HOMEWORK 3 1. Comet Inc, a retailer, provided the following balances from its records for the year ended December 31, 2018. Based on a physical count of goods at the warehouse, Inventory on 12/31/18 is $832,000. Additional information is as follows: Inventory costing $32,000 was received on January 2, 2019. The inventory was not included in the physical count at year-end. The goods had been shipped FOB Destination to Comet on Dec. 27, 2018 by the Pierce Company. Comet received inventory costing $41,000 on January 4, 2019. The inventory was not included in the physical count at year-end. The goods had been shipped FOB Shipping Point on Dec. 28, 2018 by Reynolds Company. Comet sold goods costing $45,000 to Madison Company on Dec. 31, 2018. The goods were picked up by FedEx on that same date and shipped FOB Destination. They were expected to arrive at the buyer's store as early as Jan. 2, 2019. These goods were not included in the physical count of inventory on Dec. 31, 2018. Considering this additional information, calculate the correct 2018 year-end balance for inventory. $ 2. Hunter, Inc. analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: Aging Group 0-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due Over 180 days past due Balance in A/R $90,000 20,000 11,000 6,000 5,000 Probability of Non-collection 1% 2% 6% 10% 25% The company handles credit losses using the aging of accounts receivable method. The credit balance in the Allowance for Bad Debt (ABD) account is $820 on December 31, before adjusting entries. The adjusting entry for estimated bad debt on December 31 will include: a) A debit to Allowance for Bad Debt for $3,810 b) A credit to Allowance for Bad Debt for $3,810 C) A debit to Allowance for Bad Debt for $2,990 d) A credit to Allowance for Bad Debt for $2,990 3. At December 31, 2018, Wiley, Inc. reported the following information on its balance sheet. Accounts Receivable Less: Allowance for Bad Debt $900,000 54,000 (credit) During 2019, the company had the following transactions related to receivables: Sales on account... Collections of accounts receivable.. Write-Offs of accounts deemed uncollectible... Recovery of bad debts previously written-off... $3,200,000 2,850,000 40,000 9,000 A. What is the ending balance in the Accounts Receivable account as of December 31, 2019? $ Given your answer to Part A, complete Parts B and C as two independent scenarios: B. What is the Net Realizable Value of Accounts Receivables (e.g., Net A/R) on December 31, 2019, after adjusting entries, assuming that Wiley Inc. estimates bad debts to be 2% of credit sales? $ c. What is the Net Realizable Value of Accounts Receivables (e.g., Net A/R) on December 31, 2019, after adjusting entries, assuming INSTEAD that Wiley Inc. estimates bad debts based on 5% of their total ending accounts receivable balance? $ 4. The following selected transactions occurred at Mountain Hats, Inc. during the month of September (its first month of operations). Mountain Hats currently sells only one product - specialty ski hats with built-in speakers and Bluetooth capability. The company uses the perpetual inventory method. The hats sell for a retail price of $50.00 each. (1) September 1: Purchased 100 hats for its inventory from its supplier for $28.00 each with cash. (2) September 4: Sold 16 hats to Sun NSki Sports on credit, with terms 2/10, n/30. (3) September 6: Sold 30 hats to REI on credit, with terms 2/10, n/30. (4) September 7: Sold two hats directly to a customer, who charged the purchase to her Visa credit card. Visa charges Mountain Hats, Inc. a 3 percent credit card fee. (5) September 9: Collected payment from Sun 'N' Ski Sports for the September 4th sale. (6) September 13: REI returned 10 hats back to Mountain Hats due to ordering the wrong color. (7) September 14: Collected payment from REI for the remainder of its purchases on September 6th. A. What is the ending balance in Mountain Hat's Inventory" account at the end of September? $ B. After considering the transactions above, please list the correct ending balance in each of the following contra-revenue accounts. If the account is not affected by the transactions above, enter its balance as 0 (e.g., zero). Title Ending Balance a. Credit Card Discount b. Sales Discount c. Sales Returns and Allowances c. What is Mountain Hats, Inc.'s Gross Profit for the month of September? HOMEWORK 3 1. Comet Inc, a retailer, provided the following balances from its records for the year ended December 31, 2018. Based on a physical count of goods at the warehouse, Inventory on 12/31/18 is $832,000. Additional information is as follows: Inventory costing $32,000 was received on January 2, 2019. The inventory was not included in the physical count at year-end. The goods had been shipped FOB Destination to Comet on Dec. 27, 2018 by the Pierce Company. Comet received inventory costing $41,000 on January 4, 2019. The inventory was not included in the physical count at year-end. The goods had been shipped FOB Shipping Point on Dec. 28, 2018 by Reynolds Company. Comet sold goods costing $45,000 to Madison Company on Dec. 31, 2018. The goods were picked up by FedEx on that same date and shipped FOB Destination. They were expected to arrive at the buyer's store as early as Jan. 2, 2019. These goods were not included in the physical count of inventory on Dec. 31, 2018. Considering this additional information, calculate the correct 2018 year-end balance for inventory. $ 2. Hunter, Inc. analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: Aging Group 0-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due Over 180 days past due Balance in A/R $90,000 20,000 11,000 6,000 5,000 Probability of Non-collection 1% 2% 6% 10% 25% The company handles credit losses using the aging of accounts receivable method. The credit balance in the Allowance for Bad Debt (ABD) account is $820 on December 31, before adjusting entries. The adjusting entry for estimated bad debt on December 31 will include: a) A debit to Allowance for Bad Debt for $3,810 b) A credit to Allowance for Bad Debt for $3,810 C) A debit to Allowance for Bad Debt for $2,990 d) A credit to Allowance for Bad Debt for $2,990 3. At December 31, 2018, Wiley, Inc. reported the following information on its balance sheet. Accounts Receivable Less: Allowance for Bad Debt $900,000 54,000 (credit) During 2019, the company had the following transactions related to receivables: Sales on account... Collections of accounts receivable.. Write-Offs of accounts deemed uncollectible... Recovery of bad debts previously written-off... $3,200,000 2,850,000 40,000 9,000 A. What is the ending balance in the Accounts Receivable account as of December 31, 2019? $ Given your answer to Part A, complete Parts B and C as two independent scenarios: B. What is the Net Realizable Value of Accounts Receivables (e.g., Net A/R) on December 31, 2019, after adjusting entries, assuming that Wiley Inc. estimates bad debts to be 2% of credit sales? $ c. What is the Net Realizable Value of Accounts Receivables (e.g., Net A/R) on December 31, 2019, after adjusting entries, assuming INSTEAD that Wiley Inc. estimates bad debts based on 5% of their total ending accounts receivable balance? $ 4. The following selected transactions occurred at Mountain Hats, Inc. during the month of September (its first month of operations). Mountain Hats currently sells only one product - specialty ski hats with built-in speakers and Bluetooth capability. The company uses the perpetual inventory method. The hats sell for a retail price of $50.00 each. (1) September 1: Purchased 100 hats for its inventory from its supplier for $28.00 each with cash. (2) September 4: Sold 16 hats to Sun NSki Sports on credit, with terms 2/10, n/30. (3) September 6: Sold 30 hats to REI on credit, with terms 2/10, n/30. (4) September 7: Sold two hats directly to a customer, who charged the purchase to her Visa credit card. Visa charges Mountain Hats, Inc. a 3 percent credit card fee. (5) September 9: Collected payment from Sun 'N' Ski Sports for the September 4th sale. (6) September 13: REI returned 10 hats back to Mountain Hats due to ordering the wrong color. (7) September 14: Collected payment from REI for the remainder of its purchases on September 6th. A. What is the ending balance in Mountain Hat's Inventory" account at the end of September? $ B. After considering the transactions above, please list the correct ending balance in each of the following contra-revenue accounts. If the account is not affected by the transactions above, enter its balance as 0 (e.g., zero). Title Ending Balance a. Credit Card Discount b. Sales Discount c. Sales Returns and Allowances c. What is Mountain Hats, Inc.'s Gross Profit for the month of September