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:

1. GGS acquired an additional 10,000 cash from the issuance of common stock.
2. GGS purchased $90,000 of inventory on account.
3. GGS sold inventory that cost $91,000 for $150,000. Sales were made on account.
4. The company wrote-off $800 of uncollectible accounts.
5. On September 1, GGS loaned $15,000 to Eden Co. The note had an 8 percent interest rate and a one-year term.
6. GGS paid $22,000 cash for operating expenses.
7. The company collected $152,000 cash from accounts receivable.
8. A cash payment of $96,000 was paid on accounts payable.
9. The company paid a $10,000 cash dividend to the shareholders.
10. GGS sold an additional amount of inventory for $6,000 on account. The cost of the inventory was $4,000.
11. It is estimated that 1 percent of credit sales will be uncollectible.

Required: Answer the following questions.

1. Provide the journal entry needed for transaction 4, assuming GGS uses the allowance method for accounting for bad debts.

2. What is the adjusting entry GGS would need to record at December 31, 2020 for transaction 5?

3. What is the amount of bad debt expense GGS will report in 2020?
4. What is the NRV that GGS would report on its 2020 balance sheet?
5. What is GGS gross margin for 2020?
6. What is operating income for GGS for 2020?
7. What is the amount of total assets that GGS will report on its 2020 balance sheet?
8. What is the amount of net income GGS will report for 2020?
9. What is the ending balance in Retained Earnings GGS will report for 2020?
10. What is the net cash from operating activites that would be reported on the Statement of Cash Flows for GGS for 2020?
11. Which transaction would be classified as an investing activity on the Statement of Cash Flows?

Problem 2:

The following events apply to Sams Seafood Restaurant for the year ended December 31, 2020, its first year of operations:

1. The company acquired $50,000 cash by issuing common stock.
2. Purchased a new cook top that cost $35,000 cash.
3. Earned $36,000 in cash revenue.
4. Paid $12,000 cash for salaries expense.
5. Recorded depreciation expense on the cook top for 2020 using straight-line depreciation. The cooktop was purchased on January 1, 2020, the expected useful life of the cook top is four years, and the estimated salvage value is $3,000.

Required: Answer the following questions.

1. What is the net income for 2020?

2. What amount of depreciation expense would Sams report on the 2021 income statement?

3. What amount of accumulated depreciation would Sams report on the December 31, 2021, balance sheet?

4. Would the cash flow from operating activites be affected by depreciation in 2021?

5. If Sams Seafood Restaurant decided to sell the new cooktop in 2022 for $10,000, would the company realize a gain or loss? How much?

Problem 3:

The following account balances come from the records of Stone Company:

Beginning Balance Ending Balance

Accounts Receivable $4,000 $4,500

Allowance for Doubtful Accounts $150 $250

During the accounting period, Stone recorded $21,000 of service revenue on account. The company also wrote off a $180 account receivable.

Required: Answer the following questions.

1. Determine the amount of cash collected from receivables.

2. Determine the amount of bad debt expense recognized during the period.

Problem 4:

Classic Auto Parts sells new and used auto parts. Although a majority of its sales is cash sales, it makes a significant amount of credit sales. During Year 1, its first year of operations, Classic Auto Parts experienced the following:

Sales on account $320,000

Cash sales $680,000

Collections of accounts receivable $295,000

Uncollectible accounts written-off during the year $1,400

Required: Answer the following questions.

1. Assume that Classic Auto Parts uses the allowance method of accounting for bad debt amounts and estimates that 1% of its sales on account will not be collected. Answer the following questions:
   1. What is the Accounts Receivable balance at December 31, Year 1?

2. What is the amount of bad debt expense for Year 1?

3. What is the ending balance for Allowance for Doubtful Accounts at December 31, Year 1, after all entries and adjusting entries are posted?

4. What is the net realizable value of accounts receivable at December 31, Year 1?

5. What is the journal entry to record the uncollectible accounts written-off during the year?

6. What is the journal entry to record bad debt expense for Year 1?

2. Assume that Classic Auto Parts uses the direct write-off method of accounting for bad debt amounts. Answer the following questions:
   1. What is the Accounts Receivable balance at December 31, Year 1?

2. What is the amount of bad debt expense for Year 1?

3. What is the net realizable value of accounts receivable at December 31, Year 1?

Problem 5

Canes Restaurant purchased an oven and a delivery truck from a going out of business sale for a combined total of $32,000. An independent appraiser provides the following market values: oven - $15,000; delivery truck - $35,000.

1. How much of the purchase price should Canes allocate to each of the assets?

2. If the oven has a useful life of four years and an estimated salvage value of $1,600, how much depreciation expense should Canes record each year using the straight-line method?