Powell Company began the Year 3 accounting period with $33,000 cash, $71,000 inventory, $52,000 common stock, and $52,000 retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $45,500 for $96,000 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash. 3. Received returned goods from Prentise. The goods cost Powell $5,300 and were sold to Prentise for $6,700. 4. Granted Prentise a $2,300 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $76,000 cash from accounts receivable. Required: a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods?

Powell Company began the Year 3 accounting period with $33,000 cash, $71,000 inventory, $52,000 common stock, and $52,000 retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $45,500 for $96,000 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash. 3. Received returned goods from Prentise. The goods cost Powell $5,300 and were sold to Prentise for $6,700. 4. Granted Prentise a $2,300 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $76,000 cash from accounts receivable. Required: a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The following events occurred at Moore's Hobbies and Crafts store during the most recent fiscal year: Purchased merchandise costing $114,000. Had sales revenue for the year totaling $160,000; the merchandise sold was purchased for $92,500. Paid $10,000 transportation-in costs. Incurred selling and administrative costs equal to 10 percent of sales revenue. All transactions, sales and purchases, were for cash. An inventory account at the end of the year indicated merchandise costing $107,000 was on hand. Required: Give the amounts for the following items in the Merchandise Inventory account: A. Ending Balance B. Transfers-out C. Transfers- in D. Beginning Balance
Double A Corporation provided the following information for the current year: Beginning inventory 800,000 Freight in 600,000 Purchase returns 1,800,000 Ending inventory 1,000,000 Legal and audit fees 3,400,000 Rent for office space 2,400,000 Officers' salaries 3,000,000 Insurance 1,700,000 Sales representative salaries 1,200,000 Freight out 300,000 Rent for store space 200,000 Advertising expense 800,000 The cost of goods sold is six times the selling expenses. 1. What amount should be reported as goods available for sale the current year?2. What amount should be reported as cost of goods sold for the current year?
The following were selected from among the transactions completed by Babcock Company during November of the current year: Nov. 3 Purchased merchandise on account from Moonlight Co., list price $85,000, trade discount 25%, terms FOB destination, 2/10, n/30. 4 Sold merchandise for cash, $37,680. The cost of the goods sold was $22,600. 5 Purchased merchandise on account from Papoose Creek Co., $47,500, terms FOB shipping point, 2/10, n/30, with prepaid freight of $810 added to the invoice. 6 Returned $13,500 ($18,000 list price less trade discount of 25%) of merchandise purchased on November 3 from Moonlight Co. 8 Sold merchandise on account to Quinn Co., $15,600 with terms n/15. The cost of the goods sold was $9,400. 13 Paid Moonlight Co. on account for purchase of November 3, less return of November 6. 14 Sold merchandise on VISA, $236,000. The cost of the goods sold was $140,000. 15 Paid Papoose Creek Co. on account for purchase of November 5. 23…
The Blue Moon Corporation has ending inventory of $400,000, account receivable of $330,000, and cost of goods sold for the year just ended was $2,700,000. The company's inventory turnover ratio is _______. Round it to two decimal places.
Plum Corporation began the month of May with $700,000 of current assets, a current ratio of 2.50:1, and an acid-test ratio of 1.10:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). May 2 Purchased $50,000 of merchandise inventory on credit. May 8 Sold merchandise inventory that cost $55,000 for $110,000 cash. May 10 Collected $20,000 cash on an account receivable. May 15 Paid $22,000 cash to settle an account payable. May 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account. May 22 Declared a $1 per share cash dividend on its 50,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed $100,000 cash by giving the bank a 30-day, 10% note. May 28 Borrowed $80,000 cash by signing a long-term secured note. May 29 Used the $ 180,000 cash proceeds from the notes to buy new machinery. Required: Complete the table below showing Plum's (1) current ratio, (2)…
palace made sales of merchandise inventory of $10,000 in 20Y5. The cost of sales for the year was $1,200. Administrative expenses included depreciation on office equipment, $850; insurance expense, $690; and utilities at office, $750. Selling expenses included sales salaries, $2,200; advertising expense, $890; depreciation on store equipment, $1,200; and store rental expense, $3,570. The company also had interest revenue of $3,250. Prepare a multi-step income statement for the company’s fiscal year, which ends September 30.
Riley Kilgo Inc. purchased inventory costing $100,000 and sold 80% of the goods for $240,000. All purchases and sales were on account. Kilgo later collected 20% of the accounts receivable. Journalize these transactions for Kilgo, which uses the perpetual inventory system. For these transactions, show what Kilgo will report for inventory, revenues, and expenses on its financial statements. Report gross profit on the appropriate statement.
Y Wholesale Company began the year with merchandise inventory of $9,000. During the year, Y purchased $97,000 of goods and returned $6,300 due to damage. Y also paid freight charges of $1,200 on inventory purchases. At year-end, Y's ending merchandise inventory balance stood at $17,400. Assume that Y uses the periodic inventory system. Compute Y's cost of goods sold for the year. Less: Plus: Less: Cost of Goods Sold
Whispering Winds Corporation uses a perpetual inventory system and had inventory worth $88,500 at the beginning of the year. Purchases were made during the year for $393,000; however, 10% of these goods were returned to the supplier, and a 3% discount was taken on the remaining balance owing. Whispering Winds paid $3,500 cash for freight to ship the inventory to its location during the year. Whispering Winds reported cost of goods sold for the year of $295,000. Whispering Winds has a calendar year end. What is the balance in the inventory account at the end of the year? Balance If Whispering Winds counted its actual inventory balance as $118,000 at the end of the year, what adjusting entry, if any, would be made? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and…
Viet Stores recorded the following events involving a recent purchase of merchandise: Received goods for $60,000, terms 2/10, n/30. Returned $1,200 of the shipment for credit. Paid $300 freight on the shipment. Paid the invoice within the discount period. ● As a combined result of these events, the company's inventory: Select one: A. Increased by $57,624 B. Increased by $57,900 C. Increased by $57,918 D. Increased by $57,924
Ace Company reported the following information for the current year: Sales $ 416,000 Cost of goods sold: Beginning inventory $ 141,000 Cost of goods purchased 279,000 Cost of goods available for sale 420,000 Ending inventory 150,000 Cost of goods sold 270,000 Gross profit $ 146,000 The beginning inventory balance is correct. However, the ending inventory figure was overstated by $26,000. Given this information, the correct gross profit would be:
At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash $ 8,400 Inventory 2,400 Common stock 7,900 Retained earnings 2,900 During Year 2, the company experienced the following events: Purchased inventory that cost $5,900 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $540 were paid in cash. Returned $400 of the inventory that it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost. Paid the amount due on its account payable to Ross Company within the cash discount period. Sold inventory that had cost $6,400 for $9,400 on account, under terms 2/10, n/45. Received merchandise returned from a customer. The merchandise originally cost $540 and was sold to the customer for $840 cash. The customer was paid $840 cash for the returned merchandise. Delivered goods FOB destination…