Question

If you could answer all 4 that would be greatly appreciated, thanks

1.

Hull Company reported the following income statement information for the current year:

Sales	$	413,000
Cost of goods sold:
Beginning inventory	$	136,500
Cost of goods purchased		276,000
Cost of goods available for sale		412,500
Ending inventory		147,000
Cost of goods sold		265,500
Gross profit	$	147,500

The beginning inventory balance is correct. However, the ending inventory figure was overstated by $23,000. Given this information, the correct gross profit would be:

• $137,500.

• $124,500.

• $147,500.

• $170,500.

• $113,500.

2.

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $98,400; Allowance for Doubtful Accounts, credit balance of $1,081. What amount should be debited to Bad Debts Expense, assuming 5% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

• $4,920.

• $1,081.

• $6,001.

• $2,947.

• $3,839.

3.

Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $15,662. Franklin's August bank statement shows $16,237 on deposit in the bank. Determine the adjusted cash balance using the following information:

Deposit in transit	$	5,250
Outstanding checks	$	4,400
Bank service fees, not yet recorded by company	$	75
The bank collected on a note receivable, not yet recorded by the company	$	1,500

The adjusted cash balance should be:

• $21,487

• $15,587

• $17,087

• $17,162

• $11,837.

4.

Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $9,088. FICA tax for Social Security is 6.2% on the first $118,500 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The amount of Federal Income Tax withheld from his earnings was $1,507.97. What is the amount of the employer's payroll taxes expenses for this employee? (Round your intermediate calculations to two decimal places.)

• $42.00

• $563.46

• $378.00

• $131.78

• $1,115.24

Answer 1

SOLUTION

Question -1

The correct gross profit would be $124,500 thus Option B is correct.

Gross Profit = Sales - Cost of goods sold

=$413,000 - $265,500

=$147,500

The ending inventory is overstated by $23,000 which gives rise to overstatement of gross profit by $23,000.

Therefore, gross profit is to be reduced by the amount of $23,000 in order to arrive at the correct gross profit.

Thus, the gross profit = $147,500 - $23,000

=$124,500

Question - 2

Option E is correct, i.e. $3,839

Debit balance in Account Receivable = $98,400

Given that 5% of Receivables will be uncollectible

5% of receivables = $98,400 * 5% = $4,920

Balance in Allowance for Doubtful Accounts (Credit) = $1,081

Balance to be expensed to Bad debts account = $4,920 - $1,081 = $3,839

Question - 3

Adjusted cash balance = $17,087 i.e. Option C is correct.

Book balance	15,662
Less: Bank service fees	(75)
Add: Note collected	1,500
Adjusted cash balance	17,087

Question - 4

Employer's payroll taxes expense = $1,115.24 thus Option E is correct.

Social Security tax (9,088*6.2%)	563.46
Medicare tax (9,088*1.45%)	131.78
FUTA (7,000*0.6%)	42
SUTA (7,000*5.4%)	378
Employer's payroll taxes expense	1,115.24