5.14
a. Compute the approximate annual rate of return on investment of the following cash discount terms: 1. 1/ 15, n30. 2. 2/ 10, n60. 3. 1/ 10, n90.
b. Which of these terms, if any, is not likely to be a significant incentive to the cus-tomer to pay promptly? Explain your answer.
5.16
Notes receivable- interest accrual and collection Husemann Co.' s assets include notes receivable from customers. During fiscal 2013, the amount of notes receivable averaged $ 138,750, and the interest rate of the notes averaged 4.8%.
Required:
a. Compute the amount of interest income earned by Husemann Co. during fiscal 2013 and show in the horizontal model or write a journal entry that accrues the interest income earned from the notes.
b. If the balance in the Interest Receivable account increased by $ 1,500 from the beginning to the end of the fiscal year, how much interest receivable was collected during the fiscal year? Use the horizontal model, a T- account, or write the journal entry to show the collection of this amount.
5.20
Prepaid expenses- rent ( Note: See Problem 7.25 for the related unearned revenue accounting. ) On November 1, 2013, Wenger Co. paid its landlord $ 37,800 in cash as an advance rent payment on its store location. The six- month lease period ends on April 30, 2014, at which time the contract may be renewed.
Required:
a. Use the horizontal model or write the journal entry to record the six- month advance rent payment on November 1, 2013.
b. Use the horizontal model or write the adjusting entry that will be made at the end of every month to show the amount of rent " used" during the month.
c. Calculate the amount of prepaid rent that should be reported on the December 31, 2013, balance sheet with respect to this lease. d. If the advance payment made on November 1, 2013, had covered an 18- month lease period at the same amount of rent per month, how should Wenger Co. report the prepaid amount on its December 31, 2013, balance sheet.
P5.26
Bank reconciliation- compute Cash account balance and bank statement balance before reconciling items Branson Co. received its bank statement for the month ending May 31, 2013, and reconciled the statement balance to the May 31, 2013, balance in the Cash account. The reconciled balance was determined to be $ 9,300. The reconciliation recognized the following items:
1. A deposit made on May 31 for $ 5,100 was included in the Cash account balance but not in the bank statement balance.
2. Checks issued but not returned with the bank statement were No. 673 for $ 1,470 and No. 687 for $ 2,550.
3. Bank service charges shown as a deduction on the bank statement were $ 120.
4. Interest credited to Branson Co.' s account but not recorded on the company's books amounted to $ 72.
5. Returned with the bank statement was a " debit memo" stating that a customer's check for $ 960 that had been deposited on May 23 had been returned because the customer's account was overdrawn.
6. During a review of the checks that were returned with the bank statement, it was noted that the amount of check No. 681 was $ 480 but that in the company's records supporting the Cash account balance, the check had been erroneously recorded in the amount of $ 48. Required: a. What was the balance in Branson Co.' s Cash account before recognizing any of these reconciling items? b. What was the balance shown on the bank statement before recognizing any of these reconciling items?
Problem 5.30
Analysis of accounts receivable and allowance for bad debts- determine ending balances A portion of the current assets section of the December 31, 2013, balance sheet for Gibbs Co. is presented here:
Accounts receivable . . . . . . . . . . . . . . . . . $ 315,000 Less: Allowance for bad debts . . . . . . . . . . . ( 45,000) $ 270,000 The company's accounting records revealed the following information for the year ended December 31, 2014: Sales ( all on account) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,400,000 Cash collections from customers . . . . . . . . . . . . . . . . . 2,175,000 Accounts written off . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,500 Bad debts expense ( accrued at 12/ 31/ 14) . . . . . . . . . . 82,500
Required:
Calculate the net realizable value of accounts receivable at December 31, 2014, and prepare the appropriate balance sheet presentation for Gibbs Co., as of that point in time. ( Hint: Use T- accounts to analyze the Accounts Receivable and Allowance for Bad Debts accounts.)
5.32
Cost flow assumptions- FIFO, LIFO, and weighted average using a periodic system The following data are available for Sellco for the fiscal year ended on January 31, 2014: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200 units Beginning inventory . . . . . . . . . . . . . . . . . . . . . 1,000 units @ $ 4 Purchases, in chronological order . . . . . . . . . . . 1,200 units @ $ 5 1,600 units @ $ 6 800 units @ $ 8
Required:
a. Calculate cost of goods sold and ending inventory under the following cost flow assumptions ( using a periodic inventory system): 1. FIFO. 2. LIFO. 3. Weighted average. Round the unit cost answer to two decimal places and ending inventory to the nearest $ 10.
b. Assume that net income using the weighted- average cost flow assumption is $ 116,000. Calculate net income under FIFO and LIFO.