Step by Step Assistance

Saturday, 28 October 2017

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $115,250. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash.

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $115,250. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,300. Southwest Milling had to hire a specialist to calibrate the loader. The specialist’s fee was $1,210. The loader operator is paid an annual salary of $18,700. The cost of the company’s theft insurance policy increased by $1,890 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,100.
    
Required
a.
Determine the amount to be capitalized in an asset account for the purchase of the loader.

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 b. Record the purchase in general journal format.
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Explanation:
a. 
Discount: $115,250 × 6.00% = $6,915
The operator salary and increase in insurance are operating expenses.

Friday, 27 October 2017

At year-end (December 31), Chan Company estimates its bad debts as 0.50% of its annual credit sales of $954,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $477 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare the journal entries for these transactions.

At year-end (December 31), Chan Company estimates its bad debts as 0.50% of its annual credit sales of $954,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $477 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.
 
Prepare the journal entries for these transactions.

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Wednesday, 4 October 2017

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 130 units at $60 per unit.

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 130 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 146-unit purchase at $68 per unit; the second was a 224-unit purchase at $72 per unit. During the period, it sold 292 chairs.
 
Required
Determine the amount of product costs that would be allocated to cost of goods sold and ending
inventory, assuming that Cortez uses
a. FIFO:

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b. LIFO:
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c. Weighted average:
 
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Explanation:
CORTEZ COMPANY
Inventory Purchases
  Beginning inventory 130   @ $60   = $7,800  
  First purchase 146   @ 68   = 9,928  
  Second purchase 224   @ 72   = 16,128  
 
     
  Goods available for sale 500         $33,856  
 

     




c.        
Total Cost ÷ Total Units = Cost per Unit
$ 33,856 ÷ 500 = $ 68