cost of $0.50. College Coasters records its inventory using perpetual inventory accounts and the FIFO cost flow method.
During December 2012, the company entered into the following transactions. Some of these transactions are explained in greater detail below.
Ocher relevant information includes the following:
a. College Coasters has not yet recorded $200 of selling expenses incurred in December on account.
b. The company estimates that the equipment depreciates at a rate of $10 per month. One month of depreciation needs to be recorded.
c. Wages for the period from December 23-31 are $100 and will be paid on January 15, 2013.
d. The $600 of Prepaid Rent relates to a six-month period ending on May 31, 2013.
e. No shrinkage or damage was discovered when the inventory was counted on December 31, 2012.
f. The company did not declare dividends and there were no transactions involving contributed capital.
g. The company has a 30 percent tax rate and has made no tax payments this year.
Required:
1. Analyze the accounting equation effects of each transaction and any adjustments required at month-end.
2. Prepare journal entries to record each transaction and any adjustments required at month-end.
3. Summarize the journal entries in T-accounts. Be sure to include the balances on December 1, 2012, as beginning account balances.
4. Prepare the year-end Income Statement, Statement of Stockholders' Equity, and classified Balance Sheet, using the formats presented in Exhibits 6.11, 5.8, and 5.6.
5. Calculate to one decimal place the inventory turnover ratio and days to sell in 2012, assuming that inventory was $500 on January 1, 2012. Evaluate these measures in comparison to an inventory turnover ratio of 12.0 during the year ended December 31, 2011.
Explanation
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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
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