Practice Problem Workshop 2 Practice Problem Midterm Review Fall 2019 E Djoewanda Solutions Q1 Practice Problem Midterm Review Fall 2019 E Djoewanda R E NI CS RE Total SE ID: 786657
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Slide1
Solutions Midterm Review Practice Problem
Workshop 2
Practice Problem Midterm Review Fall 2019 / E.
Djoewanda
Slide2Solutions Q1
Practice Problem Midterm Review Fall 2019 / E.
Djoewanda
R – E = NI
CS + R.E = Total S.E
Gator Investments
Income Statement
Service revenue$127,600Expenses: Advertising33,500Salaries65,100Utilities15,500Interest3,500Total expenses117,600Net income$ 10,000
Gator Investments
Statement of Stockholders’ Equity
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance
$100,000
$30,300
$130,300
Issuance of common stock
11,000
11,000
Add: Net income
10,000
10,000
Less: Dividends
(5,200)
(5,200)
Ending balance
$111,000
$35,100
$146,100
Slide3Solutions Q1 (continued)
Gator Investments
Balance Sheet
Assets
Liabilities
Cash
$ 5,500
Accounts payable$ 6,400Equipment27,000Notes payable30,000Buildings150,000Total liabilities36,400 Stockholders’ Equity
Common stock111,000 Retained earnings35,100 Total stockholders’ equity146,100 Total liabilities and stockholders’ equity$182,500Total assets$182,500
Practice Problem Midterm Review Fall 2019 / E. Djoewanda
A = L + S.E
Slide4Solutions Q2
Inventory items
Quantity
Cost
Per unit
Total
Cost
Hammers110$ 6.00$ 660Saws6011.00660Screwdrivers1203.00360Drills5022.001,1001-gallon paint cans1505.00750
Paint brushes
170
7.001,190 $4,720Practice Problem Midterm Review Fall 2019 / E. DjoewandaInventory itemsQuantityCostPer unitNRVper unit Lower of Cost and NRV per unitTotal
Hammers
110
$ 6.00
$ 7.00
$ 6.00
$ 660Saws6011.009.009.00540Screwdrivers1203.002.002.00240Drills5022.0021.0021.001,0501-gallon paint cans1505.006.005.00750Paint brushes1707.008.007.001,190Total $4,430
Adjustment
Cost of Goods Sold 290
Inventory 290
Slide5Solutions Q3
(1)
Jul. 1, 2015
DebitCreditCash15,000 Notes Payable 15,000(Borrow cash) Practice Problem Midterm Review Fall 2019 / E. Djoewanda(2)
Dec. 31, 2015
DebitCreditInterest Expense900 Interest Payable 900(Adjust interest payable)= $150 (or 1% of $15,000) per month x 6 months (Jul. – Dec.)(3) Interest PayableInterest Expense
Jan. 1, 2015
Beginning balance
$ 0
$ 0
Adjustment
Interest incurred but not paid900900Dec. 31, 2015Ending balance$900$900
Slide6Solutions Q4
Age group
Amount
receivable
Estimated percent uncollectible
Estimated amount uncollectible
Not yet due
$40,0004%$ 1,6000-90 days past due16,00020%3,20091-180 days past due11,00025%2,750More than 180 days past due13,00080%10,400Total$80,000 $17,950
Practice Problem Midterm Review Fall 2019 / E. Djoewanda
December 31, 2018
DebitCreditBad Debt Expense12,950 Allowance for Uncollectible Accounts 12,950(Estimate future bad debts)($17,950 − $5,000 = $12,950)
Slide7Solutions Q4 (continued)
Practice Problem Midterm Review Fall 2019 / E. Djoewanda
September 30, 2019
Accounts Receivable
8,000 Allowance for Uncollectible Accounts 8,000(Re-establish account previously written off) September 30, 2019 Cash8,000 Accounts Receivable 8,000
(Receive cash on account)
July 19, 2019 Allowance for Uncollectible Accounts8,000 Accounts Receivable 8,000(Write off actual bad debts)
Slide8Solutions Q5
(a)
Debit
Credit
Cash
17,000
Service Revenue 17,000(Provide services for cash) Practice Problem Midterm Review Fall 2019 / E. Djoewanda(b)
Prepaid Insurance
4,200 Cash 4,200(Purchase prepaid insurance with cash) (c)
Equipment
20,000
Cash 20,000(Purchase equipment with cash) (d) Cash30,000 Notes Payable 30,000(Obtain bank loan)
Slide9Solutions Q6
April 25
Debit
Credit
Accounts Receivable
3,200
Service Revenue 3,200(Provide services on account) Practice Problem Midterm Review Fall 2019 / E. DjoewandaApril 27 DebitCreditSales Allowances700 Accounts Receivable
700
(Record sales allowance for credit sale)
April 30 DebitCreditCash2,500 Accounts Receivable 2,500(Collect cash on account less sales allowance)
Service revenue
$3,200
Less: Sales allowances
(700)
Net sales
$2,500
Slide10Solutions Q7
November 16
Accounts Receivable
14,000
Sales Revenue 14,000(Sell inventory on account) Cost of Goods Sold9,640 Inventory 9,640(Cost of inventory sold) ($9,640 = ($94 × 60 units) + ($100 × 40 units)) Practice Problem Midterm Review Fall 2019 / E. Djoewanda
November 24
Cash12,600 Sales Revenue 12,600(Sell inventory for cash) Cost of Goods Sold9,212 Inventory
9,212
(Record cost of inventory sold)
[$9,212 = ($100 × 37 units) + ($104 × 53 units)]
October 31
DebitCreditCost of Goods Sold170 Inventory 170*(Record LIFO adjustment) * Ending inventory using LIFO (1,598 = $94 × 17 units) is $170 less than ending inventory using FIFO ($1,768 = $104 × 17 units).
Slide11Solutions Q8
March 1
Debit
Credit
Notes Receivable
18,600
Service Revenue 18,600(Provide legal services and accept note) Practice Problem Midterm Review Fall 2019 / E. DjoewandaSeptember 1 Cash19,716 Notes Receivable
18,600
Interest Revenue
1,116(Receive cash on note receivable and interest)(Interest revenue = $18,600 x 12% x 6/12) March 1 DebitCreditLegal Fees Expense18,600 Notes Payable 18,600
(Receive legal services and sign note)
September 1
Notes Payable18,600 Interest Expense1,116 Cash 19,716(Pay cash on note payable and interest)(Interest expense = $11,000 x 9% x 6/12)
Slide12Solutions Q9
Date
Transaction
Number
of units
Unit
Cost
Cost of Goods SoldJan. 1Beginning inventory10$430$4,300Apr. 9Purchase2247010,340Oct. 4Purchase124004,800 44 $19,440
Practice Problem Midterm Review Fall 2019 / E. Djoewanda
Ending Inventory - FIFO
DateTransactionNumberof unitsUnitcostEnding InventoryOct. 4Purchase64002,400FIFO
Slide13Solutions Q9 (continued)
Date
Transaction
Number
of units
Unit
cost
Cost of Goods SoldJan. 1Beginning inventory4$430$ 1,720Apr. 9Purchase2247010,340Oct. 4Purchase184007,200 44 $19,260
Practice Problem Midterm Review Fall 2019 / E. Djoewanda
Ending Inventory - LIFO
DateTransactionNumberof unitsUnitcostEnding InventoryJan. 1Beginning inventory6$430$2,580LIFO
Slide14Solutions Q9 (continued)
Practice Problem Midterm Review Fall 2019 / E. Djoewanda
Weighted-average cost = $21,840 / 50 units = $436.80
Cost of goods sold = 44 units × $436.80 = $ 19,219.20
Sales Revenue = 44 * $600 = $26,400
FIFO
LIFOWeighted-averageGross profit$6,960$7,140$7,180.80DateTransaction UnitsCostTotal CostJan. 1Beginning inventory10$430$ 4,300
Apr. 9
Purchase
2247010,340Oct. 4 Purchase 184007,200 50 $21,840
Jan. 1–Dec. 31
Sales
44
Weighted-Average
Slide15Solutions Q10
May 2
Debit
Credit
No entry
Practice Problem Midterm Review Fall 2019 / E. DjoewandaMay 7 Accounts Receivable1,200 Tour Revenue 1,200(Provide guided tour on account)
May 9
No entry May 15 Sales Allowances360 Accounts Receivable
360
(Sales allowance for services on account)
(Sales allowance = $1,200 x 30%)
May 20
Cash789.60 Sales Discounts50.40 Accounts Receivable 840(Receive cash on account)(Sales discount = $840 x 6%) Outdoor ExpoPartial Income Statement Total tour revenues$1,200.00 Less: Sales allowances(360.00) Sales discounts(50.40) Net tour revenues $789.60
Slide16Solutions Q11
Date
Transaction
Number
of units
Unitcost Ending InventoryAug. 22Purchase 30 $600 $18,000Oct. 29Purchase 80 640
51,200
110 $69,200Practice Problem Midterm Review Fall 2019 / E. DjoewandaDateTransaction Numberof units Unitcost
Cost of Goods Sold
Jan. 1
Beginning inventory
150 $540 $ 81,000Mar. 8Purchase 120 570 68,400Aug. 22Purchase 70 600 42,000 340* $191,400DateTransaction Numberof units
Unit
cost
Ending Inventory
Oct. 29
Purchase
50
$640
$32,000
Date
Transaction
Number
of units
Unit
cost
Cost of Goods Sold
Jan. 1
Beginning inventory
150
$540
$ 81,000
Mar. 8
Purchase
120
570
68,400
Aug. 22
Purchase
100
600
60,000
Oct. 29
Purchase
30
640
19,200
400*
$228,600
* First 340 units purchased are assumed sold
* First 400 units purchased are assumed sold
Slide17Solutions Q11 (continued)
2018
2019
(a) ending inventory
Overstatement
No Effect
(b) retained earningsOverstatementNo Effect(c) cost of goods soldUnderstatementOverstatement(d) net incomeOverstatementUnderstatementPractice Problem Midterm Review Fall 2019 / E. DjoewandaTransaction20182019Beginning inventory81,000
32,000
Purchase
179,600214,600Ending Inventory(32,000)(14,000)Cost of Goods Sold228,600232,600Transaction20182019Beginning inventory81,00069,200
Purchase
179,600
214,600
Ending Inventory
(69,200)
(14,000)Cost of Goods Sold191,400269,800Correct reporting in 2018Total COGS for 2 years = $461,200Incorrect reporting in 2018 ($78,400)Total COGS for 2 years = $461,200