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Final Exam

Problem 3: Kevin Transportation owns 3 buses depreciated using

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154 views5 pages

Final Exam

Problem 3: Kevin Transportation owns 3 buses depreciated using

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Mishalm96
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Mishal Mustafa

BTA111
Prof. Wu
Final Exam
Problem #1: Periodic Inventory Methods/Valuations
Hyper company had a beginning inventory on January 1 of 160 units of product 4-18-19 at a cost
of $20 per unit. During the year, the following purchases were made:
Mar 15 400 units at $23
Sept 4 330 units at $26
July 20 250 units at $24
Dec 2 100 units at $29

1,000 units were sold. Hyper Company uses a periodic inventory system.
Instructions:
a) Determine the cost of goods available for sale

Units Cost per Unit Value


Beginning Inventory 160 $20 $3,200
Purchases
Mar 15 400 $23 $9,200
Sept 4 330 $26 $8,580
July 5 250 $24 $6,000
Dec 2 100 $29 $2,900
1,240 $29,880

b) Determine 1) the ending inventory and 2) the cost of goods sold under each of the
assumed cost methods (FIFO, LIFO, and average cost).
FIFO LIFO Weighted Average
Cost of Goods Sold $23,620 $24,840 $24,096
Ending Inventory $6,260 $5,040 $5,784

Weighted Average
Units A 1240
Total Cost B $29,880
Average Cost C=B/A $24.10
FIFO
Total Units Available for Sale 1240
Units Sold 1000
Ending Inventory Units 240

Valuation
Ending Inventory 100 $29 $2,900
140 $24 $3,360
Value of Ending Inventory $6,260

Cost of Goods Sold $23,620

LIFO
Total Units Available for Sale 1240
Units Sold 1000
Ending Inventory Units 240

Valuation
Ending Inventory 160 $20 $3,200
80 $23 $1,840
Value of Ending Inventory $5,040

Cost of Goods Sold $24,840

Weighted Average
Total Units Available for Sale 1240
Units Sold 1000
Ending Inventory Units 240

Valuation
Ending Inventory 240 $24.10 $5,784

Value of Ending Inventory $5,784

Cost of Goods Sold (Total Purchase & Opening Stock Minus Closing Stock) $24,096

c) Which cost flow method results in 1) the highest inventory amount for the balance sheet,
and 2) the highest cost of goods sold for the income statement?

FIFO gives the highest amount of inventory for balance sheet.


LIFO gives the highest cost of goods sold.
Problem #2: Accounts Receivables Valuation (under allowance method)
The ledger of Meteo Company at the end of the current year shows Accounts Receivable
$420,000, Sales Revenue $920,000, and Sales Returns and Allowances $10,000.
Instructions:
If Allowances for Doubtful Accounts has a credit balance of $3,000 in the trial balance,
journalize the adjusting entry at December #1, assuming bad debits are expected be:
1) 1.5% of nets sales and
2) 8% of Accounts Receivable
3) If allowance for doubtful accounts has a debit balance of $600 in the trial balance,
journalize the adjusting entry at December 31 assuming bad debits are expected to be 1)
0.85% of net sales and 2) 6.5% of accounts receivable
Net Sales= Sales Revenue – Sales Revenue and Allowances
= $920,000-$10,000
= $910,000
Accounts Receivable= $420,000

1) 1.5% of Net Sales


Expected Uncollectible= 1.5% * Net Sales
= 1.5% * $910,000
= $13,650
Bad Debt Expense= Expected Uncollectible
= $13,650
Date General Journal Debit Credit
Dec 31 Bad Debt Expense $13,650
Allowance for Uncollectible Accounts $13,650

2) 8% of Accounts Receivable
Expected Uncollectible= 8% * Accounts Receivable
= 8% * $420,000
= $33,600
Bad Debt Expense= Expected Uncollectible – Unadjusted Credit Balance of Allowance for
doubtful Account
= $33,600- $3,000
= $30,600
Date General Journal Debit Credit
Dec 31 Bad Debt Expense $30,600
Allowance for Uncollectible Accounts $30,600

3) 0.85% of Net Sales


Expected Uncollectible= 0.85% * Net Sales
= 0.85% * $910,000
= $7,735
Bad Debt Expense= Expected Uncollectible
= $7,735
Date General Journal Debit Credit
Dec 31 Bad Debt Expense $7,735
Allowance for Uncollectible Accounts $7,735

6.5% of Accounts Receivable


Expected Uncollectible= 6.5% * Accounts Receivable
= 6.5% * $420,000
= $27,300
Bad Debt Expense= Expected Uncollectible + Unadjusted Credit Balance of Allowance for
doubtful Account
= $27,300+$600
= $27,900
Date General Journal Debit Credit
Dec 31 Bad Debt Expense $27,900
Allowance for Uncollectible Accounts $27,900

Problem #3: Fixed Assets and Depreciation


In recent years, Kevin Transportation purchased 3 used buses. Because of frequent turnover in
the accounting department, a different accountant selected the depreciation method for each bus,
and various methods were selected. Information concerning the buses is summarized as follows
Bus Acquired Cost Salvage Useful Life Depreciation
Value in Years Method
1 1/1/17 96,000 6,000 5 Straight Line
2 1/1/17 110,000 10,000 4 Declining
3 1/1/18 92,000 8,000 5 Units of
Activity

For the declining balance method, the company uses the double declining rate. For the units of
activity method, the total miles are expected to be 120,000 miles. Actual miles of use in the first
3 years were 2018, 24,000; 2019, 34,000; 2020, 30,000.
Instructions:
Compute the amount of accumulated depreciation on each bus at Dec. 31, 2019.
Bus #1

Bus #3

Total = 40,600

Bus 1 54,000
Bus 2 96,250
Bus 3 40,600

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