Week 1 ch 7 problem

Exercise 7-2                                               
Presented below are a number of independent situations.                                               
For each individual situation, determine the amount that should be reported as cash.                                               
1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180.                                               
2. Checking account balance $600,000; an overdraft in special checking account at same bank as normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund $300; coins and currency on hand $1,350.                                               
3. Checking account balance $590,000; postdated check from a customer $11,000; cash restricted due to maintaining compensating balance requirement of $100,000; certified check from customer $9,800; postage stamps on hand $620.                                               
4. Checking account balance at bank $37,000; money market balance at mutual fund (has checking privileges) $48,000; NSF check received from customer $800.                                               
5. Checking account balance $700,000; cash restricted for future plant expansion $500,000; short-term Treasury bills $180,000; cash advance received from customer $900 (not included in checking account balance); cash advance of $7,000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.                                               
                                               
Exercise 7-4                                       
Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $1,500 per month, has just purchased a new Acura. You decided to test the accuracy of the accounts receivable balance of $82,000 as shown in the ledger.                                       
                                       
The following information is available for your first year in business.                                       
-1        Collections from customers         $198,000                        
-2        Merchandise purchased         $320,000                        
-3        Ending merchandise inventory         $90,000                        
-4        Goods are marked to sell at 40% above cost                               
Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account.                                       
                           
Exercise 7-8                                       
At the end of 2014, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2015, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.                                       
Prepare the journal entry for Aramis Company to write off the Ramirez receivable. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)                                       
What is the net realizable value of Aramis Company’s accounts receivable before the write-off of the Ramirez receivable?                                       

Exercise 7-9                                               
The trial balance before adjustment of Reba McIntyre Inc. shows the following balances.                                               
        Dr.        Cr.                               
Accounts Receivable        $90,000                                        
Allowance for Doubtful Accounts        1,750                                       
Sales Revenue (all on credit)                $680,000                                
Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts receivable and (b) 1% of net sales. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)                                               
                           
Exercise 7-13
Prepare the April 1, 2014, journal entry for Rasheed Company. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)                                                           
Prepare the journal entry for Rasheed’s collection of $350,000 of the accounts receivable during the period from April 1, 2014, through June 30, 2014. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)                                                           
On July 1, 2014, Rasheed paid Third National all that was due from the loan it secured on April 1, 2014. Prepare the journal entry to record this payment. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)                                                           
                                                           
Exercise 7-16                                                           
Beyoncé Corporation factors $175,000 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2014. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments                                                           
(b)                                               
Assume that the conditions are met for the transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2014, for Beyoncé to record the sale of receivables, assuming the recourse liability has a fair value of $2,000. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)                                                           
                                                           
Exercise 8-3                                               
Assume that in an annual audit of Harlowe Inc. at December 31, 2014, you find the following transactions near the closing date.                                               
Assuming that each of the amounts is material, state whether the merchandise should be included in the client’s inventory.                                               
Use either include or do not include for the below problem                                               
1    A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2014. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2015.                                           
2    Merchandise costing $2,800 was received on January 3, 2015, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2014, f.o.b. destination.                                           
3    A packing case containing a product costing $3,400 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked “Hold for shipping instructions.” Your investigation revealed that the customer’s order was dated December 18, 2014, but that the case was shipped and the customer billed on January 10, 2015. The product was a stock item of your client.                                           
4    Merchandise received on January 6, 2015, costing $680 was entered in the purchases journal on January 7, 2015. The invoice showed shipment was made f.o.b. supplier’s warehouse on December 31, 2014. Because it was not on hand at December 31, it was not included in inventory.                                           
5    Merchandise costing $720 was received on December 28, 2014, and the invoice was not recorded. You located it in the hands of the purchasing agent; it was marked “on consignment.”                                           

Exercise 8-13                                               
Inventory information for Part 311 of Monique Aaron Corp. discloses the following information for the month of June.                                               
01-Jun        Balance        300 units @ $10        10-Jun        Sold        200 units @ $24       
11        Purchased        800 units @ $12        15        Sold        500 units @ $25       
20        Purchased        500 units @ $13        27        Sold        300 units @ $27       

 

Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO and (2) FIFO.                                               
Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the value of the ending inventory at LIFO?                                               

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