Question

1. On November 1, 2021, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $6,000 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2022. Taylor should recognize revenue in 2021 in the amount of

a.$0.

b. $3,000.

c. $6,000.

d. $1,000.

2. Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for sales discounts. What entry would Harvey's make on June 10, assuming the customer made the correct payment on that date?

a.

Cash	46,000
Accounts receivable		46,000

b.

Cash	46,000
Accounts receivable		45,540
Sales discounts revenue		460

c.

Cash	46,460
Accounts receivable		46,000
Sales discounts forfeited		460

d.

Cash	46,000
Accounts receivable		45,540
Sales discounts forfeited		460

3. Logistics Company had the following items listed in its trial balance at 12/31/2021: Balance in checking account, Bank of the East $ 462,000 Treasury bills, purchased on 11/1/2021, mature on 1/30/2022 14,000 Loan payable, long-term, Bank of the East 360,000 Included in the checking account balance is $43,000 of restricted cash that Bank of the East requires as a compensating balance for the $360,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents?

a. $419,000.

b. $462,000.

c. $433,000.

d. $476,000.

4. Data related to the inventories of Costco Medical Supply are presented below: Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling price $ 278 $ 124 $ 327 $ 159 Cost 169 105 280 160 Costs to sell 21 6 16 6 In applying the lower of cost or net realizable value rule, the inventory of rehab equipment would be valued at:

a. $311.

b. $267.

c. $242.

d. $280.

5. California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2021. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2021, $340,000; sales and purchases from January 1, 2021, to May 1, 2021, $1,220,000 and $965,000, respectively. California consistently reports a 30% gross profit. The estimated inventory on May 1, 2021, is:

a. $416,000.

b $451,000.

c. $511,000.

d. $452,600.

6. Madison Co. has determined its year-end inventory on a LIFO basis to be $602,000. Information pertaining to that inventory is as follows: Selling price $ 722,000 Costs to sell 31,000 Normal profit margin 81,000 Replacement cost 622,000 What should be the reported value of Madison's inventory?

a. $691,000.

b. $622,000.

c. $602,000.

d. $610,000.

7.

Excerpts from Huckabee Company's December 31, 2021 and 2020, financial statements are presented below:

	2021				2020
Accounts receivable	$	80,000			$	72,000
Merchandise inventory		58,000				72,000
Net sales		400,000				372,000
Cost of goods sold		240,000				220,000

Huckabee's 2021 receivables turnover (rounded) is:

Multiple Choice

a. 5.00.

b. 5.26.

c. 3.69.

d. 3.16.

Answer 1

1. C. 6000 . There is no need to make it bad debt as Taylor is confident for payment.

2. D.

Cash	46,000
Accounts receivable		45,540
Sales discounts forfeited		460

As discount is booked at the time of sale, it need to be reversed when it is not availed.

3.C. 4,33,000 [4,62,000+14,000 - 43,000 (as this can not be used in near future)}

4. D.$280 [As selling price 327 is higher than Final Sale price 311 (327-16)]

5.B. 4,51,000

Cost of sold inventrory = 12,20,000 - 30% = 8,54,000

Inventory = Opening+ Purchase - Sold

=3,40,000+9,65,000-8,54,000

= 4,51,000

6.C.602,000

NRV minus profit = SP 702000- Cost to sale 31000 - Normal profit margin 81,000 = 6,10,000

Cost = 602000

Which ever is less = 602000

7.B.5.26%

=5.26%