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    Solutionsmidterm ACCT5111 F

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    Solutionsmidterm ACCT5111 F

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    yiwenchen718
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    SolutionsmidtermACCT5111F

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    7 views2 pages

    Solutionsmidterm ACCT5111 F

    Uploaded by

    yiwenchen718

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Solutions midterm ACCT5111F

    Problem 1

    You must begin by computing the beginning and ending gross balances in the A/R account.

    Accounts receivable Allowance for bad debts


    Begin. Bal 13,389 375 beg. Bal.
    56 write-off 14 bad debt exp.
    New A/R 69,943 67,956 cash collections Write-off 56
    Ending bal. 15,320 333 ending bal.

    Problem 2

    Inventory
    Beginning balance 7,000 @ 11
    Purchase March 5 19,000 @ 9 Sale 8,000 @ 28
    Purchase Sept. 19 10,000 @ 5 Sale 16,000 @ 30

    12,000 units in ending inventory.


    Ending FIFO inventory =
    10,000 @ 5 = 50,000
    2,000 @ 9 = 18,000
    = 68,000

    Cost of Goods Sold under FIFO = 77,000 + 221,000 – 68,000 = 230,000

    Ending LIFO inventory =


    7,000 @ 11 = 77,000
    5,000 @ 9 = 45,000
    = 122,000

    Cost of Goods Sold under LIFO = 77,000 + 221,000 – 122,000 = 176,000

    Income statement through Gross Profit:

    Under FIFO Under LIFO


    Sales 704,000 704,000
    Cost of Goods Sold 230,000 176,000
    Gross Profit 474,000 528,000
    Operating expenses 400,000 400,000
    Pre-tax profit 74,000 128,000

    In an environment of falling prices, LIFO generates a lower Cost of Goods Sold and higher gross profit.
    Thus, under such circumstances, FIFO is preferable for tax purposes.
    Problem 3

    1) Journal entry for sale of property:

    Cash 53
    Accumulated dep. 774
    Loss on sale of property 13
    Property sold 840

    2) Computation of impairment

    Property, plant & equipment Accumulated depreciation


    Beg. Bal. 39,151 21,190 beg. bal.
    Capex 2,328
    840 property sold (gross) 1,923 depreciation exp.
    19 impairment Acc. dep. on
    sold property
    774
    Ending bal. 40,620 22,339 ending bal.

    Journal entry for impairment:

    Impairment expense 19
    Property, plant, & equipment 19

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