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Question 1 (10 points):What is the difference between FOB Shipping and FOB Destination? When determine the balance of inventory at the end of the year, why does it matter to know the shipping terms of in-transit inventory?Accountants report a merchandiser's and a manufacturer's revenues only when a sale is made. FOB Shipping Point pretty much indicates that the sale occurred at the shipping point, at the seller's shipping dock. FOB Destination indicates that the sale will occur only when it arrives at the destination, meaning at the buyer's receiving dock.In Accounting, we assume that the cost of transporting the goods corresponds to these terms. If the sale occurred at the shipping point (seller's shipping dock), then the buyer should definitely take responsibility for the cost of transporting the Merchandise. (The buyer will record this cost as Freight-In or Transportation-In.) If the sale doesn't occur until the goods reach the destination (terms are FOB Destination) that means that the seller should be responsible for transporting the goods until they reach the buyer's unloading dock. (The seller will record the transportation cost as Freight-Out, Transportation-Out, or Delivery Expense.)Question 2 (5 points):Franklin Corporation began the accounting period with $60,000 of merchandise inventory, purchases during the year totaled $240,000, and a physical count of inventory of hand at the end of the period totaled $72,000. What was Franklin Corporation’s cost of goods sold for the period?Question 3 (15 points)Superstar Sporting Goods had the following transactions in April 2014.April 1st – Sold merchandise on account for $288,000 with terms 2/10, n/30.April 5th – Customer who purchased goods on April 1st returned $45,000 worth of goods for full credit. Payment for these goods has not yet been received.April 8th – Payment was received for the net amount due from the sale on April 1st.Record the three journal entries to summarize the activity from the transactions above.Use the following information for Question 4 – Question 7Taylor Corporation is a newly formed entity that engages in the purchase and resale of amphibious tour vehicles. Purchases for the first year of operation were as follows: DatePurchases7-Jan50 units @ $15,000 each15-Mar70 units @ $16,000 each16-Jun30 units @ $16,500 each3-Aug90 units @ $17,000 each11-Oct25 units @ $17,200 eachSales for year amounted to 210 units and totaled $4,250,000.Question 4 (10 points)If Taylor uses the first-in, first-out (FIFO) inventory method, what value would be assigned to ending inventory and cost of goods sold? How much is gross profit?Question 5 (10 points)If Taylor uses the last-in, first-out (LIFO) inventory method, what value would be assigned to ending inventory and cost of goods sold? How much is gross profit?Question 6 (10 points)If Taylor uses the weighted average inventory method, what value would be assigned to ending inventory and cost of goods sold? How much is gross profit?Question 7 (10 points)Which of the above techniques produces the highest profit? Which of the above techniques reports the most “current “cost on the balance sheet and why? Which of the above techniques reports the most “current” cost in measuring income? Which of the above techniques results in the lowest income tax obligation?Use the following information to answer Question 8 – Question 10On January 1, 2013 ABC Inc. acquired a new machine at a cost of $23,000 with a residual value of $3,000. The estimated useful life is 10 years and 100,000 units. For the year ending December 31, 2013, the machine produced 15,000 units. For the year ending December 31, 2014, the machine produced 10,000 units and 5,000 units were produced in calendar year 2015.Question 8 (6 points)Determine the annual depreciation expense for each 2013, 2014, and 2015 using the straight-line method.Question 9 (6 points)Determine the annual depreciation expense for each 2013, 2014, and 2015 using the units of production method.Question 10 (6 points)Determine the annual depreciation expense for each 2013, 2014, and 2015 using the double-declining method.Use the following information to answer Questions 11 - 14Kirkland Beverage Company owns a delivery truck with an original cost of $50,000 and an accumulated depreciation balance of $20,000. The estimated residual value is $4,000. Consider each of the independent situations below and present the required journal entry to record the sale or disposal of the truck, using proper format.Question 11 (8 points)Sold for $30,000Question 12 (8 points)Sold for $26,000Question 13 (8 points)Sold for $34,000Question 14 (8 points)Is totaled in a collision with no scrap value and no insurance (no proceeds will be received)Question 15 (5 points)Why is it important for companies to establish strong internal controls?Question 16 (12 points)What are four controls a company can put in place to ensure cash receipts & cash disbursements are handled appropriately?Use the following information for Question 17 – Question 18Wiggins Corporation utilizes an accounting software package that is capable of producing a detailed aging of outstanding accounts receivables. Following is the aging schedule as of December 31, 2012. As denoted below the total Accounts Receivable balance outstanding at December 31, 2012 is 2,125,000.AGEAMOUNT OUTSTANDING0 to 30 days $ 1,200,000 31 to 60 days 700,000 61 to 120 days 200,000 Over 120 days 25,000 Casper Corporation has owned and operated Wiggins Corporation for many years and has a very good sense of the probability of collection of outstanding receivables, based on an aging analysis. The following table reveals the likelihood of collection:AGEPROBABILITY OF COLLECTION0 to 30 days98%31 to 60 days90%61 to 120 days75%Over 120 days50% Question 17 (8 points)Using the % of Receivables method for determining the appropriate Allowance for Uncollectible Accounts, what should the ending balance in the Allowance for Uncollectible Accounts be at December 31, 2012?Question 18 (5 points)Assume Casper Corporation has a beginning Allowance for Uncollectible Accounts balance of $56,500 and determines the ending balance of the Allowance for Uncollectible Accounts should be $156,500. What is the journal entry required to record the adjustment to the Allowance for Uncollectible Accounts?Use the following information for Question 19 – Question 20The Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2003, net credit sales totaled $4,500,000 and the estimated bad debt percentage is 1.2%. The allowance for uncollectible accounts had a credit balance of $32,000 at the beginning of 2003. The allowance for uncollectible accounts had a credit balance of $32,000 at the beginning of 2003 and a credit balance of $40,000 (after all adjusting entries) at the end of 2003.Question 19 (5 points)What is bad debt expense for 2003?Question 20 (10 points) Determine the amount of accounts receivable written off during 2003.
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