Using the inventory and sales data above calculate the

Question

Problem I - 30 Points
The following ratios have been computed for Morgan Company for 2011.
	Profit margin	20%
	Times interest earned	9 times
	Receivables turnover	3 times
	Acid-test ratio	02:01
	Current ratio	03:01
	Debt to total assets ratio	20%
Morgan Company's 2011 financial statements with missing information follow:
MORGAN COMPANY
Comparative Balance Sheet
December 31,
-------------------------------------------
Assets		2011		2,010
Cash		$30,000		45,000
Short-term Investments		10,000		25,000
Accounts receivable (net)		60,000	(6)	40,000
Inventory		65000	(8)	50,000
Property, plant, and equipment (net)		2,00,000		1,60,000
	Total assets	3,65,000	(9)	$3,20,000
Liabilities and stockholders' equity
Accounts payable		25000	(7)	$30,000
Short-term notes payable		40,000		35,000
Bonds payable		20000	(10)	20,000
Common stock		2,20,000		2,00,000
Retained earnings		60,000		35,000
	Total liabilities and stockholders' equity	3,65,000	(11)	$3,20,000
MORGAN COMPANY
Income Statement
For the Year Ended December 31, 2011
-------------------------------------------
Net sales				1,50,000
Cost of goods sold				75,000
Gross profit				75,000
Expenses:
	Depreciation expense	5,000			(5)
	Interest expense	5,000
	Selling expenses	8,000
	Administrative expenses	12,000
	Total expenses			30000	(4)
Income before income taxes				45,000	(2)
	Income tax expense			15000	(3)
Net income				30,000	(1)
Instructions
Use the above ratios and information from the Morgan Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.

 

Problem II - 20 points
Kosko Furniture Store has credit sales of $400,000 in 2010 and a debit balance of $600 in the Allowance for Doubtful Accounts at year end. As of December 31, 2010, $130,000 of accounts receivable remain uncollected. The credit manager prepared an aging schedule of accounts receivable and estimates that $3,000 will prove to be uncollectible.
On March 4, 2011, the credit manager authorizes a write-off of the $1,000 balance owed by A. Noonan.
Instructions
(a)	Prepare the adjusting entry to record the estimated uncollectible accounts expense in 2010.
(b)	Show the balance sheet presentation of accounts receivable on December 31, 2010.
(c)	On March 4, before the write-off, assume the balance of Accounts Receivable account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of $2,000. Make the appropriate entry to record the write-off of the Noonan account. Also show the balance sheet presentation of accounts receivable before and after the write-off.

 

Problem III - 20 Points
Lumley Company uses the perpetual inventory system and had the following purchases and sales during March.
		Purchases		Sales
	Units	Units	Cost per unit	Units	Price per unit
01-Mar	Beginning inventory	100	$40
03-Mar	Purchase	60	$50
04-Mar	Sales			70	$80
10-Mar	Purchase	200	$55
16-Mar	Sales			80	$90
19-Mar	Purchase	40	$60
25-Mar	Sales			120	$90
Instructions
Using the inventory and sales data above, calculate the value assigned to cost of goods sold in March and to the ending inventory at March 31 using (a) FIFO and (b) LIFO.