FINANCIAL ACCOUNTING ASSIGNMENT
1. Understand and deal with the accounting issue that arises when identical units of merchandise are acquired at different unit costs during the period;
2. Describe and illustrate the application of internal controls to cash;
3. Understand the classification of receivables and the accounting of uncollectible receivables;
4. Understand the accounting for fixed and intangible assets;
5. Understand the accounting for current liabilities and payroll;
6. Understand the accounting for partnerships and corporations and;
7. Prepare a Statement of Cash Flows.
Case Study 1 - Calculation of Inventory Balance
Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that further discussions with Alou's accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $297,000. Discussions with the accountant reveal the following.
1. Alou sold goods costing $38,000 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end.
3. Alou received goods costing $19,000 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count.
4. Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory.
5. Alou received goods costing $44,000 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000.
Instructions - Determine the correct inventory amount on December 31.
Case Study 2 - Computing Ending Inventory (3 methods)
Roselle Appliance uses a perpetual inventory system. For its flat-screen television sets, the January 1 inventory was 3 sets at $600 each. On January 10, Roselle purchased 6 units at $648 each. The company sold 2 units on January 8 and 4 units on January 15.
Instructions - Compute the ending inventory under (1) FIFO, (2) LIFO, and (3) moving-average cost.
Case Study 3 - Computing Depreciation
Tanger Company purchased a delivery truck for $36,000 on January 1, 2014. The truck has an expected salvage value of $6,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2014 and 12,000 in 2015.
Instructions - (a) Compute depreciation expense for 2014 and 2015 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method.
(b) Assume that Tanger uses the straight-line method.
1. Prepare the journal entry to record 2014 depreciation.
2. Show how the truck would be reported in the December 31,2014, balance sheet.
Case Study 4 - Preparing Long-Term Liabilities
The adjusted trial balance for Matthews Corporation at the end of the current year contained the following accounts.
Interest $9,000
Payable Lease $9,000
Liability
Bonds Payable, due 2019 180,000
Premium on Bonds Payable 24,000
Instructions - Prepare the long-term liabilities section of the balance sheet.
Multiple Choice Questions
1) A deposit made by a company will appear on the bank statement as a
A) Credit
B) Debit Memorandum
C) Debit
D) Credit memorandum
2) The cash account shows a balance of $45,000 before reconciliation. The bank statement does not include a deposit of $2,500 made on the last day of the month. The bank statement shows a collection by the bank of $1,200 and a customer's check for $320 was returned because it was NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $69 was recorded as $96. The correct balance in the cash account was
A) $46,200
B) $45,790
C) $45,817
D) $48,317
3) In preparing its August 31, 2013 bank reconciliation, Annie Corp. has available the following information:
Balance per bank statement, 8/31/13 - $21,650
Deposit in transit, 8/31/13 - 3,900
Return of customer's check not sufficient funds, 8/30/13 - 600
Outstanding checks, 8/31/13 - 2,750
Bank service charges for August - 100
At August 31, 2013, Annie's adjusted cash balance is
A) $20,500
B) $18,900
C) $18,800
D) $22,800
4) A bank reconciliation should be prepared
A) to explain any difference between the depositor's balance per books and the balance per bank.
B) by the person who is authorized to sign checks.
C) whenever the bank refuses to lend the company money.
D) when an employee is suspected of fraud.
5) Using the following information:
12/31/12
Accounts receivable - $525,000
Allowance - (35,000)
Cash realizable value - $490,000
During 2013, sales on account were $145,000 and collections on account were $100,000. Also during 2013, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $40,000.
Bad debts expense for 2013 is
A) $8,000
B) $13,000
C) $40,000
D) $5,000
6) An analysis and aging of the accounts receivable of Hugh Company at December 31 revealed the following data:
Accounts Receivable - $800,000
Allowance for Doubtful Accounts per books before adjustment (Cr.) - $50,000
Amounts expected to become uncollectible - $56,000
The cash realizable value of the accounts receivable at December 31, after adjustment, is:
A) $794,000
B) $694,000
C) $750,000
D) $744,000
7) XYZ Company accepted a national credit card for a $3,000 purchase. The cost of the goods sold is $1,800. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income?
A) Increase by $1,110
B) Increase by $1,164
C) Increase by $1,200
D) Increase by $2,910
8) A 30-day note dated May 18 has a maturity date of
A) June 16.
B) June 18.
C) June 17.
D) June 19.
9) The interest on a $10,000, 10%, 1-year note receivable is
A) $11,000.
B) $10,000.
C) $10,100.
D) $1,000.
10) The two methods of accounting for uncollectible accounts are (a) percentage of sales and (b) percentage of receivables.
A) True
B) False