Answered You can hire a professional tutor to get the answer.

QUESTION

Mikor has an account payable of $7,700 due to Smiley, Inc., one of its suppliers. The amount was due to be paid on October 15, 2016.

1. Mikor has an account payable of $7,700 due to Smiley, Inc., one of its suppliers. The amount was due to be paid on October 15, 2016. Mikor only had enough cash on hand then to pay $1,700 of the amount due, so Mikor's treasurer called Smiley's treasurer and agreed to sign a note payable for the balance. The note was dated October 15, 2016, had an interest rate of 8% per annum, and was payable with interest on December 31, 2016.

    Use the horizontal model, or write the journal entry, to show the effect of:

    a. The October 15, 2016 payment of $1,700 and the creation of a note payable for the balance    

        owed.

    b. The October 31, 2016 accrual of interest expense for the month of October.

    c. The December 31, 2016 payment of the note and all of the interest due. Interest for      

        November and December had not been accrued.

2. On January 10, 2016, Jeanco paid $2,100 rent for a storage facility for the period from

    January 10 through May 31. The rent charge is $450 per month.

    Use the horizontal model, or write the journal entry, to show the effect of:

    a. The January 10, 2016 rent payment assuming that the disbursement was recorded as an

        expense.

    b. The January 31, 2016 adjustment recorded to show the appropriate amount of expense in the

        income statement of Jeanco for the month of January.

WEEK 2 EXERCISE           CHAPTER 4   (continued)

    c. Show an alternative way of recording the disbursement of $2,100 on January 10, 2016.

    d. Record the adjustment that would be appropriate at January 31, 2016 if the disbursement had

        been recorded as in c.

    e. What is the effect of the difference between the two methods of recording these items (a and b

         versus c and d) on the:

        1. Income statement for the month of January?

        2. Balance sheet at January 31?

3. A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. The income

    statement showed net income of $3,900, and the balance sheet showed beginning retained

    earnings of $39,200. No dividends were declared or paid during the year. The firm's accountant

    reviewed the bookkeeper's work and determined that adjusting entries should be made which

    would increase revenues by $2,200, and decrease expenses by $900.

    a. What will be the amount of net income after the above adjustments are recorded?

    b. What was the ending retained earnings balance on the balance sheet prepared by the

        bookkeeper?

    c. What is the correct ending balance in retained earnings to be reported on the balance sheet?

WEEK 2 EXERCISE            CHAPTER 5

A. Accounts Receivable

1. This question is designed to help you reason through the transactions related to accounting

    for accounts receivable.  For each of the transactions described below (items a-d), enter the

    effects of the transaction on the appropriate side (debit or credit) of the T-accounts affected.

    Note that the Cash account is not included in the T-accounts shown below, but would be

    increased by transaction b. The Sales account is not included, but would be increased by

    transaction a.

    a. Credit sales.

    b. Collections from customers.

    c. Write‑off of uncollectible accounts.

    d. Estimate of bad debts expense.

------------------------------------------------------------------  Balance Sheet / Income Statement -------

            Allowance for

        Accounts Receivable                   Uncollectible Accounts               Bad Debts Expense

Beginning Balance                                                                    Beginning Balance  

                                                                                                                                          Total for the    

Ending Balance                                                                       Ending Balance              Period

2.. The remaining questions relate to the following presentation in the balance sheets of HiROE Co.    

    at December 31, 2017 and 2016:

                                                                                                                       12/31/17  12/31/16

    Accounts receivable, less allowance for

        uncollectible accounts of $12,000 and

        $4,000, respectively.................................................................         $487,000  $406,000

    a. Describe how the allowance amount at December 31, 2017 was most likely determined.

    b. If the bad debt expense for 2017 totaled $14,000, what was the amount of accounts

        receivable written off during the year? (Hint: Using the T‑account model of the allowance

        account, plug in the three amounts that you know and then solve for the unknown.)

WEEK 2 EXERCISE            CHAPTER 5   (continued)

2. c. The December 31, 2017 allowance account balance includes $3,500 for a past due account

        that is not likely to be collected. This account has not been written off. If it had been written

         off, what would have been the effect of the write off on:

        1. Working capital at December 31, 2017?

        2. Net income and ROI, for the year ended December 31, 2017?

  d. What do you suppose was the level of HiROE's sales in 2017, compared to 2016?

B. Inventories

1. This question is designed to help you reason through the transactions related to accounting

    for inventories. For each of the transactions described below (items a and b), enter the effects of

    the transaction on the appropriate side (debit or credit) of the T-accounts affected. Note that the

    Cash and Accounts Payable accounts are not included in the T-accounts shown below, but

    would be credited for the expenditures involved in transaction a.

    a. Cost of items purchased or made.

    b. Cost of items sold.

         ------------------------ Balance Sheet / Income Statement ------------------------

                            Inventory                                       Cost of Goods Sold              

            Beginning Balance                                                                                                                                                              

            Ending Balance                                                 Total for the Period    

WEEK 2 EXERCISE            CHAPTER 5  (continued)

2. Assume that the company does not keep track of the physical items sold and does not record the

    cost of an item sold at the same time that the sale is recorded. Assume also that the company

    does actually count (and determine the cost of) its inventory at the end of every accounting

    period. Construct a model (i.e., equation) that this company could use to calculate the cost of

    goods sold at the end of the period.

3. If the beginning balance of the inventory account and the cost of items purchased or made

    during the period were correct, but an error resulted in understating the firm's ending inventory

    balance by $4,000, would the firm's net income be affected?  If your answer is "yes," explain

    the amount and direction (overstated—too high or understated—too low) of the effect on net  

    income.

4. Assume that the purchase or manufacturing cost of inventory items has been rising over a period

    of time and that the LIFO cost flow assumption has been used. Would the firm's margin,

    turnover, and ROI have been higher or lower than they would have been under the FIFO cost

    flow assumption?  Consider the impact on margin, turnover, and ROI separately, and use the

    equations shown below to help you think through your answer.

                      ROI                        =          MARGIN          x                  TURNOVER

             NET INCOME                         NET INCOME                                 SALES

 AVERAGE TOTAL ASSETS  =            SALES            x      AVERAGE TOTAL ASSETS

Show more
LEARN MORE EFFECTIVELY AND GET BETTER GRADES!
Ask a Question