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Problem 1: The following are ending balances for Georges Gorcery Store (GGS) as of December 31, 2019: Cash, $8,000, Accounts Receivable, $40,000, Allowance for Doubtful
Problem 1:
The following are ending balances for Georges Gorcery Store (GGS) as of December 31, 2019: Cash, $8,000, Accounts Receivable, $40,000, Allowance for Doubtful Accounts, $2,000, Inventory $80,000, Accounts Payable, $20,000, Common Stock, $40,000, and Retained Earnings, $66,000. The company uses the allowance method to record bad debts.
The following is a list of transactions that happened in 2020 for Georges Grocery Store:
- GGS acquired an additional 10,000 cash from the issuance of common stock.
- GGS purchased $90,000 of inventory on account.
- GGS sold inventory that cost $91,000 for $150,000. Sales were made on account.
- The company wrote-off $800 of uncollectible accounts.
- On September 1, GGS loaned $15,000 to Eden Co. The note had an 8 percent interest rate and a one-year term.
- GGS paid $22,000 cash for operating expenses.
- The company collected $152,000 cash from accounts receivable.
- A cash payment of $96,000 was paid on accounts payable.
- The company paid a $10,000 cash dividend to the shareholders.
- GGS sold an additional amount of inventory for $6,000 on account. The cost of the inventory was $4,000.
- It is estimated that 1 percent of credit sales will be uncollectible.
Required: Answer the following questions.
- Provide the journal entry needed for transaction 4, assuming GGS uses the allowance method for accounting for bad debts.
- What is the adjusting entry GGS would need to record at December 31, 2020 for transaction 5?
- What is the amount of bad debt expense GGS will report in 2020?
- What is the NRV that GGS would report on its 2020 balance sheet?
- What is GGS gross margin for 2020?
- What is operating income for GGS for 2020?
- What is the amount of total assets that GGS will report on its 2020 balance sheet?
- What is the amount of net income GGS will report for 2020?
- What is the ending balance in Retained Earnings GGS will report for 2020?
- What is the net cash from operating activites that would be reported on the Statement of Cash Flows for GGS for 2020?
- Which transaction would be classified as an investing activity on the Statement of Cash Flows?
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