Question

In: Accounting

Part of the accounting records for the last quarter of 2014 of Alexandra Corp., a Canadian...

Part of the accounting records for the last quarter of 2014 of Alexandra Corp., a Canadian private company applying IFRS, were destroyed due to a software malfunction. You have been tasked with reconstructing the accounting records related to inventory and receivables.

The following information has been salvaged:

Extract from the Quarterly Statement of Financial Position as at December 31, 2014

	Oct 1, 2014	Dec 31, 2014
Current Assets
Net realizable value of Accounts receivable	$4,700	?
Inventory	300	?

Aging of receivables analysis as at December 31, 2014 (Incomplete)

Days past due	Amount	Estimated uncollectible %	Estimated uncollectible amount	Observations
0-30		3%
30-120		10%
>120	$2,000	50%		$500 of the $2,000 were deemed completely uncollectible

By talking to the CEO, the controller, and other employees of the accounting department you were also able to gather the following information:

Firm’s Accounting Policies:

a) The company uses the periodic inventory system and the FIFO cost flow assumption.

b) The company applies the aging of receivables analysis to adjust the AFDA at year-end.

The only inventory and sale-related transactions during the quarter were:

1. On October 15, 2014, Alexandra Corp. sold 80 units at $10 each, shipped on the same day, FOB destination, and arrived 3 days later, freight-out of $30 for the entire shipment, and payment within 30 days. As at December 31, 2014, the client had still not paid.

2. On November 10, Alexandra Corp. received from its supplier a shipment of 1,000 units costing $5 each. Alexandra Corp. also had to cover shipping costs of $500, import duty taxes of $100 (non-refundable).

3. On December 1, Alexandra Corp. sold 500 units at $10 each, 2/10, n/30. The client paid half of the total amount on December 5, but made no other payment since.

4. On December 15, 2014, Alexandra Corp. signed a contract for the purchase of 500 units of inventory from a Canadian supplier at a price of $6.50 per unit. The supplier shipped the goods FOB destination on December 27. On December 31, 2014, the goods had not yet been delivered, and no invoice had been received.

Other information:

a) The physical count of inventory at the end of the previous quarter was 100 units. The physical count of inventory at the end of December 2014 was 520 units.

b) The beginning balance for Gross Accounts Receivable for the quarter was $5,000.

c) The CEO estimates that inventory on hand at the end of 2014 could be sold for a per unit price of $5.50, with $0.10 per unit costs to sell.

Required:

1. Re-construct the journal entries for the transactions during the quarter.

2. Make ALL necessary quarter-end adjusting entries as at December 31, 2014. Show your computation. (Hint: there are 4 adjusting entries needed to (1) record the write-down of inventory (2) record COGS and update ending inventory (3) record write-off (4) record bad debt expense using aging analysis.)

3. Present to the CEO the calculation of gross profit.

(Please use the Gross Method to record the sales discount)

Expert Solution

Part of the accounting records for the last quarter of 2014 of Alexandra Corp., a Canadian private company applying IFRS, were destroyed due to a software malfunction. You have been tasked with reconstructing the accounting records related to inventory and receivables.

ekkarill92 answered 1 year ago

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