ACCT 3036 Test 2 Review W23 Attempt 1

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3036

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Nov 24, 2024

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On Jan 1, 2017, London Inc made a sale to Aylmer Ltd for $750,000 worth of goods. Aylmer signed a zero percent note to be repaid in 2 years. The implied interest rate is 4%. REQUIRED: prepare the necessary journal entries with appropriate calculations. PV $693,417 Rate 4% Nper 2 Pymt 0 FV -750000 Date Accounts Dr Cr 1/1/2017 Notes Receivable 693,417 Sales Revenue 693,417 12/31/2017 Notes Receivable 27,737 Interest Income 27,737 12/31/2018 Notes Receivable 28,846 Interest Income 28,846 12/31/2018 Cash 750,000 Notes Receivable 750,000
On Jan 1, 2017, London Inc made a sale to Aylmer Ltd for $300,000 worth of goods. Aylmer signed a zero percent note to be repaid in 4 years. The implied interest rate is 10%. REQUIRED: prepare the necessary journal entries with appropriate calculations. PV $204,904 Rate 10% Nper 4 Pymt 0 FV -300000 Date Accounts Dr Cr 1/1/2017 Notes Receivable 204,904 Sales Receivable 204,904 12/31/2017 Notes Receivable 20,490 Interest Income 20,490 12/31/2018 Notes Receivable 22,539 Interest Income 22,539 12/31/2019 Notes Receivable 24,793 Interest Income 24,793 12/31/2020 Notes Receivale 27,273 Interest Income 27,273 12/31/2020 Cash 300,000 Notes Receivable 300,000
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The following data pertains to Bullet Inc regarding their Accounts Receivable: Sales for 2017 were $900,000 of which 80% were on credit. The Allowance for Doubtful Acct had a credit balance of $15,400 on Jan 1, 2017 Accounts Receivable Balance was $320,000 i. Prepare the entries if: a) Bad debts are assumed to be 2% of credit sales b) Bad debts are assumed to be 5% of accounts Receivable ii. Using the same information as above, except AFDA has a debit balance of $1,000. Prepare the entries if: a) Bad debts are assumed to be 2% of credit sales b) Bad debts are assumed to be 5% of accounts Receivable i. a) Bad Dept Expense 14,400 Allowance for Doubtful Accounts 14,400 i. b) Bad Dept Expense 600 Allowance for Doubtful Accounts 600 ii. a) Bad Dept Expense 14,400 Allowance For Doubtful Accounts 14,400 ii. b) Bad Dept Expense 17,000 Allowance for Doubtful Accounts 17,000
16000
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The following data pertains to Bullet Inc regarding their Accounts Receivable: Sales for 2010 were $900,000 of which 60% were on credit. The Allowance for Doubtful Acct had a credit balance of $15,400 on Jan 1, 2010. $6,000 of bad debts were written off during the year. The aging report at December 31, 2010 is as follows: Amount % uncollectible Current A/R not due yet 50,000 0% 30 days due 12,000 4% 60 days due 63,000 8% 90 days due 56,000 10% Required: Prepare the journal entries for the following independent situations: Situation #1 - for part (a) and (b) use the Aging of Accounts Method (balance sheet approach) a) Provide the journal entry to write off the $6,000 of bad debts during the year Allowance for doubtful accounts 6,000 Accounts Receivable 6,000 b) Provide the journal entry to record bad debts expense at year end Bad debt expense 1,720 Allowance for doubtful accounts 1,720 Situation #2 - for part (c) and (d) use the Percentage of Credit Sales Method (income statement approach) c) Provide the bad debt expense journal entry for the year based on 1% of credit sales Bad debt expense 5,400 Allowance for doubtful accounts 5,400 d) Provide the journal entry to record a previously written off bad debt of $2,000 when it is unexpectedly paid Accounts Receivable 2,000 Allowance for doubful accounts 2,000 Cash 2,000 Accounts Receivable 2,000
- 480 5,040 5,600 11,120 Sales 900,000 On Credit 60% Credit sales 540000
Amount of accounts receivable sold 725,000 Melodie will assess a finance charge of 5% Melodie will retain an amount equal to 6% of the accounts receivable Fair value of recourse obligation 9,000 Required: Florida Cash 645,250 Loss on Sale of Accounts 45,250 Due on Factor 43,500 Recourse Liability 9,000 Accounts Receivable 725,000 Florida Corp sold accounts receivable to Melodie Inc on a with recourse basis. Prepare journal entries for Florida
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Amount of accounts receivable sold 751,000 Melodie will assess a finance charge of 4% Melodie will retain an amount equal to 5% of the accounts receivable Required: Florida Cash 683,410 Loss on Sale of Accounts Receivable 30,040 Due on Factor 37,550 Accounts Receivable 751,000 Melodie Accounts Receivable 751,000 Finance Revenue 30,040 Accounts Payable 37,550 Cash 683,410 Florida Corp sold accounts receivable to Melodie Inc on a without recourse basis. Prepare journal entries for both Florida and Melodie
Inventory Cost Methods Bob's Builders has the following inventory information for the month of May. Units Cost/Unit Sales $ Opening inventory 1,000 $ 4.50 Beginning I 2-May purchase 1,500 $ 4.75 7,125 Purchases 7-May sale 2,200 $ 12.00 Sales 19-May purchase 2,500 $ 5.10 12,750 Ending Inve 28-May sale 1,700 $ 12.00 Required: 1. Compute the cost of goods sold and ending inventory using the FIFO method in a perpetual inventory system 2. If Bob's Builders was using the FIFO method in a periodic accounting system would your answer to question 1 be any different? 3. Compute the cost of goods sold and ending inventory using the Weighted average method in a periodic inventory system. 4. Compute the cost of goods sold and ending inventory using the Moving average method in a perpetual inventory system. FIFO (periodic nd perpetual) Ending Inventory 1,100 Last purchase 5.10 Value of ending inventory 5,610 Beginning Inventory 4,500 Purchases 19,875 Ending Inventory 5,610 CGS 18,765 Weighted Average Opening Inventory 1,000 4.50 4,500 Purchase - May 2 1,500 4.75 7,125 Purchase - May 19 2,500 5.10 12,750
5,000 4.88 24,375 Ending Inventory 1,100 4.88 5,363 Sale - May 7 2,200 4.88 10,725 Sale - May 28 1,700 4.88 8,288 CGS 19,013 Moving Average Purchases Sales = CGS Date Units Cost Total Units Cost Total Units begin $ 1,000 2-May 1,500 $ 4.75 7,125 $ 2,500 7-May 2,200 4.65 10,230 $ 300 19-May 2,500 $ 5.10 12,750 $ 2,800 28-May 1,700 5.05 8,588 $ 1,100 Ending Inventory 5,557 CGS 18,818
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Units Inventory 1,000 4,000 3,900 entory 1,100
Total Cost Total $ 4.50 4,500 4.65 11,625 4.65 1,395 5.05 14,145 5.05 5,557
London had a fire at the end of January Y4. For insurance purposes, they had to determine the value of the ending inventory that was lost. The following information was available: Purchases 545,800 Sales 698,000 Beginning Inventory 103,000 Estimated gross margin 18% REQUIRED - determine the ending inventory Beginning Inventory 103,000 Purchases 545,800 Goods available for sale 648,800 Sales 698,000 Gross Profit 125,640 Estimated cost of goods sold 572,360 Ending Inventory 76,440
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Fair Value Through Net Income (FV-NI) vs Fair Value Through Other Comprehensive Income (FV-OCI) On December 31, 2016 Jeez Louise Inc. had the following investments on it's books: Investments Cost and Carrying Amount Fair Value ABC Co 50,000 47,690 XYZ Inc 15,000 14,000 IFRS Ltd 35,000 36,500 Total portfolio 100,000 98,190 Also assume the following information: During 2017, dividends in the amount of $35,000 were received During 2017 the XYZ Inc shares were sold for 14,500 On December 31, 2017 the fair values of the shares were as follows Investments Fair Value ABC Co 48,900 47,690 IFRS Ltd 37,950 36,500 Total portfolio 86,850 84,190 Required: 1. Prepare the adjusting journal entry(ies) needed on December 31, 2016 assuming the FV-OCI method is used. 2. Prepare the entry to record the receipt of dividends. 3. Prepare the journal entry(ies) to record the sales of the XYZ Inc shares in 2017 4. Prepare the adjusting journal entry(ies) needed on December 31, 2017 assuming the FV-OCI method is used. 5. Assume the same information as above but repeat Requirements 1-3 assuming the FV-NI method is used instead. Part 1 - FV-OCI 2016 Make the initial investment: FV-OCI Investment 100,000 Cash 100,000 assuming the FV-OCI is used. NOTE PAGES for recycling/no recycling!!
31-Dec Unrealized Gain or Loss - OCI 1,810 FV-OCI Investment 1,810 change the FV of the investment 2017 receipt of dividends Cash 35,000 Dividend Revenue 35,000 2017 adjust value of XYZ to fair value FV-OCI Investment 500 Unrealized Gain or Loss - OCI 500 2017 Cash 14,500 FV-OCI Investment 14,500 to record the sale 2017 record actual gain/loss - No Recycling Retained Earnings 500 Unrealized Gain or Loss - OCI 500 12/31/2017 FV-OCI Investment 2,660 Unrealized Gain or Loss 2,660 Using FV-NI Investment 2016 FV-NI Investments 100,000 Cash 100,000 12/31/2016 Unrealized Gain or Loss 1,810 FV-NI Investments 1,810 2017 Cash 35,000 Unrealized Gain or Loss 35,000 2017 Cash 14,500 FV-NI Investments 14,000 Unrealized Gain or Loss 500 12/31/2017 FV-NI Investments 2,660 Unrealized Gain or Loss 2,660
On May 1, Y2 Aylmer Inc purchased shares in London Inc for $39,900. The following fair value amounts are available: December 31, Y2 41,750 December 31, Y3 32,200 December 31, Y4 36,400 February 3, Y5 sold 38,000 Assuming Aylmer accounts for this investment using the FV-OCI method prepare ALL appropriate entries for Y2, Date Accounts Dr Cr 5/1/Y2 FV-OCI Investment 39,900 Cash 39,900 to record initial purchase 12/31/Y2 FV-OCI Investment 1,850 Unrealized Gain or Loss - OCI 1,850 to record adjustment to currect fair value 12/31/Y3 Unrealized Gain or Loss - OCI 9,550 FV-OCI Investment 9,550 to record adjustment current fair value 12/31/Y4 FV-OCI Investment 4,200 Unrealized Gain or Loss - OCI 4,200 to record adjustment to current fair value 2/3/Y5 FV-OCI Investment 1,600 Unrealized Gain or Loss - OCI 1,600 to record adjustment to current fair value 2/3/Y5 Cash 38,000 FV-OCI Investment 38,000 to record sale 2/3/Y5 Retained Earnings 1,900 AOCI 1,900 since the entire investment is sold - clear AOCI
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Y3, Y4, Y5
On May 1, Y2 Aylmer Inc purchased shares in London Inc for $39,900. The following fair value amounts are available: December 31, Y2 41,750 December 31, Y3 32,200 December 31, Y4 36,400 February 3, Y5 sold 38,000 Assuming Aylmer accounts for this investment using the FV-NI method prepare ALL appropriate entries for Y2, Y Date Accounts Dr Cr 5/1/Y2 FV-Ni Investment 39,900 Cash 39,900 to record initial purchase 12/31/Y2 FV-NI Investment 1,850 Unrealized Gain or Loss 1,850 to record adjustment to current fair value 12/31/Y3 Unrealized Gain or Loss 9,550 FV-NI Investment 9,550 to record adjustment to current fair value 12/31/Y4 FV-NI Investment 4,200 Unrealized Gain or Loss 4,200 to record adjustment to current fair value 2/3/Y5 Cash 38,000 Gain on Sale of Investment 1,600 FV-NI Investment 36,400 to record sale
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Y3, Y4, Y5
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Significant Influence - Equity Method Pete's Plumbing has had a particularly good year and has some excess cash to invest. Rather than stick it in a passive investment Pete has decided to purchase some shares of another company in an attempt to form a strategic alliance. During 2009 Pete's Plumbing invests his excess cash in Antoine's Toilet's. The remainder of the information regarding the purchase and the performance of Antoine's Toilet's during 2009 is listed below. Assume Pete's Plumbing has significant influence and will be using the equity method to account for this investment. Antoine's Toilets BV FV Cash and receivables 250,000 250,000 Land 150,000 170,000 20,000 Other non-depreciable assets 75,000 75,000 Equipment (10 years remaining) 125,000 145,000 20,000 Liabilities (150,000) (150,000) Net Assets 450,000 490,000 During the year Antoine's Toilets had the following results Net income 60,000 Cash dividends paid out 30,000 Purchase price paid 150,000 Ownership acquired 30% Requirement #1 - Calculate any goodwill paid on the purchase Price Paid 150,000 Book Value of assets 450,000 Amount purchased 30% 135,000 Excess 15,000 30% of excess land 6,000 30% of excess equipment 6,000 10 Years Goodwill 3,000 Requirement #2 - Calculate the net income to include on the investor's books Record share of net income Share of net income 18,000 Depreciation-excess FV equipment (600) 17,400
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Requirement #3 - Provide the journal entry to record the purchase of the shares Purchase of investment Investment in Associate 150,000 Cash 150,000 Requirement #4 - Record the dividends received and the net income entry Record share of dividends received Cash 9,000 Investment in Associate 9,000 The net income entry Investment in Associate 17,400 Investment Income 17,400
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Aylmer invested in London Inc and as a result has significant influence over London The following information is available for Y5. Aylmer purchased 4,000 of London's 20,000 outstanding shares for $320,000 Both London and Aylmer have a December 31st fiscal year end At the end of Y5: Aylmer - net income $ 658,000 London - net income $ 410,000 London - dividends paid $ 65,000 REQUIRED - prepare all the necessary entries for Aylmer At time of purchasing London's shares: Investment in Associate 320,000 Cash 320,000 At Dec 31, Y5: Record share of income: Investment in Associate $ 82,000 Investment Income $ 82,000 Record Share of dividends Cash $ 13,000 Investment in Associate $ 13,000
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