# Inventory and Receivables- Accounting Practical Solution Sample

QUESTION

1. Beginning inventory, purchases, and sales data for Acme Co. is as follows:

 Inventory Purchases Sales Dec. 1 (65 units @ \$13) Dec. 2 (40 units @ \$15 Dec. 11 (75 units) Dec. 24 (60 units @ \$16) Dec. 18 (10 units) Dec. 29 (10 units)

Complete the perpetual inventory sheets (following pages) assuming the following inventory costing methods:

1. FIFO
2. Moving weighted average
3. Specific identification – units sold as follows:
1. Dec. 11 – 50 units @ \$13 and 25 units @ \$15
2. Dec. 18 – 7 units @ \$13 and 3 units @ \$15
3. Dec. 29 – 10 units @ \$16

1. What is the journal entry to record the sale on December 18 if the company uses Specific Identification? Assume all the units are sold for \$20 per unit.

FIFO

 Date Purchases Sales at Cost Ending Inventory Total

Moving Weighted Average

 Date Purchases Sales at Cost Ending Inventory Total

Specific Identification

 Date Purchases Sales at Cost Ending Inventory Total

Question 2

Wasson, Inc. had the following items in its unadjusted trial balance as of December 31:

Sales (Cash) \$88,000

Sales (Credit) \$120,000

Accounts Receivable \$96,000

Allowance for doubtful accounts \$1000 credit balance

Prepare the adjusting entry to estimate bad debts under each of the following independent situations. (Show all your work!)

(1) Bad debts are estimated to be 8% of credit sales.

(2) An analysis shows that 8% of Accounts receivable will not be collected.

Question 3

Record the following transactions:

 May 1 Wrote off Eddie Kruger’s account receivable in the amount of \$10,000. June 1 Eddie Kruger phoned and agreed to pay off his entire balance owing with several payments, starting in August. Write back his account in full. Aug. 2 Kruger paid \$4,000 on his account.

Question 4

Record the following transactions:

 Jan 5 Accepted an \$8,000, 90-day, 10% note from Jackie Chan in granting a time extension on his past due account. ????? Jackie Chan dishonoured his note at the maturity date. Dec. 31 Wrote off the Chan account (Allowance method)

Question 5

Acme Co. built their warehouse in a place where tornadoes frequently occur. On January 27 of the current year, a tornado destroyed the warehouse and all of the inventory it contained. Acme Co. hired you to calculate the cost of the inventory using the gross profit method. They give you the following data to help you:

Purchases \$900,000 Purchase Returns \$30,000

Sales \$600,000 Transportation-In \$12,000

Sales Discounts \$25,000 Purchase Discounts \$20,000

Beginning Inventory \$85,000

The company also informed you that their gross profit rate has been 25% over the past 5 years. Calculate the value of the lost inventory.

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1. Beginning inventory, purchases, and sales data for Acme Co. is as follows:

 Inventory Purchases Sales Dec. 1 (65 units @ \$13) Dec. 2 (40 units @ \$15 Dec. 11 (75 units) Dec. 24 (60 units @ \$16) Dec. 18 (10 units) Dec. 29 (10 units)

Complete the perpetual inventory sheets (following pages) assuming the following inventory costing methods:

1. FIFO
2. Moving weighted average
3. Specific identification – units sold as follows:
1. Dec. 11 – 50 units @ \$13 and 25 units @ \$15
2. Dec. 18 – 7 units @ \$13 and 3 units @ \$15
3. Dec. 29 – 10 units @ \$16

1. What is the journal entry to record the sale on December 18 if the company uses Specific Identification? Assume all the units are sold for \$20 per unit.

 18-Dec Accounts receivable 200 To sales 200 Cost of goods sold 150 To Merchandise inventory 150
 FIFO Date Purchases Sales at Cost Ending Inventory 1-Dec 845 845 2-Dec 600 1445 11-Dec 995 450 18-Dec 150 300 24-Dec 960 1260 29-Dec 150 1110 Total 2405 1295 1110

 Moving Weighted Average Date Purchases Sales at Cost Ending Inventory 1-Dec 845 845 2-Dec 600 1445 11-Dec 1032.14 412.86 18-Dec 137.62 275.24 24-Dec 960 1235.24 29-Dec 154.40 1080.83 Total 2405 1324.2 1080.83

 Specific Identification Date Purchases Sales at Cost Ending Inventory 1-Dec 845 845 2-Dec 600 1445 11-Dec 995 450 18-Dec 150 300 24-Dec 960 1260 29-Dec 150 1110 Total 2405 1295 1110

Wasson, Inc. had the following items in its unadjusted trial balance as of December 31:

Sales (Cash) \$88,000

Sales (Credit) \$120,000

Accounts Receivable \$96,000

Allowance for doubtful accounts \$1000 credit balance

Prepare the adjusting entry to estimate bad debts under each of the following independent situations. (Show all your work!)

(1) Bad debts are estimated to be 8% of credit sales.

 Bad debt expense 9600 To Allowance for doubtful debts 9600

(2) An analysis shows that 8% of Accounts receivable will not be collected.

 Bad debt expense 7680 To Allowance for doubtful debts 7680

Record the following transactions:

 May 1 Wrote off Eddie Kruger’s account receivable in the amount of \$10,000. June 1 Eddie Kruger phoned and agreed to pay off his entire balance owing with several payments, starting in August. Write back his account in full. Aug. 2 Kruger paid \$4,000 on his account. 1-May Allowance for doubtful debts 10000 To Accounts receivable 10000 1-Jun Accounts receivable 10000 To Allowance for doubtful debts 10000 2-Aug Cash 4000 To Accounts receivable 4000

Record the following transactions:

 Jan 5 Accepted an \$8,000, 90-day, 10% note from Jackie Chan in granting a time extension on his past due account. ????? Jackie Chan dishonoured his note at the maturity date. Dec. 31 Wrote off the Chan account (Allowance method) 5-Jan 10% Notes receivable 8000 To Accounts receivable 8000 5-Apr Interest receivable 197.26 To Interest Income 197.26 31-Dec Bad debt expense 8197.26 To Allowance for doubtful debts 8197.26 31-Dec Allowance for doubtful debts 8197.26 To Notes receivable 8000 To Interest receivable 197.26

Acme Co. built their warehouse in a place where tornadoes frequently occur. On January 27 of the current year, a tornado destroyed the warehouse and all of the inventory it contained. Acme Co. hired you to calculate the cost of the inventory using the gross profit method. They give you the following data to help you:

Purchases \$900,000 Purchase Returns \$30,000

Sales \$600,000 Transportation-In \$12,000

Sales Discounts \$25,000 Purchase Discounts \$20,000

Beginning Inventory \$85,000

The company also informed you that their gross profit rate has been 25% over the past 5 years. Calculate the value of the lost inventory.

—————————————————————————————————-Net purchases= purchases +inward transportation-returns-discounts

=900000+12000-30000-20000

=862000

Net sales=sales-discount

=600000-25000

=575000

So, Cost of goods sold= net sales/125*100

= 575000/125*100

=460000

Let closing inventory be “X”

So, Cost of goods sold=opening inventory+ purchases-closing inventory

= 460000=85000+862000-X

So, X = 487000

So, the closing inventory as per gross profit method is \$ 487000.

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