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Exam 5: Accounting for Receivables and Inventory Cost Flow

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Question 71

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Define the terms FIFO and LIFO.

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FIFO = First In First Out: This cost flo...

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Question 72

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Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad\text { Decrease } = \mathrm { D } \quad\text { No Effect } = \mathrm { N }$ Hardin Company collected a receivable due from a credit card company (from a sale to a customer who paid with a credit card). Show the effect of collection of the credit card receivable on Ulmer's financial statements.

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Question 73

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Indicate whether each of the following statements is true or false. 1. Accrued interest revenue is recognized at the time that a company loans money by accepting a note receivable 2. Notes Receivable is a balance sheet account 3. A company with outstanding notes receivable should accrue interest on the notes at the end of the accounting period 4. The recognition of accrued interest revenue increases both equity and liabilities 5. Loaning money to another company in exchange for a note receivable is an asset use transaction

How would a company estimate the percentage of its sales that will be uncollectible?

The principal on a promissory note is the person to whom the note is payable.

What are some advantages to a business of accepting credit cards for sales? What cost to the business is involved?

For a company that uses the allowance method, the write-off of an uncollectible account receivable is an asset use transaction.

Stewart Company sold 180 units @ $320 each on October 31, 2014. Cash selling and administrative expenses were $15,000. The following information is also available: $\begin{array}{ll}\text { Beginning inventory } & 30 \text { units } @ \$ 180 \\\text { Feb } 3 \text { purchase } & 60 \text { units } @ \$ 190 \\\text { June 2 purchase } & 70 \text { units } @ \$ 220 \\\text { Oct } 1 \text { purchase } & 40 \text { units } @ \$ 230\end{array}$ The company's income tax rate is 40%. Required: a) Determine the amount of cost of goods sold using: FIFO LIFO Weighted Average b) Determine the amount of ending inventory using: FIFO LIFO Weighted Average c) Determine the company's net income (after income taxes) using: FIFO LIFO

What type of transaction is the collection of cash from accounts receivable? (asset source, asset use, asset exchange, claims exchange)

For Engle Company, the balance in Accounts Receivable at the beginning of the period was $800. During the period $3,200 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $400, and uncollectible accounts of $200 were written off, the amount of cash inflow from customers that would appear in the operating section of the cash statement would be:

The following information is for Carmen Company for 2014: Beginning inventory, 100 units @ $25 Units purchased, 200 units @ $28 During the year, Carmen sold 250 units for $45 each. Required: a) Calculate gross margin assuming Carmen uses: 1) FIFO; 2) LIFO b) Disregarding the effect of income taxes, what would be the dollar amount of difference in net income between FIFO and LIFO? c) Calculate the cash flow from operating activities assuming that Carmen uses 1) LIFO; 2) FIFO. Assume that all transactions during the year were for cash.

Bay Company began using the allowance method in 2014. On January 1, 2014, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2014, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account. The balance in Accounts Receivable as of December 31, 2014 was

Zephyr Sewing Machine Company makes many of its sales on account. For 2014, its beginning balance in Accounts Receivable was $91,000. Sales on account for the year were $412,000, and the amount of cash collected from its accounts receivable was $394,950. During the year, uncollectible accounts of $4,050 were written off. What was the ending balance in Accounts Receivable?

Haven Company began 2014 with a balance in Accounts Receivable of $28,000 and a balance in the Allowance for Doubtful Accounts of $1,050. The following events occurred during 2014: 1. Recognized $107,000 of revenue on account 2. Collected $104,500 from accounts receivable 3. Wrote off as uncollectible $920 of accounts receivable 4. Recognized uncollectible accounts expense of $1,070 for the year Required: a. What was the net realizable value of Haven's accounts receivable at the beginning of the year? b. What was Haven's balance in Accounts Receivable on December 31, 2014? c. What was the balance in the Allowance for Doubtful Accounts on December 31, 2014? d. What was the net realizable value of Haven's accounts receivable on December 31, 2014?

On December 31, 2014, the Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method of accounting for uncollectible accounts. On February 15, 2015, Landon wrote off the account of one of its customers, in the amount of $2,500. On April 7, 2015, the customer paid the account in full. Which of the following answers correctly states the effect of Landon's write-off entry on February 15, 2015?

During November 2014, Hall Company purchased two identical inventory items. The item purchased first cost $12.00, and the item purchased second cost $15.00. Hall sold one of the inventory items for $20.00. Based on this information

When an uncollectible account receivable is written off, the amount of total assets is unchanged.

Indicate whether each of the following statements is true or false. 1. An aging of accounts receivable classifies accounts receivable by the length of time that a company has had a business relationships with a particular customer 2. An aging of accounts receivable may be used in estimating the amount of uncollectible accounts receivable 3. The percent of receivables method of estimating uncollectible accounts expense is sometimes called the income statement method 4. When Uncollectible Accounts Expense is determined based on percent of receivables, the existing balance in the Allowance for Doubtful Accounts must be considered 5. Uncollectible Accounts Expense may be calculated using a percentage of receivables or a percentage of sales

Indicate whether each of the following statements about promissory notes is true or false. 1. To the payee on a promissory note, the note is a receivable 2. The payee on a promissory note uses the note to borrow money 3. The interest rate on a promissory note is normally stated as an annual interest rate 4. The maker on a promissory note is responsible for paying the note at maturity 5. Some promissory notes are secured by assets belonging to the payee of the note

The face value of Accounts Receivable less the balance in the Allowance for Doubtful Accounts is equal to the net realizable value of the receivables.