Comprehensive Problem (Chapters 2, 5, 6, 8)

COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 123 NAME PROFESSOR'S NAME SECTION SCORE ACC 255 SPRING 2020 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) INSTRUCTIONS: Complete all requirements for the comprehensive problem and turn in the original of your problem (stapled) by the due date & time specified by your professor. No late problems will be accepted for any reason! You should take pictures of your solution to check your answers with the solutions which will be provided on BbLearn. REQUIREMENTS: (1) PREPARE JOURNAL ENTRIES FOR MERCHANDISING TRANSACTIONS (2) PREPARE JOURNAL ENTRIES FOR ACCOUNTS RECEIVABLE TRANSACTIONS PREPARE FINANCIAL STATEMENTS: (a) MULTIPLE-STEP INCOME STATEMENT (b) RETAINED EARNINGS STATEMENT (c) CLASSIFIED BALANCE SHEET CALCULATE LIQUIDITY, PROFITABILITY, & SOLVENCY MEASURES Page 124 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) COMPREHENSIVE PROBLEM 2 REQUIREMENTS (1) Prepare journal entries to record the merchandising transactions below for March 2020, assuming that the perpetual inventory system is used: Check figure Total Debits $ 200,910. (2) Prepare journal entries to record additional transactions (a) and (b) on the following page for Accounts Receivable related to uncollectible accounts (3) Tri Sports Gear, Inc.'s fiscal year ends on December 31. Using the December 31, 2020 Adjusted Trial Balance (accounts listed in alphabetical order), prepare in good form, the 2020 fiscal year financial statements: (a) Detailed, Multistep Income Statement include earnings per share there were 60,000 shares of common stock outstanding throughout the year); Check figure Net Income = $91,655. (b) Retained Earnings Statement: Check figure: Retained Earnings, December 31, 2020 - $413,410. (c) Classified Balance Sheet: Check figure: Total Assets + $635,525. (4) Calculate liquidity, profitability, & solvency measures: show all calculations and use the proper notation for each answer (%, times, 5). Round your final answer to at least one decimal place (eg for a ratio stated as a percentage, show an amount calculated to be 10463 as 10.5%). TRANSACTIONS FOR REQUIREMENT (1): Presented below are selected inventory transactions pertaining to Tri Sports Gear, Inc. for the month of March 2020 Mar. 2 5 10 Purchased $58,700 of merchandise on account from RunQuick, terms 1/10, net 30, FOB Destination Returned $28,000 of merchandise to RunQuick for credit on account. Sold $6,250 of merchandise for cash, FOB Destination Cost of merchandise was $3,375 Paid $375 to UPS for shipping cost related to merchandise sold on March 6. Paid RunQuick the balance due from the March 2 purchase less the March 5 return (hint: payment is within the discount period). Sold $19,600 of merchandise on credit to the USA Olympic triathlon team, terms 2/10.net 30, FOB Shipping Point. Cost of merchandise was $8,820 Purchased merchandise from Specialized Bikes, $23,450 cash, FOB Shipping Point, The USA team returned $4,000 of merchandise sold on March 12 for credit on their account. Cost of merchandise returned $1,800. Paid $240 to FedEx for shipping cost related to purchase on March 13, Received payment in full from the USA team for the balance due from the March 12 sale less the March 19 return (hint: payment received within the discount period). 19 23 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, B) Page 125 TRANSACTIONS FOR REQUIREMENT (2) Assume that Tri Sports Gear has a beaning of the year balance in Allowance for Doubtful Accounts of $4,075. On December 31. the following events occurred related to accounts receivable: (a) Record the write-off of $2 615 of accounts receivable due from customers (6) After recording (a) above, the following aging schedule of accounts receivable is provided. Prepare the year-end adjusting journal entry for bad debts using the allowance method, using the percentage of receivables basis from the aging schedule. Accounts Estimated Percentage Estimated Uncollectible Receivable Uncollectible Amount Current Accounts $29,500 1-30 days past due 11,200 5% 31-60 days past due 6,850 61-90 days past due 4,780 25% Over 90 days past due 3,200 80% Totals $55.530 2% 10% INFORMATION FOR REQUIREMENT (3): After the transactions from requirements (1) and (2) above and other transactions for the year were posted to the accounts, the accounts in alphabetical order from the December 31, 2020 year-end adjusted trial balance of Tri Sports Gear, Inc. are as follows: DEBIT CREDIT $ 42,750 $ 55,530 TRI SPORTS GEAR, INC ADJUSTED TRIAL BALANCE DECEMBER 31, 2020 ACCOUNT TITLES Accounts Payable Accounts Receivable Accrued Liabilities Accumulated Depreciation - Equipment Accumulated Depreciation - Vehicles Advertising Expense Allowance for Doubtful Accounts Bad Debt Expense Cash Common Stock (60,000 shares outstanding) Copyright 6,200 35,360 22.890 52,960 5,590 3,350 21,635 60,000 72,300 Page 126 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) CREDIT DEBIT 612,500 45,850 37,500 55,000 82.000 12,500 2,330 28,770 1,585 18.000 3,250 2.855 ACCOUNT TITLES Cost of Goods Sold Depreciation Expense Dividends Equipment Franchise Freight-out Expense Gain on the sale of Equipment Income Taxes Expense Income Taxes Payable Insurance Expense Interest Expense Interest Revenue Inventory Land (not currently used in operations) Legal Service Expense Long-Term Investments in Bonds Notes Payable ($10,000 due in next year) Notes Receivable (to be received in 9 months) Prepaid Insurance Rent Expense Retained Earnings (beginning balance) Salaries & Wages Expense Sales Discount Sales Returns Sales Revenue Stock Investments (short-term) Supplies Supplies Expense Unearned Revenue Utilities Expense Vehicles 109,560 130,500 9.750 56,500 98.000 4,200 5,800 26,200 359 255 169,865 22,315 98,250 1,215,625 26,000 11,800 15,450 13,580 10,145 68,540 Totals $1.866,020 $ 1.866.020 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 127 DATE 2020 GENERAL JOURNAL ACCOUNT TITLES REQUIREMENT (1) JOURNAL ENTRIES: DEBIT CREDIT Page 128 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) GENERAL JOURNAL ACCOUNT TITLES DEBIT CREDIT DATE 2020 REQUIREMENT (2) JOURNAL ENTRIES: COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 129 TRI SPORTS GEAR, INC. INCOME STATEMENT Complete the date line = Page 130 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) INCOME STATEMENT (CONTINUED) EFFEIJJJ TRI SPORTS GEAR, INC. RETAINED EARNINGS STATEMENT Complete the date line = Page 131 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, B) TRI SPORTS GEAR, INC. BALANCE SHEET Complete the date line Page 132 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) BALANCE SHEET (CONTINUED) COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 133 REQUIREMENT (4) FINANCIAL MEASURES: Show all calculations Refer to page 74 in the course packet for a summary of ratio formulas. Show your answer using the proper notation and round your final answer to one decimal place. Place your answers in the spaces provided for each ratio. CALCULATION: ANSWER: MEASURE LIQUIDITY Working Capital Current Ratio Receivable Turnover Ratio (note: beginning net accounts receivable - $47,000) (use net sales) Average collection Period Inventory Turnover Ratio (note: beginning inventory = $112,840) Days in Inventory PROFITABILITY Gross Profit Rate Profit Margin SOLVENCY Debt to Assets COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 123 NAME PROFESSOR'S NAME SECTION SCORE ACC 255 SPRING 2020 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) INSTRUCTIONS: Complete all requirements for the comprehensive problem and turn in the original of your problem (stapled) by the due date & time specified by your professor. No late problems will be accepted for any reason! You should take pictures of your solution to check your answers with the solutions which will be provided on BbLearn. REQUIREMENTS: (1) PREPARE JOURNAL ENTRIES FOR MERCHANDISING TRANSACTIONS (2) PREPARE JOURNAL ENTRIES FOR ACCOUNTS RECEIVABLE TRANSACTIONS PREPARE FINANCIAL STATEMENTS: (a) MULTIPLE-STEP INCOME STATEMENT (b) RETAINED EARNINGS STATEMENT (c) CLASSIFIED BALANCE SHEET CALCULATE LIQUIDITY, PROFITABILITY, & SOLVENCY MEASURES Page 124 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) COMPREHENSIVE PROBLEM 2 REQUIREMENTS (1) Prepare journal entries to record the merchandising transactions below for March 2020, assuming that the perpetual inventory system is used: Check figure Total Debits $ 200,910. (2) Prepare journal entries to record additional transactions (a) and (b) on the following page for Accounts Receivable related to uncollectible accounts (3) Tri Sports Gear, Inc.'s fiscal year ends on December 31. Using the December 31, 2020 Adjusted Trial Balance (accounts listed in alphabetical order), prepare in good form, the 2020 fiscal year financial statements: (a) Detailed, Multistep Income Statement include earnings per share there were 60,000 shares of common stock outstanding throughout the year); Check figure Net Income = $91,655. (b) Retained Earnings Statement: Check figure: Retained Earnings, December 31, 2020 - $413,410. (c) Classified Balance Sheet: Check figure: Total Assets + $635,525. (4) Calculate liquidity, profitability, & solvency measures: show all calculations and use the proper notation for each answer (%, times, 5). Round your final answer to at least one decimal place (eg for a ratio stated as a percentage, show an amount calculated to be 10463 as 10.5%). TRANSACTIONS FOR REQUIREMENT (1): Presented below are selected inventory transactions pertaining to Tri Sports Gear, Inc. for the month of March 2020 Mar. 2 5 10 Purchased $58,700 of merchandise on account from RunQuick, terms 1/10, net 30, FOB Destination Returned $28,000 of merchandise to RunQuick for credit on account. Sold $6,250 of merchandise for cash, FOB Destination Cost of merchandise was $3,375 Paid $375 to UPS for shipping cost related to merchandise sold on March 6. Paid RunQuick the balance due from the March 2 purchase less the March 5 return (hint: payment is within the discount period). Sold $19,600 of merchandise on credit to the USA Olympic triathlon team, terms 2/10.net 30, FOB Shipping Point. Cost of merchandise was $8,820 Purchased merchandise from Specialized Bikes, $23,450 cash, FOB Shipping Point, The USA team returned $4,000 of merchandise sold on March 12 for credit on their account. Cost of merchandise returned $1,800. Paid $240 to FedEx for shipping cost related to purchase on March 13, Received payment in full from the USA team for the balance due from the March 12 sale less the March 19 return (hint: payment received within the discount period). 19 23 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, B) Page 125 TRANSACTIONS FOR REQUIREMENT (2) Assume that Tri Sports Gear has a beaning of the year balance in Allowance for Doubtful Accounts of $4,075. On December 31. the following events occurred related to accounts receivable: (a) Record the write-off of $2 615 of accounts receivable due from customers (6) After recording (a) above, the following aging schedule of accounts receivable is provided. Prepare the year-end adjusting journal entry for bad debts using the allowance method, using the percentage of receivables basis from the aging schedule. Accounts Estimated Percentage Estimated Uncollectible Receivable Uncollectible Amount Current Accounts $29,500 1-30 days past due 11,200 5% 31-60 days past due 6,850 61-90 days past due 4,780 25% Over 90 days past due 3,200 80% Totals $55.530 2% 10% INFORMATION FOR REQUIREMENT (3): After the transactions from requirements (1) and (2) above and other transactions for the year were posted to the accounts, the accounts in alphabetical order from the December 31, 2020 year-end adjusted trial balance of Tri Sports Gear, Inc. are as follows: DEBIT CREDIT $ 42,750 $ 55,530 TRI SPORTS GEAR, INC ADJUSTED TRIAL BALANCE DECEMBER 31, 2020 ACCOUNT TITLES Accounts Payable Accounts Receivable Accrued Liabilities Accumulated Depreciation - Equipment Accumulated Depreciation - Vehicles Advertising Expense Allowance for Doubtful Accounts Bad Debt Expense Cash Common Stock (60,000 shares outstanding) Copyright 6,200 35,360 22.890 52,960 5,590 3,350 21,635 60,000 72,300 Page 126 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) CREDIT DEBIT 612,500 45,850 37,500 55,000 82.000 12,500 2,330 28,770 1,585 18.000 3,250 2.855 ACCOUNT TITLES Cost of Goods Sold Depreciation Expense Dividends Equipment Franchise Freight-out Expense Gain on the sale of Equipment Income Taxes Expense Income Taxes Payable Insurance Expense Interest Expense Interest Revenue Inventory Land (not currently used in operations) Legal Service Expense Long-Term Investments in Bonds Notes Payable ($10,000 due in next year) Notes Receivable (to be received in 9 months) Prepaid Insurance Rent Expense Retained Earnings (beginning balance) Salaries & Wages Expense Sales Discount Sales Returns Sales Revenue Stock Investments (short-term) Supplies Supplies Expense Unearned Revenue Utilities Expense Vehicles 109,560 130,500 9.750 56,500 98.000 4,200 5,800 26,200 359 255 169,865 22,315 98,250 1,215,625 26,000 11,800 15,450 13,580 10,145 68,540 Totals $1.866,020 $ 1.866.020 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 127 DATE 2020 GENERAL JOURNAL ACCOUNT TITLES REQUIREMENT (1) JOURNAL ENTRIES: DEBIT CREDIT Page 128 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) GENERAL JOURNAL ACCOUNT TITLES DEBIT CREDIT DATE 2020 REQUIREMENT (2) JOURNAL ENTRIES: COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 129 TRI SPORTS GEAR, INC. INCOME STATEMENT Complete the date line = Page 130 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) INCOME STATEMENT (CONTINUED) EFFEIJJJ TRI SPORTS GEAR, INC. RETAINED EARNINGS STATEMENT Complete the date line = Page 131 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, B) TRI SPORTS GEAR, INC. BALANCE SHEET Complete the date line Page 132 COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) BALANCE SHEET (CONTINUED) COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5, 6, 8) Page 133 REQUIREMENT (4) FINANCIAL MEASURES: Show all calculations Refer to page 74 in the course packet for a summary of ratio formulas. Show your answer using the proper notation and round your final answer to one decimal place. Place your answers in the spaces provided for each ratio. CALCULATION: ANSWER: MEASURE LIQUIDITY Working Capital Current Ratio Receivable Turnover Ratio (note: beginning net accounts receivable - $47,000) (use net sales) Average collection Period Inventory Turnover Ratio (note: beginning inventory = $112,840) Days in Inventory PROFITABILITY Gross Profit Rate Profit Margin SOLVENCY Debt to Assets