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Title : WEEK 3 HOMEWORK BUSN 5600 QC F2 2019 ACCOUNTING THEORY AND PRACTICE ASSIGNMENT
Assignment: Week 3 Homework
WEEK 3 HOMEWORK BUSN 5600 QC F2 2019 ACCOUNTING THEORY AND PRACTICE ASSIGNMENT 1. The following is a portion of the current assets section of the balance sheets of Avanti's, Inc., at December 31, 2017 and 2016: 12/31/17 12/31/16 Accounts receivable, less allowance for bad debts of $9,282 and $19,202, respectively $178,205 $222,120 ________________________________________ Required: a. If $11,576 of accounts receivable were written off during 2017, what was the amount of bad debts expense recognized for the year? (Hint: Use a T-account model of the Allowance account, plug in the three amounts that you know, and solve for the unknown.)….ANS……1656 b. The December 31, 2017, Allowance account balance includes $3,045 for a past due account that is not likely to be collected. This account has not been written off. (1) If it had been written off, will there be any effect of the write-off on the working capital at December 31, 2017? Yes No (2) If it had been written off, will there be any effect of the write-off on Net income and ROI for the year ended December 31, 2017? Yes No c. The level of Avanti's sales in 2017 were probably lower as compared to 2016. True False 2. Mower-Blower Sales Co. started business on January 20, 2016. Products sold were snow blowers and lawn mowers. Each product sold for $350. Purchases during 2016 were as follows: Blowers Mowers January 21 20 @ $ 195 February 3 36 @ 199 February 28 33 @ 182 March 13 15 @ 187 April 6 16 @ $ 213 May 22 37 @ 213 June 3 35 @ 219 June 20 56 @ 228 August 15 17 @ 213 September 20 16 @ 213 November 7 19 @ 195 ________________________________________ The December 31, 2016, inventory included 8 blowers and 22 mowers. Assume the company uses a periodic inventory system. Required: a-1. Compute ending inventory valuation at December 31, 2016, under the FIFO and LIFO cost-flow assumptions. (Hint: Compute ending inventory under each method, and then compare results.) a-2. Is there any difference in valuation under LIFO and FIFO. Yes No b. If the cost of mowers had increased to $248 each by December 1, and if management had purchased 30 mowers at that time and if it wants to minimize taxes, which cost-flow assumption was probably being used by the firm? LIFO FIFO 3. The following data are available for Sellco for the fiscal year ended on January 31, 2017: Sales 790 units Beginning inventory 230 units @ $ 4 Purchases, in chronological order 330 units @ $ 4 400 units @ $ 6 240 units @ $ 8 ________________________________________ Required: a. Calculate cost of goods sold and ending inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic inventory system): (Round unit cost to 2 decimal places.) b. Assume that net income using the weighted-average cost flow assumption is $13,000. Calculate net income under FIFO and LIFO. (Round unit cost to 2 decimal places.) 4. Following are condensed income statements for Uncle Bill's Home Improvement Center for the years ended December 31, 2017, and 2016: 2017 2016 Sales $ 811,800 $ 785,400 Cost of goods sold (606,900 ) (540,600 ) Gross profit $ 204,900 $ 244,800 Operating expenses (155,550 ) (142,050 ) Net income (ignoring income taxes) $ 49,350 $ 102,750 ________________________________________ Uncle Bill was concerned about the operating results for 2017 and asked his recently hired accountant, "If sales increased in 2017, why was net income less than half of what it was in 2016?" In February of 2018, Uncle Bill got his answer: "The ending inventory reported in 2016 was overstated by $35,250 for merchandise that we were holding on consignment on behalf of Kirk's Servistar. We still keep some of their appliances in stock, but the value of these items was not included in the 2017 inventory count because we don't own them." Required: a. Recast the 2016 and 2017 income statements to take into account the correction of the 2016 ending inventory error. b-1. Calculate the combined net income for 2016 and 2017 before and after the correction of the error. b-2. The error was corrected in 2017 before it was actually discovered in 2018. True False c. Is there any effect on net income and stockholders' equity in 2018 due to the error? Yes No