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Exam 5: Accounting for Receivables and Inventory Cost Flow

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Perez Company began Year 2 with a balance of $148,000 in accounts receivable and $8,600 in allowance for doubtful accounts. During the year, the company recognized $656,000 of service earned on account and collected $580,000 cash from accounts receivable. Perez wrote off $6,500 of uncollectible accounts during Year 2. At the end of the year, the company prepared an aging schedule and adjusted its accounts based on the estimate that $12,600 of receivables would not be collected.Required:What was the net realizable value of Perez accounts receivable at the end of Year 2?

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$204,900$148,000 beginning accounts rece...

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Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn September 1, Year 1, Ruiz Company loaned $10,000 to Alpha company. Show the effect of the December 31, Year 1 adjusting entry to accrue interest on Ruiz's financial statements.

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Singh Company sold 75 units @ $350 each on October 31, Year 1. The following information is also available: $\begin{array} { l l } \text { Beginning inventory } & 25 \text { units @ } \$ 175 \\\text { February } 2 \text { purchase } & 20 \text { units@ } \$ 180 \\\text { June } 1.5 \text { purchase } & 45 \text { units@ } \$ 200 \\\text { october } 1 \text { purchase } & 30 \text { units@ } \$ 220\end{array}$ Required:Determine the amount of cost of goods sold using: FIFO LIFO Weighted Average Determine the amount of ending inventory using: FIFO LIFO Weighted Average

The following information is for Benitez Company for the current year: $\begin{array}{ll}\text { Beginning inventory }& 300 \text { units @ } \$ 25 \\\text { Purchase April } 8 &150 \text { units }@ \$ 30 \\\text { Purchase September } 12 & 250 \text { units @ } \$ 34 \\\text { Sales } &590 \text { units @ }\$50 \\\end{array}$ Required:Assuming that Benitez uses the FIFO cost flow method,How much product cost would be allocated to Cost of Goods Sold?How much product cost would be allocated to Merchandise Inventory at the end of the year?

What type of account is Allowance for Doubtful Accounts?

In relation to inventory, differentiate between the flow of cost and the physical flow of goods.

Vincent Company accepted a 12-month, 7% promissory note from a customer, Graves Company, on September 1, Year 1, in exchange for $24,000 of services that Vincent performed. What amount will be collected on August 31, Year 2?

Geary, Incorporated had the following sales during Year 2: $\begin{array}{ll}\text { Cash sales } & \$ 240,000 \\\text { Credit sales } & 1,200,000 \\\text { Credit card sales } & 4,000,000\end{array}$ Geary also had the following beginning and ending balances in its receivables accounts: $\begin{array}{lrr}&\text { Beginning}&\text { Ending}\\\text { Credit sales } & \$ 240,000 & \$ 180,000 \\\text { Credit card sales } & 800,000 & 840,000\end{array}$ Geary, who uses the allowance method of accounting for uncollectible accounts, estimated that 3% of the credit sales will go uncollected. The credit card company charges Geary a 4% service charge.Required:How will Geary's year-end adjusting entry for uncollectible accounts expense affect the company's financial statements? How will the entry to record the credit card sales affect the company's financial statements? What is Geary's cash flow from customers for the year?

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn March 1, Year 2, King Company collected a note receivable and related interest from Havilland Company The note had been issued one year earlier. Indicate the effects of this event on the elements of King's financial statements.

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $235,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

During December Year 1, Crowe Company sold 125 units @ $225 each. Cash selling and administrative expenses for the year were $11,000. All transactions were cash transactions. The following information is also available: $\begin{array}{ll}\text { Beginning inventory } & 60 \text { units @ } \$ 100 \\\text { April } 18 \text { purchase } & 90 \text { units @ } \$ 115 \\\text { August } 5 \text { purchase } & 30 \text { units @ } \$ 120\end{array}$ The company's income tax rate is 30%. Required:Prepare an income statement for Crowe Company for Year 1 assuming: FIFO inventory cost flow LIFO inventory cost flowPrepare the operating activities section of the statement of cash flows for Year 1 assuming: FIFO inventory cost flow LIFO inventory cost flow

How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = D Not Affected = NA Stan's Surf Shack purchased 5 surfboards for $200 each. Later it purchased 2 more surfboards for $250 each. Stan's uses the perpetual inventory system. Assume that 6 surfboards were sold during the period for $350 cash each. Stan's Surf Shack uses the FIFO inventory cost flow method. When its income tax is paid with cash, what is the effect of the entry on the financial statements? Note that no tax liability had been accrued.

In a world with inflation, but no income tax, how does the choice between LIFO and FIFO affect a company's cash flows? Would the presence of an income tax system cause a difference in the amount of cash outflow when using FIFO versus LIFO?

What type of transaction (that is, asset source, asset use, asset exchange, or claims exchange) is the write-off of an uncollectible account using the allowance method?

Vailes Services Company loaned $6,000 on August 1, Year 1, to an individual who issued Vailes a promissory note with 6% interest. The issuer of the note repaid the principal and interest on July 30, Year 2. How did the August 1, Year 1, event affect Vailes's statement of cash flows? How did the July 30, Year 2 event affect it?

What is meant by the net realizable value for accounts receivable?

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAGarrison Company uses the allowance method to account for uncollectible accounts. Show how the adjusting entry to recognize uncollectible accounts expense would affect the elements of Garrison's financial statements.

Blake Company loaned Jimenez Corporation $18,000 on October 1, Year 1. The 8-month note carried a 6% rate of interest. Required:How will Blake report the note and interest on its Year 1 income statement, balance sheet, and statement of cash flows?How will Blake report the note and interest on its Year 2 income statement and statement of cash flows?

Vancouver Company began Year 2 with balances in accounts receivable and allowance for doubtful accounts of $92,800 and $9,280, respectively. The company reported credit sales of $875,550 during the year, collected $870,200, and wrote off $6,800 of uncollectible accounts. Vancouver estimates that 10% of its accounts receivable balance will be uncollectible.Required:What will Vancouver report as its allowance for doubtful accounts on December 31, Year 2?What is Vancouver's net realizable value of accounts receivable on December 31, Year 2?What is Vancouver's uncollectible accounts expense for Year 2?