Problem 1 Revenue and Receivables (33%) Required:

Problem 1 Revenue and Receivables (33%)
Required:
Complete the following journal entries in a proper format for ABC Company.
1. On September 2nd, ABC Company sold furniture to XYZ for $8,000.
Terms were 2/10, n/30. The cost of the furniture was $5,000.

2. On September 6th, ABC Company sold furniture to EFG for $10,000.
Terms were 2/10, n/30. The cost of the furniture was $6,000.

3. On September 7th XYZ company returned $3,000 of the furniture.

4. On September 14th XYZ paid the balance due on their furniture purchase.

5. On September 15th EFG paid the balance due on their furniture purchase.

6. On September 30th ABC Company recorded bad debts for the month
based on a 4 percent of credit sales. For the month of September sales
were $80,000, credit sales were $75,000, the balance in Allowance for
Doubtful Accounts is $2,500.

7. On September 30th ABC Company recorded bad debts for the month based on an aging
schedule. For the month of September sales were $80,000, credit sales were $75,000, the
balance in Allowance for Doubtful Accounts is $2,500. The aging schedule is as follows:
Aged Accounts Receivable

Percent Uncollectible

Not Yet Due

40,000

2%

Up to 90 Days Past Due

20,000

10%

Over 90 Days Past Due

5,000

30%

Amount Uncollectible

8. $1,700 of accounts receivable are written off in September.

Problem 2 Inventory Costing Methods (34%)
Required:
1. Determine the dollar amount of cost of goods sold, dollar amount of ending inventory, and dollar amount of gross margin using the FIFO, LIFO and specific identification inventory costing
methods for the month of October.
2. Complete journal entries for October 3 rd and 8th using the specific identification method assuming all purchases and sales were on account.
Beginning Inventory Units 1 – 5 at $24 each

120

October 3 Purchased Units 6 – 15 at $25 each

250

October 8 Sold 8 Units at $40 each
October 15 Purchased Units 16 – 25 at $26 each

320
260

October 20 Sold 9 Units at $40 each
October 25 Purchased Units 26 – 35 at $27 each

360
270

October 31 Sold 12 Units at $42 each

504

For Specific Identification purposes the inventory sold were units 1, 2, 3, 6, 7, 8, 9, 10 on October 8 th,
units 4, 11, 12, 13, 18, 19, 20, 21, 22 on October 20 th and units 14, 23, 26, 27, 28, 29, 30, 31, 32, 33, 34
and 35 on October 31st.

Problem 3 Property, Plant and Equipment (33%)
Required:
Complete the following journal entries for PAT Company.
1. An assembly machine was purchased for $500,000, shipping cost was
$10,000, and the company incurred $5,000 installation cost and $3,000
in testing cost. The company took out a $450,000 15 year 8 percent note
payable and paid the balance in cash.

2. PAT Company paid $7,500 in routine maintenance costs.

3. Improvements of $10,000 were paid on an old machine which extended
its useful flie..

4. Monthly depreciation of $8000 was recorded.

5. The monthly depreciation of a $100,000 asset with a salvage value of
$4,000 at the end of its useful life of 8 years was recorded. The company
uses a straight line method of depreciation.

6. The monthly depreciation of a $60,000 asset with a salvage value of
$6,000 at the end of its useful life of 12,000 hours of production was
recorded. The production for this month was 50 hours. The company
uses a unit of production method of depreciation.

7. An old machine with an original cost of $30,000, accumulated depreciation of $20,000, residual value of $3,000 and market value of $7,000 was
sold for $6,000 in cash.