I thought i could open some files to see examples for these problems, but instead opened a file with just the exact same questions without an answer.

Homework Assignment #3 - Due November 8, 2015 Problem 1 (40 points) Pinkerton Energy Company builds specially designed blades for generators used in wind energy farming operations. The company started the year with the following accounts receivable position: Accounts receivable Less: Allowance for uncollectibles $ 10,500,000 (320,500) $ 10,179,500 During the year, a customer, Black Point Power Company, was devastated by an unusually severe storm. At that time, Pinkerton concluded that it was highly unlikely that Black Point would ever be able to pay its outstanding balance of $150,000. This account was written off against the allowance account. Much later in the year, Black Point was rescued by a group of investors who offered to pay $90,000 toward the unpaid balance, provided Pinkerton would permanently forgive the other $60,000 and resume selling product to Black Point. Pinkerton agreed, and has since resumed doing business with Black Point. During the year, sales on account amounted to $25,689,000. Collections on account totaled $21,300,500 (excluding the Black Point collection). During the year, accounts written-off (not including the Black Point transaction) were $123,000. At year's end, a detailed analysis of accounts receivable was performed, and it was concluded that the allowance account should contain a balance of $475,000. (a) Prepare summary journal entries: To record the write-off of the Black Point receivable To restore the portion of the Black Point receivable that was collected To record the collection of the Black Point receivable To record sales on account To record collections on account To record the write-off of accounts To establish the correct balance in the allowance for uncollectibles Problem 2 (60 points) Blue Star Corporation is a newly formed entity that engages in the purchase and resale of amphibious tour vehicles. Purchases for the first year of operation were as follows: Date Purchases 7-Jan 50 units @ $15,000 each 15-Mar 70 units @ $16,000 each 16-Jun 30 units @ $16,500 each 3-Aug 90 units @ $17,000 each 11-Oct 25 units @ $17,200 each Sales for this first year of operation amounted to 210 units and totaled $4,250,000. (a) If Blue Star uses the first-in, first-out (FIFO) inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit? (b) If Blue Star uses the last-in, first-out (LIFO) inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit? (c) If Blue Star uses the weighted-average inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit? (d) Which of the above techniques produces the highest profit? Which of the above techniques reports the most "current" cost on a balance sheet? Which of the above techniques report the most "current" cost in measuring income? Which of the above techniques results in the lowest income tax obligation? Homework Assignment #3 - Due November 8, 2015 Problem 1 (40 points) SOLUTION particulars dr Income statement 150000 Account receivables To record the write-off of the Black Point receivable cr particulars dr Accounts receivable 90000 Income statement To restore the portion of the Black Point receivable that was collected cr particulars dr cash 90000 Income statement To record the collection of the Black Point receivable cr particulars Accounts receivables Income statement To record sales on account dr 25,689,000 cr particulars cash Accounts receivables To record collections on account dr 21,300,500 particulars Income statement Account receivables To record the write-off of accounts dr 123,000 particulars Provision for bad debts 150000 90000 90000 25,689,000 cr 21,300,500 cr 123,000 dr 475,000 cr Account receivables To establish the correct balance in the allowance for uncollectibles Problem 2 (60 points) SOLUTION sales per unit 4250000/210 units=20238 a)FIFO Issued 50 units*15000=750000 70*16000=1120000 300*165000 60*17000=1020000 total units issued 210 ending inventory 30*17000=51000 25*17200=430000 Ending inventory=940000 Sales 50*20238=1011900 70*20238=1416660 30*20238=607140 60*20238=1214280 Cost of goods sold=3385000 475,000 Sales=4249980 Gross profit Sales 4249980 Cost of goods sold (3385000) 864980 b)LIFO 25*172000=430000 90*17000=1530000 30*16500=495000 65*16000=1040000 Total units issued 210 cost of goods sold 3495000 Ending inventory 5*16000=80000 50*15000=750000 Ending inventory values 830000 Sales 25 units*20238=505950 90*20238=1821420 30*20238=607140 65*20238=1315470 Sales 4249980 Sales 4249980 Cost of goods sold (3495000) Gross profit 754980 c)Weighted-average method 50*15000=750000 70*16000=1120000 30*16500=495000 60*17000=1020000 Total units issued 210 cost of goods sold 3385000 Ending inventory 30*17000=51000 25*17200=430000 Ending inventory values 940000 Weighted-average issue price 15000+16000+16500+17000+20238 =16947.6 5 Sales 50*16947.6=847380 70*16947.6=1186332 30*16947.6=508428 60*16947.6=1016856 Sales 3558996 Gross profit Sales 3558996 Cost of sales (3385000) Gross profit 173996 d)-Highest profit is FIFO basis -LIFO report the most current cost in balance sheet -FIFO technique report current cost in measuring income -Weighted-average method results in lowest income tax obligation #Good luck# Homework Assignment #3 - Due November 8, 2015 Problem 1 (40 points) SOLUTION particulars dr Income statement 150000 Account receivables To record the write-off of the Black Point receivable cr particulars dr Accounts receivable 90000 Income statement To restore the portion of the Black Point receivable that was collected cr particulars dr cash 90000 Income statement To record the collection of the Black Point receivable cr particulars Accounts receivables Income statement To record sales on account dr 25,689,000 cr particulars cash Accounts receivables To record collections on account dr 21,300,500 particulars Income statement Account receivables To record the write-off of accounts dr 123,000 particulars Provision for bad debts 150000 90000 90000 25,689,000 cr 21,300,500 cr 123,000 dr 475,000 cr Account receivables To establish the correct balance in the allowance for uncollectibles Problem 2 (60 points) SOLUTION sales per unit 4250000/210 units=20238 a)FIFO Issued 50 units*15000=750000 70*16000=1120000 300*165000 60*17000=1020000 total units issued 210 ending inventory 30*17000=51000 25*17200=430000 Ending inventory=940000 Sales 50*20238=1011900 70*20238=1416660 30*20238=607140 60*20238=1214280 Cost of goods sold=3385000 475,000 Sales=4249980 Gross profit Sales 4249980 Cost of goods sold (3385000) 864980 b)LIFO 25*172000=430000 90*17000=1530000 30*16500=495000 65*16000=1040000 Total units issued 210 cost of goods sold 3495000 Ending inventory 5*16000=80000 50*15000=750000 Ending inventory values 830000 Sales 25 units*20238=505950 90*20238=1821420 30*20238=607140 65*20238=1315470 Sales 4249980 Sales 4249980 Cost of goods sold (3495000) Gross profit 754980 c)Weighted-average method 50*15000=750000 70*16000=1120000 30*16500=495000 60*17000=1020000 Total units issued 210 cost of goods sold 3385000 Ending inventory 30*17000=51000 25*17200=430000 Ending inventory values 940000 Weighted-average issue price 15000+16000+16500+17000+20238 =16947.6 5 Sales 50*16947.6=847380 70*16947.6=1186332 30*16947.6=508428 60*16947.6=1016856 Sales 3558996 Gross profit Sales 3558996 Cost of sales (3385000) Gross profit 173996 d)-Highest profit is FIFO basis -LIFO report the most current cost in balance sheet -FIFO technique report current cost in measuring income -Weighted-average method results in lowest income tax obligation #Good luck#