Problems 1. Below is a list of items. Classify each into one of the following balance sheet categories:
a. Cash c. Marketable Securities
b. Receivables d. Other
a. Compensating balances held in long-term borrowing arrangements
b. Savings account
c. Certificate of deposit maturing in five years
d. Checking account
e. Postage stamps
Problems 2. Colaw Co. records the sale of merchandise inventory at gross amounts and uses perpetual inventories. Prepare journal entries in journal entry form for the following:
a. Sold merchandise costing $1,200 for $3,100 on account with terms 2/10, n/30.
b. Collected from the customer on the ninth day after the sale.
Problems 3. The Pine Shop shows the following data related to an item of inventory:
Inventory, January 1 100 units @ $8.00
Purchase, January 9 200 units @ $8.10
Purchase, January 19 75 units @ $8.30
Inventory, January 31 120 units
a. What value should be assigned to the ending inventory using the weighted average cost flow assumption?
b. What value should be assigned to cost of goods sold using a LIFO cost flow assumption?
Problems 4. Consider each of the items below. For each transaction below, indicate the effect on the balance sheet and income statement. Be clear as the the account(s) involved, and the amount of the increase or decrease in the account's value. All transactions are cash transaction unless otherwise stated. Disregard income tax considerations.
a. A motor in one of Grant Company's trucks was overhauled at a cost of $600. It is expected that this will extend the life of the truck for two years.
b. Machinery which had originally cost $130,000 was rearranged at a cost of $450, including installation, in order to improve production.
c. Long Bike Company recently purchased land and two buildings for a total cost of $35,000, and entered the purchase on the books. The $1,200 cost of razing the smaller building, which has an appraisal value of $6,200, is recorded.
d. Sanders Company traded its old machine with a net book value of $3,000 plus cash of $7,000 for a new one which had a fair market value of $9,000.
e. Ken Ellis and Barb Potter, maintenance repair workers, spent five days in unloading and setting up a new $6,000 precision machine in the plant. The wages paid for this five-day period, $480, are recorded.
Problems 5. At the end of the fiscal year, Tobey Inc. prepares its adjusting entries. The adjustment for bad debts is prepared using an aging of accounts receivable. Tobey assembles the following information: Accounts receivable consists of $35,000 accounts less than 30 days old, $20,000 accounts between 30 and 60 days old, $10,000 accounts between 60 and 90 days old, and $4,000 accounts older than 90 days. Based on prior experience, Tobey has estimated that 2% of its newest accounts will be uncollectible, 5% of the accounts between 30 and 60 days will be uncollectible, 20% of the accounts between 60 and 90 days is uncollectible, and 50% of any other accounts is probably uncollectible. Prior to preparing its adjustments, Tobey has a debit balance in the allowance for doubtful accounts of $400.
a) Prepare the aging schedule.
b) Prepare the journal entry to record the bad debts.
c) Show how Tobey would disclose the accounts receivable on it balance sheet at the end of its fiscal year.