Intermediate Accounting question
Intermediate Accounting question It is November 1, 2010, the first business day of the month, and you have just been hired as the accountant for ABC Corporation, which operates with monthly accounting periods. For simplicity, ignore all tax considerations (include income tax) and assume that ABC Corporation sells one product. All of the company's accounting work has been completed through the end of October, 2010. ABC's Corporation's year end is November 30. The post-closing trial balance at October 31, 2010 follows. Accounts receivable (note 1) Accouts payable (note 2) Accumulated amortization, store equipment Allowance for doubtful accounts Cash Common shares (note 3) Interest receivable (note 4) Merchandise inventory (note ABC Corporation Post-Closing Trial Balance October 31, 2010 Debit 147,700 Credit 466,500 19,261 26,586 1,661,891.50 41,500 131.50 1,200,000 5) Notes receivable (note 4) Prepaid insurance Retained earnings Store equipment (note 7) Utilities payable TOTALS 52,500 24,500 2,539,826 24,950 3,111,673 18,000 3,111,673 Note 1: See the Accounts Receivable Subledger below for details regarding customer balances. Note 2: See the Accounts Payable Subledger below for details regarding creditor balances. Note 3: There are an unlimited number of shares authorized with 20,000 shares issued and outstanding as at October 31, 2010. Note 4: This is a 6% note due October 15, 2015 with interest collectible on the 15th of each month. Refer to the collection schedule below for the note details. Values in schedule have been rounded for convenience. Note 5: See the Merchandise Inventory Subledger below for details of inventory holdings. Note 6: The balance in Prepaid Insurance represents payment for 6 months starting November1, 2010. Note 7: See the Capital Asset Subledger below for detailed information. You have determined that ABC Corporation uses the moving weighted average cost flow assumption under a perpetual system to account for merchandise inventory and that the terms of all credit sales are 2/10, n/30. Merchandise sells for $209 per unit. The following table are 23 source documents from November. Inter-Office Memo 93: November 1, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2791 to Stake Technology Inc. in payment of the November rent, $5400. Charge 40% of the rent to \"Rent expense, selling space\" and the balance to \"Rent expense, office space\". Invoice 7516 Thanks Carter Stark ABC Corporation November 3, 2010 Credit terms: 2/10, n/30 Customer: Allarco Inc. Rep: N/A PO No: Verbal Receipt 1023 Quantity: 1600 Description: Merchandise Inventory Unit Price: $209 Sub total: $334,400 Freight: $0 Total: $334,400 ABC Corporation November 5, 2010 Customer: XYZ Corp. Rep: N/A PO No: Verbal Quantity: 1 Description: Store equipment (NOTE: All of the store equipment owned by ABC Corporation was sold to XYZ Corporation) Inter-Office Memo 94 Unit price: $5950 Sub total: $5950 Paid: $5950 Balance Due: $0 November 7, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2792 to Callaho Inc. in payment of the October 19, 2010 purchase. Deposit Slip (November 9) Thanks, Carter Stark ABC Corporation November 9, 2010 Account No: 139 CUSTOMER: Allarco Inc Cash Account payment RE: Invoice 7516 $327,712 Cheques Invoice 1178 Total Deposits $327,712 Zcom Inc. November 9, 2010 Credit Terms: 1/5, n/15 Customer: ABC Corporation Rep: Carter Stark PO No: Verbal Invoice 1186 Quantity: 9000 Description: Merchandise Inventory Unit Price: $79.50 Sub total: $715,500 Freight: $0 Total: $715,500 Courtland Corp. November 12, 2010 Credit Terms: n/15 Customer: ABC Corporation Rep: Carter Stark PO No: Verbal Credit Memorandum 139 Quantity: 5 Description: Office Furniture (estimated useful life is 10 years, estimated residual value is not available and will be donated to charity) [use the straight line method calculated to the nearest whole month when amortizing this asset] Unit Price: $2400 Sub total: $12000 Freight: $0 Total: $12000 Courtland Corp November 14, 2010 Original Invoice No: 1186 Customer: ABC Corporation Invoice 7517 Quantity: 1 Description: Office furniture returned due to defects. Unit price: $2400 Total: $2400 ABC Corporation November 14, 2010 Credit Terms: 2/10, n/30 Customer: Allarco Inc. Rep: N/A PO No: Verbal Inter-Office Memo 95 Quantity: 8000 Description: Merchandise Inventory Unit Price: $209 Sub total: $1672000 Freight: $0 Total: $1672000 November 15, 2010 From: Carter Stark To: Office Assistant SUBJECT: Issuance of Shares Please issue 14,000 shares at $2 per share. Deposit slip (November 15) Thanks Carter Stark ABC Corporation November 15, 2010 Account No: 140 Customer: ABC Inc. Cash Cheques N/A $1015 (re: interest and principal regarding the note receivable) Inter-Office Memo 96 TOTAL DEPOSITS $1015 November 15, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Employees earn monthly salaries and are paid bimonthly. Please prepare a cheque (#2793) in payment of mid-month sales salaries, $35000 and mid-month office salaries, $11000. Inter-Office Memo 97 Thanks Carter Stark November 18, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please prepare cheque #2794 to pay dividends of $1.10 per share to shareholders of record on today's date. Thanks Inter-Office Memo 98 Carter Stark November 18, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2795 to Zcom Inc. to pay for the November 9 purchase. Invoice 1089 Thanks Carter Stark Callaho Inc. November 18, 2010 Credit Terms: 2/10, n/30 Customer: ABC Corporation Rep: Carter Stark PO No: Verbal Inter-Office Memo 99 Quantity: 10000 Description: Merchandise Inventory Unit Price: $79 Sub total: $790000 Freight: $0 Total: $790000 November 21, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2796 to Courtland Corp. to pay for the November 12 purchase regarding Invoice 1186. Inter-Office Memo 100 Thanks Carter Stark November 21, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write cheque #2797 to Callaho Inc. to pay for the November 18 invoice regarding Invoice 1089. Inter-Office Memo 101 Thanks Carter Stark November 22, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please write-off customer account belonging to Weber Inc. as it has been determined to be uncollectible. Deposit slip (November 23) Thanks Carter Stark ABC Corporation Customer: Allarco Inc. November 23, 2010 Account No: 141 Cash Account payment. RE: Invoice 7517 $1,638,560 Cheques Invoice 7518 Total Deposits $1,638,560 ABC Corporation November 26, 2010 Credit Terms: 2/10, n/30 Customer: X-Cell Inc. Rep: N/A PO No: Verbal Inter-Office Memo 102 Quantity: 4400 Description: Merchandise Inventory Unit Price: $209 Sub total: $919,600 Freight: $0 Total: $919,600 November 28, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please prepare a cheque (#2798) to pay for the October utilities accrued on October 31. Invoice 1445 Thanks Carter Stark Bentley Inc. November 28, 2010 Credit Terms: 1/15, n/30 Customer: ABC Corporation Rep: Carter Stark PO No: Verbal Inter-Office Memo 103 Quantity: 6000 Description: Merchandise Inventory Unit price: $79 Sub total: $474,000 Freight: $0 Total: $474,000 November 30, 2010 From: Carter Stark To: Office Assistant SUBJECT: Cash Disbursement Please prepare a cheque (#2799) in payment of month-end sales salaries, $35000 and month end office salaries, $11000. Thanks Carter Stark For all parts of this question, round all calculations to two decimal places unless otherwise specified. a) Analyze each of the preceding source documents as well as the tables and prepare journal entries using this information only. Note that some source documents may not require an entry. Use the gross method for purchase discounts. Enter an appropriate description when entering the transactions in the journal. Transactions affecting the Accounts Receivable (AR), Accounts Payable (AP), Merchandise Inventory (MI), or Capital Asset (CA) subledgers must be posted into the corresponding subledger(s) with the appropriate posting reference included in the General Journal (use the subledger abbreviations provided). You are not required to post into the General Ledger. NOTE: The subledgers can be found below. (WRITE THE JOURNAL ENTRIES BELOW) General Journal Page G1 Date Account/Explanation PR Debit Credit General Journal Date Account/Explanation Page G2 PR Debit Credit Merchandise Inventory Subledger (Acct. #119) (Note: Recalculate the Balance in Inventory's AvgCost/Unit after each transaction.) *All cost/unit calculations should be rounded to two decimal places. Find the values for each question mark Purchases/TransportationIn/(Purchase Returns/Discounts) Cost of Goods Sold/ (Returns to Inventory) Balance in Inventory Units Units Cost/Unit* Total $ 15,000 80 1,200,000 Date PR Units Cost/Unit* Total $ October 31 BFW D ? 15,000 80 1,200,000 November 3 November 9 November 14 November 18 November 21 November 26 November 28 Cost/Unit* Total $ ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Period Ending October 15, 2010 November 15, 2010 December 15, 2010 January 15, 2011 February 15, 2011 March 15, 2011 April 15, 2011 May 15, 2011 June 15, 2011 July 15, 2011 August 15, 2011 September 15, 2011 October 15, 2011 November 15, 2011 August 15, 2015 September 15, 2015 October 15, 2015 Collection Principal Interest 1,015 752 263 Balance 52,500 51,748 1,015 756 259 50,992 1,015 1,015 1,015 1,015 1,015 1,015 1,015 1,015 1,015 760 764 768 771 775 779 783 787 791 255 251 247 244 240 236 232 228 224 50,232 49,468 48,700 47,929 47,154 46,375 45,592 44,805 44,014 1,015 1,015 795 799 220 216 43,219 42,420 - - - - 1,015 1,015 1,000 1,005 15 10 2,015 1,010 1,015 60,900 1,010 52,500 5 8,400 0 Find the values for each question mark ABC Corporation Accounts Receivable Subledger Acct. #10603, Allarco Inc. Date Desc. PR Debit ? ? ? ? Credit Balance ? ? Acct. #10611, Weber Inc. Date Desc PR Debit . Oct 1 Terms BFW 147,700 Credit Balance 147,700 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 2/10, n/30 ? Acct. #10610, X-Cell Inc. Date Desc. PR Debit D Credit ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Credit Balance ? ? ? ? ? ? ? ? ? ? ? ? Balance ? ? ? ? ? ? ? ? ? ABC Corporation Accounts Payable Subledger Acct. #20105, Callaho Inc. Date Desc. PR Debit Oct 19 Credit Balance 466,500 Acct. #20108, Zcom Inc. Date Desc PR Debit . 466,500 BFW D ? Terms 2/10, n/30 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Credit Balance Acct. #20106, Courtland Corp. Date Desc. PR Debit Credit Balance Acct. #20109, Bentley Inc. Date Desc PR Debit . ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Find the values for each question mark Capital Asset Subledger Cost Information Amortization Desc. Store Equipment Office Furniture PR BFW D ? Purch. Date Amort. Method Cost Residual Life Accum. Amort. Bal., October 31, 2010 Dec 2, 2007 Nov 12, 2010 DoubleDeclining ? Amort. Exp, November, 2010 Accum. Amort. Bal., November 30, 2010 24,950 3,000 5 19,261 ? ? ? ? ? ? N/A N/A Notes: 1) Calculated to the nearest whole month for partial periods. 2) For Double-Declining-Balance, amortization is calculated for the fiscal year and then divided by the number of months the asset was used in that fiscal year to get the amortization per month. Round final values to the nearest whole dollar. *Please note that Oppong Corporation is another name for ABC Corporation, they are they same company QuickTime and a decompressor are needed to see this picture. QuickTime and a decompressor are needed to see this picture. *Please note that Oppong Corporation is another name for ABC Corporation, they are they same company QuickTime and a decompressor are needed to see this picture. QuickTime and a decompressor are needed to see this picture
