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ACC422 - Intermediate Accounting II Individual Assignments - Week 2 This assignment is worth a total of 75 points distributed evenly among the four problems. It will be graded based upon both the accuracy of your solutions (2/3) and effort (1/3). Points for effort will be impacted by poor formatting, poor organization, clear lack of effort, and careless errors. Any simple arithmetic errors, unbalanced journal entries, or unbalanced schedules will result in zero effort points for that problem. Show your work and double check your math and entries! Problem 1: The BTA Company's bank accounts, along with balances, at the end of December 31, 2011 are: Bank Account Type CDB Trust Co. ELM National Bank ELM National Bank ELM National Bank ELM National Bank EBM State Bank Savings Checking - Acct #2651797 Checking - Acct #4725042 Savings Certificate of Deposit Checking - Acct #5755687 Balance $4,987,000 $63,000 ($720) $1,676,000 $88,000 ($13,000) 1) Indicate how each of the following items should be classified in BTA Company's financial statements as of December 31. 2011. Classify each as one of: Cash Cash Equivalent Accounts Receivable Temporary Investment Prepaid Expense Other Current Asset Fixed Asset Other Long Term Asset Accounts Payable a. A customer paid for merchandise with a check dated January 2, 2012 in the amount of $620. b. BTA Company's board of directors has restricted cash in the amount of $680,000 for the construction of a new office building to begin in 2013. The cash is in the Company's savings account at CDB Trust Co. c. BTA Company holds $27,000 of U.S. Treasury bills that mature on January 21, 2012. d. BTA Company advanced an employee $450 for a business trip. The employee is an outside salesman and he pays his own expenses. Consequently, BTA Company will recover the $450 from the employee's next paycheck. e. BTA Company has a money market fund with an investment fund in the amount of $39,000. This particular money market fund allows withdrawals only upon written request. f. An employee of BTA Company, lost his wallet on the way to work. With the office manager's approval, he was issued $90 from the petty cash fund to help him until he could visit his bank. He signed a note placed in the petty cash box that he owed BTA Company $90. g. BTA Company holds a certificate of deposit with the ELM National Bank in the amount of $53,000 that matures on February 28, 2012. h. The petty cash box contains $14 of U.S. Postage Stamps. i. The Company has overdrawn checking account # 4725042 at ELM National Bank $720. j. The Company holds commercial paper from the DTV Company in the amount of $55,000 and maturing on February 28, 2012. k. BTA Company has loaned $81,000 to its wholly owned subsidiary HCK Company. l. BTA Company holds a certificate of deposit with the ELM National Bank in the amount of $35,000 that matures on April 30, 2012. m. BTA Company has a money market fund with WBW Investment Fund in the amount of $216,000. BTA Company can write checks on the fund. n. The petty cash fund contains $9 in coins and $392 in currency. o. The Company holds U.S. Treasury bills in the amount of $34,000 that mature on May 31, 2012. p. The board of directors has restricted $1,198,000 of the cash in CDB Trust Co. for use in constructing a new factory in 2012. q. ELM National Bank has returned a check that BTA Company deposited from a customer in the amount of $620. r. As one of the terms of a loan agreement, BTA Company must maintain $319,000 in their savings account at ELM National Bank. The loan is in the amount of $1,923,000 and must be repaid no later than December 31, 2012. s. As one of the terms of another loan agreement, BTA Company must maintain an additional $80,000 in their savings account at ELM National Bank. That loan is in the amount of $626,000 and must be repaid no later than July 31, 2013. t. The Company has overdrawn checking account 5755687 at EBM State Bank $13,000. u. The Company advanced $470 for travel expenses to an employee for travel to another company location for a meeting. Her travel expenses are paid by the company. v. The Company holds commercial paper from the DTV Company in the amount of $20,000 and maturing on May 30, 2012. Problem 2: The following are account balances of the WBW Company as of December 31, 2011 before any adjustments: Account Debit Accounts Receivable Allowance for Doubtful Accounts Sales Revenue Bad Debt Expense Credit $2,029,000 $104,700 $10,766,000 $0 It has been determined that it is very unlikely that the following Accounts Receivable accounts will be collected but no entries have yet been recorded to write off the accounts receivable balances: DTV Company: HCK Company: EBM Company: $28,000 $31,000 $22,000 Analysis of historical balances indicates that approximately 1.2% of all sales is a reasonable estimate of uncollectable accounts under the percentage of sales method and 5.7% of accounts receivable is a reasonable estimate of uncollectable accounts under the percentage of receivables method. Instructions: 1. Record the journal entries necessary to properly record 2011 bad debt expense for the WBW Company each of the following assumptions: a. The company uses the percentage of sales method. b. The company uses the percentage of receivables method. 2. Compute the net realizable value of accounts receivable before and after the write- off of the doubtful accounts and the recording of bad debt expense under each of the following assumptions: a. Before recording entries to write off the doubtful accounts and bad debt expense, and the company uses the percentage of sales method. b. After recording entries to write off the doubtful accounts and bad debt expense, and the company uses the percentage of sales method. c. Before recording entries to write off the doubtful accounts and bad debt expense, and the company uses the percentage of receivables method. d. After recording entries to write off the doubtful accounts and bad debt expense, and the company uses the percentage of receivables method. Problem 3: Beginning inventory on March 1 consisted of 1,000 units each costing $6.80 . During March, the following was purchased for inventory: Date March 5 March 10 March 14 March 22 March 28 Purchase 4,000 units at a cost of $7.80 each 2,000 units at a cost of $7.30 each 2,800 units at a cost of $7.45 each 4,000 units at a cost of $7.55 each 4,000 units at a cost of $7.65 each During March, the following was sold from inventory: Date March 3 March 12 March 17 March 21 March 25 March 31 Sales 900 units at a price of $13.60 each 4,500 units at a price of $15.60 each 3,300 units at a price of $14.90 each 400 units at a price of $14.90 each 4,300 units at a price of $15.10 each 3,800 units at a price of $15.30 each Instructions: Compute the cost of goods sold and the ending inventory value as of March 31 under each of the following assumptions: 1. Periodic Inventory Method a) FIFO b) LIFO c) Weighted Average 2. Perpetual Inventory Method a) FIFO b) LIFO c) Weighted Average Problem 4: Information relating to the DTV Company's inventory as of December 31, 2011 includes: 1. DTV Company uses the periodic inventory method. 2. On December 31, a physical count of inventory indicates that $365,400 of inventory was on hand. 3. DTV Company shipped $81,100 of merchandise to the HCK Company on December 4. 5. 6. 7. 8. 9. 28, FOB shipping point. HCK Company actually received the shipment on January 4. DTV Company ordered $80,900 of merchandise from the EBM Company on December 29, FOB destination. EBM Company shipped the merchandise on December 31 and DTV Company received the merchandise on January 2. DTV Company ordered $89,900 of merchandise from the ELM Company on December 31, FOB shipping point. PDQ shipped the merchandise on January 2 and DTV Company received the shipping on January 5. DTV Company shipped $68,300 of merchandise to the CDB Company on December 27, FOB destination. CDB Company received the shipment on January 3. DTV Company ordered $93,800 of merchandise from the WBW Company on December 31, FOB shipping point. WBW Company shipped the merchandise on the same day and DTV Company received the shipment on January 2. DTV Company's inventory count included $20,400 in merchandise it received from the BTA Company with the agreement that DTV Company would try to sell it, keep 20% of the sales price, and remit the remainder the BTA Company. If the merchandise does not sell it will be returned to BTA Company. DTV Company shipped $60,500 of merchandise on December 15 to the EBM Company. Prior to the shipment, DTV Company agreed to repurchase the inventory on January 15 for $60,500 plus 7.2% and to pay all costs of shipping both ways. Instructions: 1) Prepare a schedule in good form reconciling the physical count value with the correct ending inventory value to be shown in the balance sheet for DTV Company. Note: A schedule in good form simply means a well labeled and organized listing beginning with the physical count value and ending with the correct ending inventory value to be shown on the balance sheet. Each adjusting amount should be clearly labeled in the schedule. Another accountant picking up your work should be able to determine exactly the adjustments you made and why you made them