Question
There are two exercises in this Project 1.2; Journal Entries for Inventory & Accounts Receivable Part I and Journal Entries for Inventory & Accounts Receivable
- There are two exercises in this Project 1.2; Journal Entries for Inventory & Accounts Receivable Part I and Journal Entries for Inventory & Accounts Receivable Part II.
- Please read the following instructions and review the table carefully. Then, enter answers for journal items [A] to [L] for Part II in the next two items in this Lesson, called Project 1.2 Journal Entries for Inventory & Accounts Receivable Part I and Project 1.2 Journal Entries for Inventory & Accounts Receivable Part II.
The Balance Sheet of the Illini as of 12/31/20X0:
Illini Company, Inc.Balance Sheet as of 12/31/20X0
Current Assets:
Cash 1,500,000
Accounts receivable, net 18,000
Inventory 50,000
Total current assets 1,568,000
Equipment 90,000
Goodwill 20,000
Total assets 1,678,000
Liabilities and shareholders' equity
Shareholders' equity:
Common stock, 20,000 shares outstanding, $1 par 20,000
Additional paid-in capital 280,000
Retained earnings 1,378,000
Total shareholders' equity 1,678,000
Total liabilities and shareholders' equity $1,678,000
Note that all additional paid-in capital (APIC) sub accounts (e.g., APIC-options and APIC-treasury stock), if any, are tracked in the Additional paid-in capital account on the Balance Sheet.
Project 1.2 Topic: Inventory and Accounts Receivable Part 1
Illini Company uses a LIFO periodic inventory system and physically counts inventory only at year-end. Illini has the following transactions affecting inventory in 20X1 and 20X2 (suppose there is no loss of inventory):
1/1/20X1 Beginning balance: 1,000 units @ $50/unit
2/15/20X1 Purchase 6,000 units @ $65/unit in cash
4/1/20X1 Purchase 8,000 units @ $60/unit on account with terms of 2/10, n/30. Illini uses the gross method to record purchases.
4/9/20X1 Pay $392,000 ($400,000 less 2% discount) for 4/1/20X1 purchases
4/28/20X1 Pay the remaining $80,000 for 4/1/20X1 purchases
9/1/20X1 Sell and ship 10,000 units @ $100/unit on credit (i.e., not receiving cash right away) to a customer f.o.b. shipping point
12/28/20X1 Sell and ship 2,000 units @ $100/unit on credit to a customer f.o.b. destination
1/3/20X2 The customer receives the products shipped on 12/28/20X1
4/1/20X2 Purchase 8,000 units @ $70/unit in cash
9/1/20X2 Sell and ship 10,000 units @ $100/unit on credit to a customer f.o.b. shipping point
Project 1.2 Topic: Inventory and Accounts Receivable Part 2
Illini Company uses the Balance Sheet approach to estimate bad debt. On 12/31/20X0 (or equivalently 1/1/20X1), Illini's allowance for uncollectible accounts has a credit balance of $2,000. For 20X1 and 20X2 sales, please refer to the information disclosed above. During 20X1 and 20X2, Illini collects $980,000 and $1,160,000, respectively, of the receivables. The write-offs in 20X1 and 20X2 are $1,000 and $2,000, respectively. Illini has the following age summary of year-end accounts receivable.
Age groups | 12/31/20X1 | 12/31/20X2 | ||||||
Amounts | Estimated percent uncollectible | Amounts | Estimated percent uncollectible | |||||
0-60 days | $20,000 | 3% | $40,000 | 3% | ||||
61-90 days | $10,000 | 10% | $20,000 | 10% | ||||
91-120 days | $5,000 | 25% | $10,000 | 25% | ||||
Over 120 days | $4,000 | 50% | $7,000 | 50% | ||||
Total | $39,000 |
| $77,000 |
Project 1.2 Part 2 Balance Sheet
Date | Account Name | Debit | Credit | ||
20X1 collections | Cash | [A] | |||
Accounts Receivable | [B] | ||||
20X1 write-offs | Allowance for U/A | [C] | |||
Accounts Receivable | [D] | ||||
20X1 provision for doubtful accounts: | |||||
Bad debt expense | [E] | ||||
Allowance for U/A | [F] | ||||
20X2 collections: | Cash | [G] | |||
Accounts Receivable | [H] | ||||
20X2 write-offs: | Allowance for U/A | [I] | |||
Accounts Receivable | [J] | ||||
20X2 provision for doubtful accounts: | |||||
Bad debt expense | [K] | ||||
Allowance for U/A | [L] |
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