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acct_301_week_3_homework.xls

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Problem b 05.06

Partial information follows about net sales, net purchases, cost of goods sold, gross profit, total expenses, and net income for Slabaugh Company. Compute the missing values.
	NET SALES
		Sales	$ 900,000
		Sales discounts	20,000
		Sales returns and allowances	?
		Net sales	735,000
	NET PURCHASES
		Purchases	$ 350,000
		Freight-in	20,000
		Purchase discounts	?
		Purchase returns and allowances	2,500
		Net purchases	413,500
	COST OF GOODS SOLD
		Beginning inventory	$ 85,400
		Ending inventory	74,500
		Cost of goods sold	?
	GROSS PROFIT
		Gross profit	?
	TOTAL EXPENSES
		Rent	$ 36,000
		Salaries	145,700
		Utilities	12,300
		Freight-out	?
		Other	24,100
		Total expenses	242,200
	NET INCOME
		Net income	?

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B-05.06

Worksheet b 05.06


Sales			$ 900,000
Less:	Sales discounts	$ 20,000
	Sales returns and allowances	45,000	65,000
Net sales			$ 835,000

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-05.06

B-05.06

This problem presents an excellent opportunity to use the solver function. It is found on the Data tab under the Analysis group. (Note: You may need to enable the solver add-in in the Excel options.) In older versions of Excel, this function is called goal seek and is found in the Excel tools menu. For example, one would construct the basic structure and formulas as shown for the net sales calculations. Then, launch goal seek and set cell "E6" to equal the known value of "$735,000" by changing the unknown cell D5. The value to input into cell D5 is calculated automatically. You are encouraged to experiment with the solver function/goal seek to solve this problem.

Problem B.06.03

Dine-Corp International publishes ratings and reviews of the world's finest restaurants. Following are facts you need to prepare Dine-Corp's March bank reconciliation:
Balance per company records at end of month	$ 72,644.12
Bank service charge for the month	44.00
NSF check returned with bank statement	1,440.66
Note collected by the bank during the month	45,000.00
Outstanding checks at month end	31,553.57
Interest on note collected during the month	4,500.00
Balance per bank at end of month	144,223.99
Deposit in transit at month end	7,989.04

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B-06.03

Worksheet B06.03


Ending balance per bank statement		$ 144,223.99
Add:
		- 0
Deduct:
		- 0
Correct cash balance		$ - 0
Ending balance per company records		$ 72,644.12
Add:
	$ - 0
	- 0	- 0
Deduct:
	- 0
	- 0	- 0
Correct cash balance		$ - 0

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-06.03

B-06.03

Problem b 7.11

Prepare journal entries for each of the following transactions:
	On December 1, 20X5, Musaka received a 10%, 1-year, note receivable from Lambert. This note was issued in payment for a $24,000 outstanding account receivable.
	On December 31, 20X5, Musaka recorded an end-of-year adjusting entry to record accrued interest on the note receivable.
	On November 30, 20X6, Lambert paid Musaka the full amount due on the note receivable.
How would the November 30 entry differ if Lambert defaulted on the payment?

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B-07.11

Sheet2

Sheet1

Worksheet b 7.11


GENERAL JOURNAL
Date	Accounts	Debit	Credit
Dec. 1
	To record issuance of 10%, 1-year note, in exchange for outstanding receivable
Dec. 31
	To accrued interest on note ($24,000 X 10% X 1/12)
Nov. 30
	To record interest income (11 months) and collection of note receivable and previously accrued interest

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-07.11

B-07.11

Problem I 07.01

Rocks Shoes is a three-year old company that started out producing specialty shoes for rock climbing and mountaineering. The shoe's unique styling has made them a hit with climbing enthusiasts, and the company is now growing rapidly. Rocks needs additional capital to expand its manufacturing capacity, and it plans to sell additional shares of stock to raise money.
During its first three years in operation, Rocks used the direct-write off method to account for uncollectible accounts. Information about sales, write-offs, and the company's income follows:
		Sales	Write-offs	Net Income
	Year 1	$ 2,400,000	$ -	$ 100,000
	Year 2	6,300,000	24,000	300,000
	Year 3	12,900,000	111,000	550,000
Rocks is required to have audited financial statements prior to offering its shares of stock for sale. This will require the company to recompute its income under generally accepted accounting principles for each of the three prior years. The only item that requires adjustment is the treatment of uncollectible accounts. Rocks estimates that 3% of sales ultimately prove to be uncollectible -- 1% in the year following a sale, and 2% in the year thereafter.
(a)	Prepare the journal entries that were used by Rocks for each year under the direct write-off method.
(b)	Determine if the actual write-offs are aligning with the estimates provided by Rocks. Why does GAAP require an allowance method for uncollectibles?
(c)	Prepare the journal entries that would have been made each year had the percentage of sales technique been used to establish an allowance account. Be sure to include entries to both establish the allowance and record the write offs.
(d)	How much is the corrected net income for each year? Will the reduction in income potentially impact the amount of capital that can be raised?

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I-07.01

Worksheet I 07.01


(a)	GENERAL JOURNAL
	Date	Accounts	Debit	Credit
	Year 1	No Entry
	Year 2
	Year 3
(b)
(c)	GENERAL JOURNAL
	Date	Accounts	Debit	Credit
	Year 1
	Year 2
	Year 2
	Year 3
	Year 3
(d)

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I-07.01

Problem B08.03

Elizabeth Egbert owns a galvanizing plant. Customers bring in their fabricated steel products (like light poles, towers, trailers, etc.), and Egbert dips them into a heated vat of molten zinc. The zinc bonds to the metal and produces a highly durable corrosion resistant product.
Egbert's primary inventory is molten zinc purchased from suppliers in large blocks of solid material. These blocks are immersed in the heated vat and will melt together with the zinc already in the pool. Egbert generally keeps the vat relatively full, and it is never allowed to cool.
Egbert started the year 20X8 with 500,000 pounds of zinc in the pool. During the year Egbert purchased 2,800,000 pounds of zinc. At year's end, the pool contained 520,000 pounds of zinc.
(a)	How much zinc was used during 20X8?
(b)	Accountants frequently refer to "goods available for sale." Is this concept the same as ending inventory? How much zinc, in pounds, was "available for sale?"
(c)	If the beginning inventory cost $1.25 per pound, and purchases during 20X8 cost $1.50 per pound, how much is the "cost of goods available for sale"?
(d)	In preparing financial statements for 20X8, to what financial statement elements will the amount you calculated in part (c) be allocated?
(e)	If Egbert uses FIFO, how much should be attributed to ending inventory and how much to cost of goods sold?
(f)	If Egbert uses LIFO, how much should be attributed to ending inventory and how much to cost of goods sold?
(g)	What will be the difference in profitability between choosing the FIFO and LIFO methods? Does is seem reasonable the choice of accounting method can change the reported profit?

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B-08.03

Worksheet B08.03

(a)

(b)

(c)

(d)

(e)

(f)

(g)

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B-08.03