Question

Use the following information for questions 29 – 32 regarding Peach Co. in 2017 (assume this is the first year of operations for Peach Co., and assume Peach pays cash unless noted otherwise). Peach’s year-end is December 31. Assume Peach uses FIFO perpetual for inventory, straight-line depreciation, and estimates it will not collect 4% of accounts receivable.

1/1 Issues 10,000 shares of common stock for $5 each.

2/15 Purchase 2,000 units of inventory at $4/unit.

3/1 Sells 500 units of inventory for $16/unit, customer pays on account.

4/1 Signs a 2-year lease for its manufacturing facility, paying the first years’ rent of $3,600 upfront.

6/1 Purchases equipment for $60,000 on account, 6 year useful life, $7,000 salvage value. It cost Peach $10,000 to have the equipment installed, also paid on account.

7/1 Sells 100 units of inventory for $20 per unit, customer pays on account.

9/1 The customer from the 3/1 sale of inventory paid back 70% of their balance.

10/15 Declared and paid $3,000 of dividends.

12/1 Purchase $1,200 worth of supplies. By 12/31, 20% have been used.

(the answers are A,B,D I don't know how to get them)

19. What is Peach’s bad debt expense for 2017?
    1. $176
    2. $320
    3. $400
    4. $4,000

20. What is cost of goods sold for 2017?
    1. $8,000
    2. $2,400
    3. $5,600
    4. $2,000

21. What amount is reported on Peach’s December 31, 2017 Balance Sheet related to Property, Plant, and Equipment?
    1. $58,847
    2. $51,167
    3. $59,500
    4. $63,875

Answer 1

Peach's Bad debt for the year 2017 is $ 176
Beg Bal AR	$                -
Sales on 03/01	$    8,000.00
Sales on 07/01	$    2,000.00
Collection on 09/01	$ (5,600.00)	70% of Sales made on 03/01
End Bal AR	$    4,400.00
4% Uncollectible on AR	$       176.00
Cost of good Sold for 2017 is $2,400
Peach uses FIFO perpectual method of inventory ,Therfore COGS is calculated as follows
	Units	Rate	Cost
Purchase	2,000.00	$      4.00	$   8,000.00
Less
Sales on 03/01	$     (500.00)	$      4.00	$ (2,000.00)
Sales on 07/01	$     (100.00)	$      4.00	$     (400.00)
Total COGS	$     (600.00)	$      4.00	$ (2,400.00)
COGS	$       600.00	$      4.00	$   2,400.00
Amount reported on Peach's Dec,31 2017 balance sheet related to PPE is $ 63,875
Cost of Equipment	$ 60,000.00
Add Installation cost	$ 10,000.00
Acquisition cost of Equipment	$ 70,000.00
No of useful life	6.00 years	y
Date of Acquisition	June 01,2017
Salvage Value	$    7,000.00
Method used	Straight line method
Formulae	Cost of Equipment-Salvage value
	no of useful years
	$70,000-$7,000
	6.00
Depreciation for full year	$ 10,500.00
But it was purchased on 1st June	$    6,125.00
Seven months depreciation to be charged to Income statement
Acquisition cost of Equipment	$ 70,000.00
Accumulated Depreciation	$ (6,125.00)
Net Book Value	$ 63,875.00