problem 1-2

Problem #1

As the struggling owner of a new restaurant, you suffer from a habitual shortage of cash.  Yesterday the following invoices arrived:

            Vendor                        Face Amount                          Terms             

            Cornation Produce      $             600                           n/30

            John’s Fisheries                       1,000                           1/10, n/45

            Garcia Equipment                   2,000                           2/10, n/60

1.         Write out the exact meaning of each of the terms.

2.         You can borrow cash from the local bank on a note bearing an annual interest rate of 12%.  Should you borrow to take advantage of the cash discounts offered by the last two vendors?  Why?  Show computations.  For interest computations, assume a 360-day year.

3.         Prepare the journal entry from Garcia Equipment’s standpoint if you were to pay the amount due within the discount period.

Problem #2  Sherwin-Williams (obtain 2013 annual report or 10k online—review financial statements and notes)

1.   What is the amount of gross accounts receivable at fiscal year-end 2013?

2.   Suppose that write-offs of accounts receivable during fiscal year 2013 amounted to $6K, there were no reinstatements, and all sales during 2013 were on credit. 

      (a)  Prepare the journal entry to record bad debt expense during 2013.

      (b)  Determine cash collected from customers during 2013.

3.   What inventory costing method(s) does Sherwin-Williams use for financial reporting?

4.  Calculate inventory turnover for fiscal year 2013 (use total reported inventory).

5.   Compute the amount of “Work-in-process and raw materials” transferred to finished goods during 2013.

6.   What is the LIFO reserve at fiscal year-end 2013?

7.   What method of depreciation does Sherwin-Williams use for its PPE?

8.   How much was depreciation expense during 2013? 

9.   Was any PPE sold during 2013?  How do you know?