Question 1 (15%) A company just starting business made the following inventory purchases in February: February 1 150 units $ 150 February 10 200 units 250 February 15 200 units 300 February 28 150 units 480 All units were sold to customers for cash at $10 per unit. A physical count of merchandise inventory on February 29 reveals that there are 200 units on hand. Using the periodic inventory method, calculate the value of the ending inventory and cost of goods sold for each of the three methods below: 1. LIFO 2. FIFO 3. Average-cost When necessary round values to the nearest value in dollars and cents. Question 2 (9%) Using the information from question 1 prepare the journal entry or entries to record the sales and cost of goods sold for the month of February. This will require three separate journal entries, one for each inventory costing method as noted below: 1. LIFO 2. FIFO 3. Average-cost Question 3 (36%) On January 1, 2014 Continental Can Company purchased a new machine at a cost of $15,000 with a scrap value of $3,000 and a useful life of 5 years and 120,000 units. For the year ending December 31, 2014 the machine produced 20,000 units. For the year ending December 31, 2015, the machine produced 25,000 units. 1. Using the three depreciation methods (straight line, units of production, and double decline balancing) calculate the depreciation for the year ending 12/31/2015 and present each of the three journal entries in proper form. (this problem continues on the next page with item #2) 2. On January 1, 2016 the machine is sold for $8,000. Complete the journal entry in proper form based on your calculations under each of the three depreciation methods (see item 1 in this problem). You will present three separate, independent journal entries. Question 4 (10%) Dexter Axle Company owns a vehicle with an original cost of $40,000 and an accumulated depreciation value of $30,000. The estimated residual value remains $6,000. Consider each of the independent situations below and present the required journal entry to record the sale of the vehicle on January 1, 2015, using proper format. A. Sold for $12,000 B. Sold for $ 8,000 C. Sold for $ 6,000 Question 5 (5%) PPG Corporation uses the direct write off method. Their customer, One Stop Paints, has declared bankruptcy with no assets to pay off creditors. Present the journal entry, in proper format to record the necessary adjustment for the $18,000 remaining in the Accounts Receivable Subsidiary ledger from One Stop Paints. Question 6 (5%) McCormick Spice uses the allowance method for accounts receivable uncollectible accounts. Briteway Distributors has closed its business, left no forwarding address, and has not made any payments on account for over two years. Present the journal entry, in proper form, to write off the remaining accounts receivable of $36,000. Question 7 (5%) Nova Electronics uses the allowance method for uncollectible accounts. A former customer, RS Distributors, is seeking to return to good standing and begin doing business with the company again. As part of the agreement, on January 30, 2015, RS Distributors paid Nova Electronics the $48,000 balance due (Nova Electronics wrote this value off three years ago). Present the required journal entry or entries to record this transaction. Question 8 (5%) What is the purpose of the bank reconciliation? As the president of the company what would you expect to see on the bank reconciliation document and what actions would be required of the accountant after completing the bank reconciliation schedule?  |
