Assignment
Problem 1
Partial information follows about net sales, net purchases, cost of goods sold, gross profit, total expenses, and net income for Slabaugh Company. Compute the missing values.
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NET SALES
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Sales
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$ 900,000
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Sales discounts
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20,000
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Sales returns and allowances
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?
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Net sales
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735,000
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NET PURCHASES
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Purchases
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$ 350,000
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Freight-in
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20,000
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Purchase discounts
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?
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Purchase returns and allowances
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2,500
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Net purchases
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413,500
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COST OF GOODS SOLD
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Beginning inventory
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$ 85,400
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Ending inventory
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74,500
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Cost of goods sold
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?
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GROSS PROFIT
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Gross profit
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?
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TOTAL EXPENSES
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Rent
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$ 36,000
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Salaries
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145,700
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Utilities
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12,300
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Freight-out
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?
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Other
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24,100
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Total expenses
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242,200
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NET INCOME
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Net income
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?
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Problem 2
Dine-Corp International publishes ratings and reviews of the world's finest restaurants. Following are facts you need to prepare Dine-Corp's March bank reconciliation:
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Balance per company records at end of month
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$ 72,644.12
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Bank service charge for the month
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44.00
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NSF check returned with bank statement
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1,440.66
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Note collected by the bank during the month
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45,000.00
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Outstanding checks at month end
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31,553.57
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Interest on note collected during the month
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4,500.00
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Balance per bank at end of month
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144,223.99
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Deposit in transit at month end
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7,989.04
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Problem 3
"Prepare journal entries for each of the following transactions:
On December 1, 20X5, Musaka received a 10%, 1-year, note receivable from Lambert. This note was issued in payment for a $24,000 outstanding account receivable.
On December 31, 20X5, Musaka recorded an end-of-year adjusting entry to record accrued interest on the note receivable.
On November 30, 20X6, Lambert paid Musaka the full amount due on the note receivable.
"How would the November 30 entry differ if Lambert defaulted on the payment?
Problem 4
Rocks Shoes is a three-year old company that started out producing specialty shoes for rock climbing and mountaineering. The shoe's unique styling has made them a hit with climbing enthusiasts, and the company is now growing rapidly. Rocks needs additional capital to expand its manufacturing capacity, and it plans to sell additional shares of stock to raise money.
During its first three years in operation, Rocks used the direct-write off method to account for uncollectible accounts. Information about sales, write-offs, and the company's income follows:
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Sales
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Write-offs
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Net Income
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Year 1
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$ 2,400,000
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$ -
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$ 100,000
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Year 2
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6,300,000
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24,000
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300,000
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Year 3
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12,900,000
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111,000
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550,000
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"Rocks is required to have audited financial statements prior to offering its shares of stock for sale. This will require the company to recompute its income under generally accepted accounting principles for each of the three prior years. The only item that requires adjustment is the treatment of uncollectible accounts.
Rocks estimates that 3% of sales ultimately prove to be uncollectible -- 1% in the year following a sale, and 2% in the year thereafter."
(a) Prepare the journal entries that were used by Rocks for each year under the direct write-off method.
(b) Determine if the actual write-offs are aligning with the estimates provided by Rocks. Why does GAAP require an allowance method for uncollectibles?
(c) Prepare the journal entries that would have been made each year had the percentage of sales technique been used to establish an allowance account. Be sure to include entries to both establish the allowance and record the write offs.
(d) How much is the corrected net income for each year? Will the reduction in income potentially impact the amount of capital that can be raised?
Problem 5
"Elizabeth Egbert owns a galvanizing plant. Customers bring in their fabricated steel products (like light poles, towers, trailers, etc.), and Egbert dips them into a heated vat of molten zinc. The zinc bonds to the metal and produces a highly durable corrosion resistant product.
Egbert's primary inventory is molten zinc purchased from suppliers in large blocks of solid material. These blocks are immersed in the heated vat and will melt together with the zinc already in the pool. Egbert generally keeps the vat relatively full, and it is never allowed to cool.
Egbert started the year 20X8 with 500,000 pounds of zinc in the pool. During the year Egbert purchased 2,800,000 pounds of zinc. At year's end, the pool contained 520,000 pounds of zinc.
(a) How much zinc was used during 20X8?
(b) Accountants frequently refer to "goods available for sale." Is this concept the same as ending inventory? How much zinc, in pounds, was "available for sale?"
(c) If the beginning inventory cost $1.25 per pound, and purchases during 20X8 cost $1.50 per pound, how much is the "cost of goods available for sale"?
(d) In preparing financial statements for 20X8, to what financial statement elements will the amount you calculated in part (c) be allocated?
(e) If Egbert uses FIFO, how much should be attributed to ending inventory and how much to cost of goods sold?
(f) If Egbert uses LIFO, how much should be attributed to ending inventory and how much to cost of goods sold?
(g) What will be the difference in profitability between choosing the FIFO and LIFO methods? Does is seem reasonable the choice of accounting method can change the reported profit?
Attachment:- Chavez-Dariuz-Assignment.rar