Quiz #3 - ACCT 310 6380 Intermediate Accounting

Quiz #3 - ACCT 310 6380 Intermediate Accounting I (2162)

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Week 7 Module - Feb 22 - 28

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Quiz #3

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Quiz #3 - ACCT 310 6380 Intermediate Accounting I (2162)

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Quiz
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Question 1 (10 points)
Floopy uses the periodic inventory method for inventories. Prepare the journal entries for each of the following transactions. Do not
provide any journal explanations. If no entry is necessary, write "no entry." Floopy uses the net method for recording inventory
transactions.
>> On January 5, 2015, purchased $17,000 of garden tillers on account from Flip, terms 2/10, n/30, FOB destination. Freight
charges were $200.
>> On January 10, 2015, returned garden tillers worth $2,000 to Flip due to defects.
>> On January 24, 2015, paid for tillers purchased from Flip.
>> On January 28, 2015, purchased $30,000 of lawn mowers from Flam, terms 3/10, n/30, FOB shipping point. The
freight charges were $820.
>> On February 6, 2015, paid for the lawn mowers purchased on January 28, 2015, from Flam.

Forma

Date

Account

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Question 2 (10 points)
Floppy Co., sells lawn mowers and garden tillers. The garden tillers are purchased from Badly Built LLC and sold to customers
without modification. The lawn mowers, however, are purchased from several contractors. Floppy then makes ongoing design
refinements to the mowers before selling them to customers.
The lawn mowers cost $200. Floppy then makes the design refinements at a cost of $85 per lawn mower. Floppy stores the lawn
mowers in its own warehouse and sells them directly to retailers at a list price of $500. Floppy uses the FIFO inventory method.
Approximately two-thirds of new lawn mower sales involve trade-ins. For each used lawn mower traded in and returned to Floppy,
retailers receive a $40 allowance regardless of whether the trade-in was associated with a sale of a 2015 or 2016 model. Floppy's
net realizable value on a used lawn mower averages $25.
At December 31, 2015, Floppy's inventory of new lawn mowers includes both 2015 and 2016 models. When the 2016 model was
introduced in September 2015, the list price of the remaining 2015 model lawn mowers was reduced below cost. Floppy is
experiencing rising costs.
Floppy has contacted your firm for advice on how to report the carrying value of inventory, the impact of the decline in value on the
2015 models, and the effects of using the FIFO method on their December 31, 2015 financial statements.
All freight bills are paid directly to the freight companies.
Floppy had the following information regarding the garden tiller inventory for the fiscal year ended December 31, 2015:
Purchases
$210,000
Purchase discounts
38,000
Purchase returns
15,700
Freight-in
12,200
Freight-out
18,000
Beginning inventory
42,900
34,500
Ending inventory
Prepare a Schedule of Cost of Goods Sold for the fiscal year ended December 31, 2015:

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Forma

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Question 3 (8 points)
Floppy Corp. has the following information regarding its allowance for uncollectible accounts. Allowance for Uncollectible
Accounts & provision for Uncollectible Accounts for the 2014 & 2015:
Balance December 31, 2014

$31,000

Write-offs during 2015

(23,000)

Recoveries during 2015

7,500

Required allowance at December 31, 2015

28,000

Prepare the journal entries for the write-offs & recoveries for 2015, and for the provision for uncollectible accounts expense at
December 31, 2015. Do not provide any journal explanations. If no entry is necessary, write "no entry." The date for all entries will
be 12/31/15.

Forma
Write-offs:
Date

Account

Debit

Credit

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Question 4 (8 points)
On January 1, 2014, Floppy enters into an agreement with State Finance Corporation to sell a group of receivables without
recourse. The total face value of the receivables is $150,000. State Finance Corp. will charge 12% interest on the weighted-average
time to maturity of the receivables of 95 days plus a 2% fee. Prepare the journal entry to record the transfer of the receivables. Do
not provide any journal explanations. Round calculations to the nearest dollar. If no entry is necessary, write "no entry."

Forma

Date

Account

Debit

Credit

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Question 5 (4 points)
The following information pertains to Frack Corp.'s 2015 cost of goods sold:
Inventory, 12/31/14
$ 90,000
2015 purchases
124,000
2015 write-off of obsolete inventory
30,000
Inventory, 12/31/15
24,000
The inventory written off became obsolete due to an unexpected and unusual technological advance by a competitor. In its 2015
income statement, what amount should Frack report as cost of goods sold?

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Question 6 (6 points)
On December 15, 2015, Frack purchased goods costing $100,000. The terms were FOB shipping point. Costs incurred by Frack in
connection with the purchase and delivery of the goods were as follows:
Normal freight charges

$3,000

Handling costs

2,200

Insurance on shipment

200

Abnormal freight charges for express shipping

1,500

The goods were received on December 17, 2015. What is the amount that Frack should charge to:
a. inventory
b. current period expense

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Question 7 (6 points)
Flip Co. adopted the dollar-value LIFO inventory method as of January 1, 2015. A single inventory pool and an internally computed
price index are used to compute Flip's LIFO inventory layers. Information about Flip's dollar value inventory follows:
Inventory
Date

At base year cost At dollar value LIFO

1/1/14

$90,000

$90,000

2014 layer

15,000

30,000

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2015 layer

25,000

80,000

What were the price indexes used to compute Flip's: (Round all values to one decimal place.)
a. 2014 dollar value LIFO inventory layer
b. 2015 dollar value LIFO inventory layer

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Question 8 (4 points)
Flip Co.'s accounts payable balance at December 31, 2015, was $2,020,000 before considering the following data:
>> Goods shipped to Flip FOB shipping point on December 22, 2015, were lost in transit. The invoice cost of $40,000 was not
recorded by Flip. On January 7, 2016, Flip filed a $40,000 claim against the common carrier.
>> Goods shipped to Flip FOB destination on December 20, 2015, were received on January 6, 2016. The invoice cost was
$50,000.
What amount should Flip report as accounts payable in its December 31, 2015 balance sheet?

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Question 9 (4 points)
The following items were included in Floozy Co.'s inventory account at December 31, 2015:
Merchandise out on consignment, at sales price,
including 40% markup on selling price

$36,000

Goods purchased, in transit, shipped FOB shipping
point

40,000

Goods held on consignment by Floozy

27,000

By what amount should Floozy's inventory account at December 31, 2015, be reduced?

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Question 10 (4 points)
During 2015, Floozy Co. purchased $960,000 of inventory. The cost of goods sold for 2015 was $900,000, and the ending inventory
at December 31, 2014, was $240,000. What was the inventory turnover for 2015? Round answer to one decimal place.

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Question 11 (4 points)
Selected data pertaining to Floozy Co. for the calendar 2015 is as follows:
Net cash sales
$6,000
Cost of goods sold
24,000
Inventory at 12/31/14
6,000
Purchases
20,000
Accounts receivable 12/31/14
24,000
Accounts receivable 12/31/15
22,000
Calculate Floozy's average days' sales in inventory. Round answer to one decimal place.

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Question 12 (4 points)
Flip Co. had the following balances at December 31, 2015:
Cash in checking account
$35,000
Cash in money market account
75,000
350,000
US Treasury bill, purchased 12/1/2015, maturing 3/31/2016
US Treasury bill, purchased 11/1/2015, maturing 1/31/2016
450,000
Flip's policy is to treat as cash equivalents all highly liquid investments with a maturity of three months or less when purchased.
What amount should Flip report as cash and cash equivalents in its December 31, 2015 balance sheet?

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Question 13 (4 points)
Flip Co. has an 8% note receivable dated June 30, 2014, in the original amount of $150,000. Payments of $25,000 in principal plus
accrued interest are due annually on July 1. In its June 30, 2017 balance sheet what amount should Flip report as a current asset
for interest on the note receivable?

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Question 14 (6 points)
Floppy Corp. factored $600,000 of accounts receivable to Floozy Corp. on October 1, 2015. Control was surrendered by Floppy.
Floozy accepted the receivables subject to recourse for nonpayment. Floozy assessed a fee of 3% and retains a holdback equal to
2% of the accounts receivable. In addition, Floozy charged 15% interest computed on a weighted-average time to maturity of the
receivables of fifty-four days. The fair value of the recourse obligation is $9,000. Floppy will record:
a. cash of
b. a loss of

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Question 15 (4 points)
In its 2015 financial statements, Flam Co. reported interest expense of $58,000 in its income statement and cash paid for interest of
$68,000 in its cash flow statement. There was no prepaid interest or interest capitalization either at the beginning or end of 2015.
Accrued interest at December 31, 2014, was $25,000. What amount should Flam report as accrued interest payable in its December
31, 2015 balance sheet?

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Question 16 (4 points)
Flam Co. salaried employees are paid biweekly. Advances made to employees are paid back by payroll deductions. Information
relating to salaries follows:
12/31/14

Employee advances

12/31/15

$24,000

$36,000

40,000

??

Accrued salaries payable
Salaries paid during 2015 (gross)

$390,000

Salaries expense during 2015

$420,000

In Flam's December 31, 2015 balance sheet, accrued salaries payable was?

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Question 17 (6 points)
Flam Co.'s payroll for the month ended January 31, 2015, is summarized as follows:
Total wages

Federal income tax withheld

$11,000

1,200

All wages paid were subject to FICA. FICA tax rates were 7% each for employee and employer. Flam remits payroll taxes on the
15th of the following month. In its financial statements for the month ended January 31, 2015, what amounts should Flam report as:
a. total payroll tax liability
b. payroll tax expense

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Question 18 (4 points)

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Floozy Co. sells its products in reusable containers. The customer is charged a deposit for each container delivered and receives a
refund for each container returned within two years after the year of delivery. Floozy accounts for the containers not returned
within the time limit as being retired by sale at the deposit amount. Information for 2016 is as follows:
Container deposits at December 31, 2015 from deliveries in
2014

$150,000

2015

430,000

$580,000

Total

870,000

Deposits for containers delivered in
2016

Deposits for containers returned in 2016 from deliveries in
Returns by year
2014

$ 90,000

2015

250,000

2016

268,000

2016 Total

608,000

In Floozy's December 31, 2016 balance sheet, the liability for deposits on returnable containers should be

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