ACCT 200 Study Guide - Midterm Guide: Accrued Interest, Income Statement, Net Income

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pucemouse259

14 Dec 2019

School

University of Arizona

Department

Accounting

Course

ACCT 200

Professor

Rob Stussie

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Document Summary

Debits/credit rules, normal balances, & journal entries. Financial statements: income statement, statement of retained earnings and classified. Balance sheet - know how each is composed and how they are affected by journal entries. Cost flow assumptions (fifo, lifo, weighted average methods) Ending inventory and/or cost of goods sold under periodic system. Inventory errors and effect on balance sheet and income statement. Effect of different cost flow methods on balance sheet and income statement. Terms of ownership fob shipping point or destination, consignment goods. Journal entries to record steps in the purchasing process (purchase, freight, return, & payment within discount period) Journal entries to record sale of merchandise (sale, freight, return, & receipt of payment within discount period) Accounts receivable activity (sales on account and cash collections) Estimating uncollectible amounts using percent of receivables method & recording bad debt expense. Net (or cash) realizable value of accounts receivable. Calculation of interest for full and partial year.

Related Questions

problem 4-26A Comprehensive cycle problem: Perpetual system LO4-2,

At the beginning of 2016, the Redd Company had the followingbalances in Its accounts:

cash 6.900

Inventory 15,000

Land 7,000

Common Stock 15,000

Retaind Earnings 13,900
l . purchased inventory that cost $5,200 on account from RossCompany under terms 1/10. 11/30. The merchandise was delivered FOBshipping point. Freight costs of S]90 '*ere paid incash.During 2016, the company experienced the followingevents:

2. Returned $400 of the inventory that it had purchased becausethe inventory was damaged In transit. The seller agreed to pay thereturn freight cost.

3. Paid the amount due on its account payable to Ross Companywithin the cash discount period.

4. Sold inventory that had cost $6,800 for $12, 100 on account,under terms 2/10, n/45.

5. Received merchandise returned from a customer. Themerchandise originally cost $900 and was sold to the customer for$1 ,680 cash, The customer was paid Sl ,680 cash for the returnedmerchandise.

6. Delivered goods FOB destination in Event 4. Freight costs of$140 were paid in cash.

7. Collected the amount due on the account receivable within thediscount period.

8. Sold the land for $8,500.

9. Recognized accrued interest income of $600.

10. Took a physical count indicating that $13,400 of inventorywas on hand at the end of the accounting period.

used, When an event has more than one part, use letters todistinguish the etyeets of each part. The first event is recordedas an example

b. Record the events in general journal format.

c. Open ledger T-accounts, and post the beginning balances andthe events to the accounts.

Prepare a multistep income statement, a statement of changes instockholders' equity, a bal. ance sheet, and a statement of cashflows.

e. Record and post the closing entries, and prepare apost-closing trial balance.

tealsardine885

Background: This is a continuation of the activities at TECHNOGYM in January, 2017. As in past activities, TECHNOGYM uses a Jan. 1 â Dec. 31 financial year.

Exercise for Inventory:

TECHNOGYM uses a periodic inventory system for its normal operations. Following are the unadjusted account balances as of Dec. 31, 2016 for all accounts related to sales and inventory of TechTone products.

Account Debit Credit

Accounts Receivable 17,607,500

Allowance for Doubtful Accounts 20,000

Purchases 85,832,500

Inventory 2,500,000

TechTone Sales Revenue 134,500,000

TechTone Sales Returns 2,017,500

Cost of TechTone Equipment Sold 0

Upper management is contemplating changing the method used to report the cost of goods sold. They will choose the method (either FIFO or DVLIFO) that maximizes operating cash flow. The general ledger has historically been kept on a FIFO basis. Following is the inventory purchases information for 2016:

Purchases for 2016 (normal operations)
Beginning:	5,000	units @	$500	each
Purchases:
Apr-May	40,000	units @	$500	each
Jun-Jul	35,000	units @	$505	each
Aug-Sep	48,500	units @	$515	each
Oct	24,000	units @	$520	each
Nov-Dec	20,000	units @	$535	each

Year-End Physical Inventory Count	38,000	units

Note: For full credit, you must show documentation for both DVLIFO and FIFO calculations, with indication and reasoning for your choice.

Requirement 1: Develop a detailed schedule showing the calculation of Ending Inventory and Cost of Goods Sold using FIFO for 2016.

Requirement 2: Show the adjusting journal entry(ies) (if any) that is/are needed on Dec. 31, 2016 related to FIFO inventory. Remember to show the journal entry in proper form!

Requirement 3: Develop a detailed schedule showing the calculation of Ending Inventory and Cost of Goods Sold using DVLIFO for 2016. Hint: DVLIFO adjustments are calculated at the end of the year, using annual layersânot based on each individual purchase. TECHNOGYM used 1.07 as its DVLIFO index.

DV LIFO	Ending Inventory at Year-End Cost	Index	Ending Inventory at Base-Yr Cost	Inventory Layers at Base-Yr Cost	Inventory Layers at Acq.-Yr Cost	Ending Inventory at DV LIFO Cost	LIFO Reserve Adjustment
2015

2016
2016

Requirement 4: Show the adjusting journal entry(ies) (if any) that would be needed on Dec. 31, 2016 if management decides to adopt the DVLIFO inventory method. Remember to show the journal entry in proper form!

Requirement 5: Using the table below, show the amounts that would appear on indicated line items of the Income Statement and Balance Sheet under the two methods.

		FIFO Method	DVLIFO Method
Income Statement	Cost of TechTone Equipment Sold

Balance Sheet	Inventory

Which method gives higher net income?

Which method gives higher assets?

limekangaroo380

1. Inventory is classified on the balance sheet as a

a.current liability

b.long-term asset

c.current asset

d.long-term liability

2. What is the term applied to the excess of sales over the cost of goods sold?

a.net income

b.gross profit

c.operations

d.gross sales

3. The inventory system employing accounting records that continuously disclose the amount of inventory is called

a.periodic

b.retail

c.perpetual

d.physical

4. Calculate the gross profit for Jefferson Company based on the following:

Sales $764,000

Selling Expenses $42,500

Cost of Goods Sold $538,000

a.$183,500

b.$721,500

c.$495,500

d.$226,000

5. Calculate income from operations for Jonas Company based on the following data:

Sales $764,000

Selling Expenses $52,500

Cost of Goods Sold $538,000

a.$226,000

b.$711,500

c.$485,500

d.$173,500

6. The primary difference between the periodic and perpetual inventory systems is that a

a.periodic system keeps a record showing the inventory on hand at all times

b.periodic system determines the inventory on hand only at the end of the accounting period

c.periodic system records the cost of the sale on the date the sale is made

d.periodic system provides an easy means to determine inventory shrinkage

7. In credit terms of 3/15, n/45, the "3" represents the

a.percent of the cash discount

b.full amount of the invoice

c.number of days when the entire amount is due

d.number of days in the discount period

8. Which of the following accounts has a normal credit balance?

a.Inventory

b.Accounts Receivable

c.Sales

d.Delivery Expense

9. Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

a.debit to Inventory

b.debit to Accounts Payable

c.credit to Sales

d.credit to Inventory

10. Which of the following accounts usually has a debit balance?

a.Sales

b.Inventory

c.Accounts Payable

d.Sales Tax Payable

11. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a.n/30

b.consigned

c.FOB shipping point

d.FOB destination

12. When goods are shipped FOB destination and the seller pays the freight charges, the buyer

a.does not take a discount

b.journalizes a reduction for the cost of the merchandise

c.makes no journal entry for the freight

d.journalizes a reimbursement to the seller

13. When the perpetual inventory system is used, the inventory sold is debited to

a.Supplies Expense

b.Cost of Goods Sold

c.Sales

d.Inventory

14. Generally, the revenue account for a merchandising business is entitled

a.Gross Sales

b.Sales

c.Gross Profit

d.Fees Earned

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ACCT 200 Study Guide - Midterm Guide: Accrued Interest, Income Statement, Net Income

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