ACC 550 FINAL EXAM SPRING SEMESTER I 2016 INTERMEDIATE ACCOUNTING I

ACC 550 FINAL EXAM  SPRING SEMESTER I 2016
INTERMEDIATE ACCOUNTING I

BRIEF EXERCISES

1. On October 1, 2012, Chang, Inc. assigns $1,000,000 of its accounts receivable to Easley National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the October 1 journal entry to record the assignment.

2. Oak Incorporated factored $150,000 of accounts receivable with Ingram Factors, Inc. on a without-recourse basis. Ingram assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments, payable back to Oak to the extent it is not needed after 6 months. Prepare the journal entry for Oak Incorporated to record the factoring of the receivables.

3. Assume the same information as #2 above, except that the receivables are factored with recourse. Prepare the journal entry for Oak to record the sale, assuming that the recourse liability has a fair value of $7,500.

4. Thompson Company had ending inventory at end-of-year prices of $100,000 at December 31, 2011; $119,900 at December 31, 2012; and $134,560 at December 31, 2013. The year-end price indexes were 100 at 12/31/2011; 110 at 12/31/2012; and 116 at 12/31/2013. Compute the ending inventory for Thompson Company as of December 31, 2013 usng the dollar-value LIFO method.

5. Stopman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Newberry Corporation, f.o.b. shipping point, and $22,000 of goods sold to Juarez Company for $30,000, f.o.b. destination. Both the Newberry purchase and the Juarez sale were in transit at year-end. What amount should Stopman report as its December 31 inventory?

 

6. The Company began the year with $200,000 in Allowance for Sales Returns. During 2012, Hollings Industries recorded sales of $10,600,000. Cost of goods sold totaled $6,360,000 (60% of sales). The Company estimates that 8% of all sales will be returned. Prepare the year-end adjusting entries to account for anticipated sales returns, assuming that all sales are made on credit and all accounts receivable are outstanding. 7. Sanford Corporation has the following four items in its ending inventory:

Item                 Cost Net           Realizable Value

Jokers              $2,000                         $2,100
Penguins          $5,000                         $4,950
Riddlers           $4,400                         $4,625
Scarecrows      $3,200                         $3,830

Determine the final lower-of-cost-or-net-realizable-value of inventory, assuming it is applied (a) on an item-by-item basis and (b) on a total inventory basis.

8. Apache Inc. purchased land, building, and equipment from Sahara Corporation for a cash payment of $315,000. The estimated fair values of the assets are land $60,000, building $220,000, and equipment $80,000. At what amount should each of these three assets be recorded?

9. Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 (cost of $110,000 and A/D of $28,000) and $90,000, respectively. Prepare the journal entry to record the transaction, assuming that that exchange has commercial substance.

10. Assume the same facts as #9 above, except that the exchange does not have commercial substance. Prepare the journal entry under that assumption.

 

PROBLEMS
1. The trial balance before adjustment of Pratt Company reports the following balances:

DR                   CR

Accounts receivable                            $100,000

Allowance for doubtful accounts                                $ 2,500

Sales (all on credit)                                                      $650,000

 

REQUIRED

(a) Prepare the adjusting entry for estimated bad debts assuming that doubtful accounts are estimated to be:

i. 7% of gross accounts receivable
ii. 1% of net sales

(b) Assume that in the following year, a $2,000 account was written off as worthless. Provide the journal entry to show the writeoff.

(c) Later in that year, the person whose debt had been written off wrote the company to apologize for his delinquency and enclosed a check for $1,200, all of the money that he could afford at the moment. Provide the journal entries to show this recovery.

 

2. Inventory information for Orange Company discloses the following information for the month of June:

June 1             Balance            300 units @ $10

June 10            Sold                 200 units

June 11            Purchased        800 units @ $11

June 15            Sold                 500 units

June 20            Purchased        500 units @ $13

June 27            Sold                 250 units 

REQUIRED

Calculate Ending Inventory at June 30 and Cost of Goods Sold for the month of June under each of the following methods:

(a) FIFO Perpetual

(b) LIFO Periodic
(c) Average Cost Perpetual

 

3. Presented below is information related to Tyler Company:

Cost                 Retail

Beginning Inventory                $ 200,000        $280,000

Purchases                                 $1,425,000      $2,140,000

Markups                                                          95,000

Markup cancellations                                       15,000

Markdowns                                                      35,000

Markdown cancellations                                  5,000

Sales                                                                2,250,000 

REQUIRED

(a) Compute the ending inventory by the conventional retail inventory method.

(b) Compute the ending inventory by the gross profit method, assuming that gross profit is 40% of sales.

4. Tiger Industries purchased $12,000 of merchandise on February 1, 2012, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $3,000 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.

REQUIRED

(a) Assuming that Tiger uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
(b) Assuming that Tiger uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the net method.

5. Roddick Company purchased equipment for $304,000 on January 1, 2012. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $16,000. Estimated production is 40,000 units. During 2012, the equipment produces 1,000 units; during 2013, the equipment produces 12,000 units.

REQUIRED

Calculate depreciation expense for 2012 and 2013 under each of the following methods:
(a) Straight-line
(b) Sum-of-the-years’-digits
(c) Double-declining balance
(d) Units-of-production
 

SOLUTION PREVIEW

Item		Cost		Net Realizable Value (NRV)		LCM
Jokers		$2,000		$2,100		$2,000
Penguins		5,000		4,950		4,950

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