2.The remaining questions relate to the following presentation in the balance sheets of Sanders Co.

at December 31, 2020 and 2019:

12/31/2012/31/19

Accounts receivable, less allowance for

uncollectible accounts of $12,000 and

$4,000, respectively................................................................. $487,000$406,000

a.Describe how the allowance amount at December 31, 2020 was most likely determined.

b.If the bad debt expense for 2020 totaled $14,000, what was the amount of accounts

receivable written off during the year?(Hint: Using the Taccount model of the allowance

account, plug in the three amounts that you know and then solve for the unknown.)

(continued)

2. c.The December 31, 2020 allowance account balance includes $3,500 for a past due account

that is not likely to be collected.This account has not been written off.If it had been written

off, what would have been the effect of the write off on:

Working capital, and net income at December 31, 2020?

Part 2

1. For each of the transactions described below (items a-d), enter the effects the transaction on the appropriate side (debit or credit) of the T-accounts affected.Note that several accounts which would be affected by these transactions are not included in the T-accounts shown below.

a.Cost of equipment purchased.

b.Cost of equipment sold.

c.Depreciation expense for the period.

d.Accumulated depreciation on equipment sold.

------------------------------------Balance Sheet / IncomeStatement ------

EquipmentAccumulated DepreciationDepreciation Expense

Beginning BalanceBeginning Balance

Ending BalanceEnding BalanceTotal for the Period

2.This question relates to the following presentation in the balance sheets of Jonis Co. at March 31,

2020 and 2019:

3/31/203/31/19

Equipment, less accumulated depreciation of $76,000 and

$57,000, respectively............................................................... $104,000$98,000

a. If the cost of new equipment purchased during the year totaled $32,000, what was the cost of

equipment sold?

b. If the accumulated depreciation on equipment sold (in part a) totaled $5,000, what was the

amount of depreciation expense for the year?

c.If there was a gain of $1,000 from the sale of equipment (in part a), how much cash was

received in the sale transaction?(Hint: Prepare the journal entry to record transaction).

(continued)

3. For the month ended February 28, 2020, a company capitalized a $3,000 expenditure that

should have been expensed.Depreciation expense for the full month, using the straightline

method, was recorded for $120 in February with respect to this item.Reported operating income

for February was $11,700.

a.Calculate the amount of operating income that should have been reported for February.

b.If this error is not corrected, what will be the impact on operating income for the tenmonth

period from March 1, 2020 through December 31, 2020?

Part 3

1. For each of the transactions described below (items a and b), enter the effects of

the transaction on the appropriate side (debit or credit) of the T-accounts affected.Note that the

Cash and Accounts Payable accounts are not included in the T-accounts shown below, but

would be credited for the expenditures involved in transaction a.

a.Cost of items purchased or made.

b.Cost of items sold.

------------------------Balance Sheet / IncomeStatement ------------------------

InventoryCost of Goods Sold

Beginning Balance

Ending BalanceTotal for the Period

2.Assume that the company does not keep track of the physical items sold and does not record the

cost of an item sold at the same time that the sale is recorded.Assume also that the company

does actually count (and determine the cost of) its inventory at the end of every accounting

period.Construct a model (i.e., equation) that this company could use to calculate the cost of

goods sold at the end of the period.

3.If the beginning balance of the inventory account and the cost of items purchased or made

during the period were correct, but an error resulted in understating the firm's ending inventory

balance by $4,000, would the firm's net income be affected?If your answer is "yes," explain

the amount and direction (overstatedtoo high or understatedtoo low) of the effect on net

income.

(continued)

4.Assume that the purchase or manufacturing cost of inventory items has been rising over a

period of time and that the LIFO cost flow assumption has been used.Would the firm's margin,

turnover, and ROI have been higher or lower than they would have been under the FIFO cost

flow assumption?Consider the impact on margin, turnover, and ROI separately, and use the

equations shown below to help you think through your answer.

ROI=MARGINxTURNOVER

NET INCOMENET INCOMESALES

AVERAGE TOTAL ASSETS=SALESxAVERAGE TOTAL ASSETS