Rex elects to use the deferral method to account for the transaction.

c)

Though the sci-fi figurines were not quite as popular, BAM sold 400 figurines at a sci-fi convention in April. Rex accepted cash only and received

$11,000 for these sales.

d)

In January, BAM determined that it would not be able to collect on $2,000 of its beginning-of-the-year receivables, so it wrote off $2,000 of specific receivables. BAM sold 100,000 other figurines on credit for $120,000. BAM estimates that it will be unable to collect 5 percent of the sales revenue from these sales, but it has not been able to specifically identify any accounts to write off.

e)

f) Assume that BAM correctly determined that its cost of goods sold using an appropriate inventory method is $54,000 this year.

The sci-fi convention in April was held in Chicago, Illinois. Rex attended the convention because he felt it was a good opportunity to gain new customers and to get new ideas for figurines. He paid $350 round-trip airfare, $100 for entrance to the convention, $210 for lodging, $65 for cab fare, and $110 for meals during the trip. He was busy with business activities the entire trip.

g)

On August 1, BAM purchased a 12-month insurance policy that covers its business property for accidents and casualties through July 31 of next year.

The policy cost BAM $3,600.

h)

i) BAM reported depreciation expense of $8,200 for this year.

Rex had previously operated his business out of his garage, but in January he decided to rent a larger space. He entered into a lease agreement on February 1 and paid $14,400 ($1,200 per month) to possess the space for the next 12 months (February of this year through January of next year).

j)

Before he opened his doors for business, Rex spent $30,000 investigating and otherwise getting ready to do business. He expensed $5,000 immediately and is amortizing the remainder using the straight-line method over 180 months.

k)

In December, BAM agreed to a 12-month, $8,000 contract with Advertise-With-Us (AWU) to produce a radio ad campaign. BAM paid $3,000 up front

(in December of this year), and AWU agreed that BAM would owe the remaining $5,000 only if BAM’s sales increased by 15 percent over the 9-month period after the contract was signed.

l)

In November of this year, BAM paid $2,500 in business property taxes (based on asset values) covering the period December 1 of this year through November 30 of next year. In November of last year, BAM paid $1,500 for business property taxes (based on asset values) covering the period December 1 of last year through November 30 of this year.

m)

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