What amount should IVERMET report as cost of goods manufactured? What amount should IVERMET report as total operating expenses? What amount should IVERMET report as profit for the year ended December 31, 2020?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
PROBLEM 1 (ftg)
Your audit of IVERMET Company’s
|
|
Debit |
Credit |
|
Sales |
|
5,720,000 |
|
Cost of sales |
2,400,000 |
|
|
Administrative expenses |
700,000 |
|
|
Loss on sales of equipment |
100,000 |
|
|
Sales commissions |
500,000 |
|
|
Interest revenue |
|
250,000 |
|
Freight out |
150,000 |
|
|
Loss on early retirement of long-term debt |
200,000 |
|
|
Uncollectible accounts expense |
150,000 |
|
|
|
4,200,000 |
6,000,000 |
Finished goods inventory:
January 1 (Physical count) 4,000,000
December 31 (Per record) 3,000,000
(In transit to customer fob destination) 600,000
Work in process inventory
January 1 (Physical count) 200,000
December 31 No work in process
No raw materials inventory per audit on January 1 and December 31, all were used in the production and were verified.
Direct labor is 30% of the total
Factory
Assume IVERMET’s income tax rate is 30%. In IVERMET’s 2020 comprehensive income statement determine the following:
- What amount should IVERMET report as cost of goods manufactured?
- What amount should IVERMET report as total operating expenses?
- What amount should IVERMET report as profit for the year ended December 31, 2020?
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