Financial Accounting Fundamentals Homework – Week 3 (ACC201)
This lesson contains questions from financial accounting fundamentals homework from week 3.
Preparing journal entries for merchandising activities-perpetual system
Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)
| July | 1 | Purchased merchandise from Boden Company for $6,600 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1. | ||
| 2 | Sold merchandise to Creek Co. for $950 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $550. | |||
| 3 | Paid $120 cash for freight charges on the purchase of July 1. | |||
| 8 | Sold merchandise that had cost $1,900 for $2,300 cash. | |||
| 9 | Purchased merchandise from Leight Co. for $2,600 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. | |||
| 11 | Received a $600 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9. | |||
| 12 | Received the balance due from Creek Co. for the invoice dated July 2, net of the discount. | |||
| 16 | Paid the balance due to Boden Company within the discount period. | |||
| 19 | Sold merchandise that cost $1,200 to Art Co. for $1,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19. | |||
| 21 | Issued a $300 credit memorandum to Art Co. for an allowance on goods sold on July 19. | |||
| 24 | Paid Leight Co. the balance due, net of discount. | |||
| 30 | Received the balance due from Art Co. for the invoice dated July 19, net of discount. | |||
| 31 | Sold merchandise that cost $5,400 to Creek Co. for $6,900 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31. |
Journal Entries
| No | Date | General Journal | Debit | Credit |
| 1 | July 01 | Merchandise inventory | 6,600 | |
| Accounts payable—Boden | 6,600 | |||
| 2 | July 02 | Accounts receivable—Creek | 950 | |
| Sales | 950 | |||
| 3 | July 02 | Cost of goods sold | 550 | |
| Merchandise inventory | 550 | |||
| 4 | July 03 | Merchandise inventory | 120 | |
| Cash | 120 | |||
| 5 | July 08 | Cash | 2,300 | |
| Sales | 2,300 | |||
| 6 | July 08 | Cost of goods sold | 1,900 | |
| Merchandise inventory | 1,900 | |||
| 7 | July 09 | Merchandise inventory | 2,600 | |
| Accounts payable—Leight | 2,600 | |||
| 8 | July 11 | Accounts payable—Leight | 600 | |
| Merchandise inventory | 600 | |||
| 9 | July 12 | Cash | 931 | |
| Sales discounts | 19 | |||
| Accounts receivable—Creek | 950 | |||
| 10 | July 16 | Accounts payable—Boden | 6,600 | |
| Merchandise inventory | 132 | |||
| Cash | 6,468 | |||
| 11 | July 19 | Accounts receivable—Art | 1,800 | |
| Sales | 1,800 | |||
| 12 | July 19 | Cost of goods sold | 1,200 | |
| Merchandise inventory | 1,200 | |||
| 13 | July 21 | Sales returns and allowance | 300 | |
| Accounts receivable—Art | 300 | |||
| 14 | July 24 | Accounts payable—Leight | 2,000 | |
| Merchandise inventory | 40 | |||
| Cash | 1,960 | |||
| 15 | July 30 | Cash | 1470 | |
| Sales discounts | 30 | |||
| Accounts receivable—Art | 1,500 | |||
| 16 | July 31 | Accounts receivable—Creek | 6,900 | |
| Sales | 6,900 | |||
| 17 | July 31 | Cost of goods sold | 5,400 | |
| Merchandise inventory | 5,400 |
Perpetual: Alternative cost flows
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions
| Date | Activities | Units Acquired at Cost | Units Sold at Retail | |||||||||
| Jan. | 1 | Beginning inventory | 600 | units | @ $60 per unit | |||||||
| Feb. | 10 | Purchase | 400 | units | @ $57 per unit | |||||||
| Mar. | 13 | Purchase | 150 | units | @ $45 per unit | |||||||
| Mar. | 15 | Sales | 750 | units | @ $85 per unit | |||||||
| Aug. | 21 | Purchase | 150 | units | @ $65 per unit | |||||||
| Sept. | 5 | Purchase | 450 | units | @ $61 per unit | |||||||
| Sept. | 10 | Sales | 630 | units | @ $85 per unit | |||||||
| Totals | 1,750 | units | 1,380 | units | ||||||||
Required:
1. Compute cost of goods available for sale and the number of units available for sale.
| Cost of goods available for sale | $102,750 | |
| Number of units available for sale | 1,750 | units |
2. Compute the number of units in ending inventory.
| Ending inventory | 370 | units |
3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, units sold consist of 600 units from beginning inventory, 330 from the February 10 purchase, 150 from the March 13 purchase, 100 from the August 21 purchase, and 200 from the September 5 purchase. (Round your average cost per unit to 2 decimal places.)
Complete this question by entering your answers in the tabs below.
Compute the cost assigned to ending inventory using FIFO. (Round your average cost per unit to 2 decimal places.)
| Perpetual FIFO: | |||||||||||||
| Goods Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| Jan 1 | 600 | @ | $60.00 | = | $36,000.00 | ||||||||
| Feb 10 | 400 | @ | $57.00 | 600 | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | 22,800.00 | |||||||||
| $58,800.00 | |||||||||||||
| Mar 13 | 150 | @ | $45.00 | 600 | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | 22,800.00 | |||||||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| $65,550.00 | |||||||||||||
| Mar 15 | 600 | @ | $60.00 | = | $36,000.00 | 250 | @ | $57.00 | = | $14,250.00 | |||
| 150 | @ | $57.00 | = | 8,550.00 | 150 | @ | $45.00 | = | 6,750.00 | ||||
| $44,550.00 | $21,000.00 | ||||||||||||
| Aug 21 | 150 | @ | $65.00 | 250 | @ | $57.00 | = | $14,250.00 | |||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| $30,750.00 | |||||||||||||
| Sept 5 | 450 | @ | $61.00 | 250 | @ | $57.00 | = | $14,250.00 | |||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| 450 | @ | $61.00 | = | 27,450.00 | |||||||||
| $58,200.00 | |||||||||||||
| Sept 10 | 250 | @ | $57.00 | = | $14,250.00 | 0 | |||||||
| 150 | @ | $45.00 | = | 6,750.00 | 0 | ||||||||
| 150 | @ | $65.00 | = | 9,750.00 | 0 | ||||||||
| 80 | @ | $61.00 | = | 4,880.00 | 370 | @ | $61.00 | = | 22,570.00 | ||||
| $35,630.00 | $22,570.00 | ||||||||||||
| Totals | $80,180.00 | $22,570.00 |
Last In First Out – LIFO
Compute the cost assigned to ending inventory using LIFO. (Round your average cost per unit to 2 decimal places.)
| Perpetual LIFO: | |||||||||||||
| Goods Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| Jan 1 | 600 | @ | $60.00 | = | $36,000.00 | ||||||||
| Feb 10 | 400 | @ | $57.00 | 600 | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | 22,800.00 | |||||||||
| $58,800.00 | |||||||||||||
| Mar 13 | 150 | @ | $45.00 | 600s | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | 22,800.00 | |||||||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| $65,550.00 | |||||||||||||
| Mar 15 | 200 | @ | $45.00 | = | $9,000.00 | 400 | @ | $60.00 | = | $24,000.00 | |||
| 400 | @ | $57.00 | = | 22,800.00 | 0 | ||||||||
| 150 | @ | $60.00 | = | 9,000.00 | |||||||||
| $40,800.00 | $24,000.00 | ||||||||||||
| Aug 21 | 150 | @ | $65.00 | 400 | @ | $60.00 | = | $24,000.00 | |||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| $33,750.00 | |||||||||||||
| Sept 5 | 450 | @ | $61.00 | 400 | @ | $60.00 | = | $24,000.00 | |||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| 450 | @ | $61.00 | = | 27,450.00 | |||||||||
| $61,200.00 | |||||||||||||
| Sept 10 | 450 | @ | $61.00 | = | $27,450.00 | 370 | @ | $60.00 | = | $22,200.00 | |||
| 150 | @ | $65.00 | = | 9,750.00 | 0 | ||||||||
| 37,200 | |||||||||||||
| Totals | $78,000.00 | $22,200.00 |
Weighted Average – Ending Inventory
Compute the cost assigned to ending inventory using weighted average. (Round your average cost per unit to 2 decimal places.)
| Weighted Average Perpetual: | |||||||||||||
| Goods Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| Jan 1 | 600 | @ | $60.00 | = | $36,000.00 | ||||||||
| 1 | |||||||||||||
| Feb 10 | 400 | @ | $57.00 | 600 | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | 22,800.00 | |||||||||
| Average | 1,000 | @ | $58.80 | = | $58,800.00 | ||||||||
| Mar 13 | 150 | @ | $45.00 | 1,000 | @ | $58.80 | = | $58,800.00 | |||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| 1,150 | @ | $57.00 | = | $65,550.00 | |||||||||
| Mar 15 | 750 | @ | $57.00 | = | $42,750.00 | 400 | @ | $57.00 | = | $22,800.00 | |||
| Aug 21 | 150 | @ | $65.00 | 400 | @ | $57.00 | = | $22,800.00 | |||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| Average | 550 | @ | $59.18 | = | $32,550.00 | ||||||||
| Sept 5 | 450 | @ | $61.00 | 550 | @ | $59.18 | = | $32,549.00 | |||||
| 450 | @ | $61.00 | = | 27,450.00 | |||||||||
| 1,000 | @ | $59.99 | = | $59,999.00 | |||||||||
| Sept 10 | 630 | @ | $59.99 | = | $37,793.70 | 370 | @ | $59.99 | = | $22,196.30 | |||
| Totals | $80,543.70 |
Specific Identification – Ending Inventory
Compute the cost assigned to ending inventory using specific identification. For specific identification, units sold consist of 600 units from beginning inventory, 330 from the February 10 purchase, 150 from the March 13 purchase, 100 from the August 21 purchase, and 200 from the September 5 purchase. (Round your average cost per unit to 2 decimal places.)
| Specific Identification: | |||||||||||||
| Goods Purchased | Cost of Goods Sold | Inventory Balance | |||||||||||
| Date | # of units | Cost per unit | # of units sold | Cost per unit | Cost of Goods Sold | # of units | Cost per unit | Inventory Balance | |||||
| January 1 | 600 | @ | $60.00 | = | $36,000.00 | ||||||||
| February 10 | 400 | @ | $57.00 | 600 | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | 22,800.00 | |||||||||
| $58,800.00 | |||||||||||||
| March 13 | 150 | @ | $45.00 | 600 | @ | $60.00 | = | $36,000.00 | |||||
| 400 | @ | $57.00 | = | $22,800.00 | |||||||||
| 150 | @ | $45.00 | = | $6,750.00 | |||||||||
| $65,550.00 | |||||||||||||
| March 15 | 600 | @ | 60.00 | = | 36,000 | 250 | @ | $57.00 | = | $14,250.00 | |||
| 150 | @ | 57.00 | = | 8,550 | 150 | @ | $45.00 | = | 6,750.00 | ||||
| $44,550.00 | $21,000.00 | ||||||||||||
| Aug 21 | 150 | @ | $65.00 | 250 | @ | $57.00 | = | $14,250.00 | |||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| $30,750.00 | |||||||||||||
| Sep 5 | 450 | @ | $61.00 | 250 | @ | $57.00 | = | $14,250.00 | |||||
| 150 | @ | $45.00 | = | 6,750.00 | |||||||||
| 150 | @ | $65.00 | = | 9,750.00 | |||||||||
| 450 | @ | $61.00 | = | 27,450.00 | |||||||||
| $58,200.00 | |||||||||||||
| Sep 10 | 180 | @ | $57.00 | = | $10,260.00 | 70 | @ | $57.00 | = | $3,990.00 | |||
| 150 | @ | $45.00 | = | 6,750.00 | 50 | @ | $65.00 | = | 3,250.00 | ||||
| 100 | @ | $65.00 | = | 6,500.00 | 250 | @ | $61.00 | = | 15,250.00 | ||||
| 200 | @ | $61.00 | = | 12,200.00 | |||||||||
| $35,710.00 | $22,490.00 | ||||||||||||
| Totals | $80,260.00 | $22,490.00 |
Gross Profit
4. Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places.)
| FIFO | LIFO | Weighted Average | Specific Identification | |
| Sales | $117,300 | $117,300 | $117,300 | $117,300 |
| Less: Cost of goods sold | 80,180 | 78,000 | 80,544 | 80,260 |
| Gross profit | $37,120 | $39,300 | $36,756 | $37,040 |
Financial Accounting Fundamentals Homework
Required information
Preparing a bank reconciliation and recording adjustments
[The following information applies to the questions displayed below.]
The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.
- On July 31, the company’s Cash account has a $25,642 debit balance, but its July bank statement shows a $26,679 cash balance.
- Check No. 3031 for $1,010 and Check No. 3040 for $497 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $281 and Check No. 3069 for $1,778, both written in July, are not among the canceled checks on the July 31 statement.
- In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,290 but was erroneously entered in the accounting records as $1,280.
- The July bank statement shows the bank collected $10,000 cash on a noninterest-bearing note for Branch, deducted a $50 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.
- The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.
- The July statement shows a $15 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.
- Branch’s July 31 daily cash receipts of $11,152 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.
Part 1
Required:
1. Prepare the bank reconciliation for this company as of July 31, 2017.
| BRANCH COMPANY | |||||
| Bank Reconciliation | |||||
| July 31, 2017 | |||||
| Bank statement balance | $26,679 | Book balance | $25,642 | ||
| Add: | Add: | ||||
| Deposit of July 31 | $11,152 | Proceeds of note less collection charge | $9,950 | ||
| 11,152 | 9,950 | ||||
| 37,831 | 35,592 | ||||
| Deduct: | Deduct: | ||||
| Check No. 3031 | 1,010 | NSF check | 805 | ||
| Check No. 3065 | 281 | Service charge | 15 | ||
| Check No. 3069 | 1,778 | Error (Check 3056) | 10 | ||
| 3,069 | 830 | ||||
| Adjusted bank balance | $34,762 | Adjusted book balance | $34,762 |
Financial Accounting Fundamentals Homework
Required information
Preparing a bank reconciliation and recording adjustments
[The following information applies to the questions displayed below.]
The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.
- On July 31, the company’s Cash account has a $25,642 debit balance, but its July bank statement shows a $26,679 cash balance.
- Check No. 3031 for $1,010 and Check No. 3040 for $497 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $281 and Check No. 3069 for $1,778, both written in July, are not among the canceled checks on the July 31 statement.
- In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,290 but was erroneously entered in the accounting records as $1,280.
- The July bank statement shows the bank collected $10,000 cash on a noninterest-bearing note for Branch, deducted a $50 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.
- The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.
- The July statement shows a $15 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.
- Branch’s July 31 daily cash receipts of $11,152 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.
Part 2
2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2017. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)
| No | Transaction | General Journal | Debit | Credit |
| 1 | a. | No journal entry required | ||
| 2 | b. | No journal entry required | ||
| 3 | c. | Rent expense | 10 | |
| Cash | 10 | |||
| 4 | d. | Cash | 9,950 | |
| Collection expense | 50 | |||
| Notes receivable | 10,000 | |||
| 5 | e. | Accounts receivable—E. Shaw | 805 | |
| Cash | 805 | |||
| 6 | f. | Miscellaneous expenses | 15 | |
| Cash | 15 | |||
| 7 | g. | No journal entry required |
Estimating and reporting bad debts
[The following information applies to the questions displayed below.]
At December 31, 2017, Hawke Company reports the following results for its calendar year.
| Cash sales | $ | 1,763,510 | |
| Credit sales | $ | 3,606,000 | |
In addition, its unadjusted trial balance includes the following items.
| Accounts receivable | $ | 1,092,618 | debit |
| Allowance for doubtful accounts | $ | 22,170 | debit |
To recognize bad debts under each of the following independent assumptions.
- Bad debts are estimated to be 2% of credit sales.
- Bad debts are estimated to be 1% of total sales.
- An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
Part 1
Required:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
- Bad debts are estimated to be 2% of credit sales.
- Bad debts are estimated to be 1% of total sales.
- An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
Adjusting entries (all dated December 31, 2017).
| No | Transaction | General Journal | Debit | Credit |
| 1 | a. | Bad debts expense | 72,120 | |
| Allowance for doubtful accounts | 72,120 | |||
| 2 | b. | Bad debts expense | 53,695 | |
| Allowance for doubtful accounts | 53,695 | |||
| 3 | c. | Bad debts expense | 76,801 | |
| Allowance for doubtful accounts | 76,801 |