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In: Accounting

The company takes a physical inventory count at the end of the year and adjusts their...

The company takes a physical inventory count at the end of the year and adjusts their inventory and cost of goods sold if there is a difference between the inventory value determined from the actual count compared to the value in the general ledger. The information below includes the number of units counted in inventory at the end of the year and the purchases of inventory during the month.
Number of units held in the company's inventory at 12/31/2016 based on a count of the inventory was 17,728 units. A listing of purchases during the month of December are as follows:

Date Quantity Purchased Unit Cost Total Cost
12/5/16 15,000 3.75 56,250
12/14/16 6,500 4.00 26,000
12/21/16 7,500 4.50 33,750

The company uses FIFO to account for its inventory cost.
What is the cost of the company's ending inventory (round answer to nearest dollar and show your calculation below for full credit)?

The balance in inventory per the unadjusted trial balance before making any adjustments is $76,730.
What is the amount of the December 31 adjustment to inventory cost (show your calculation below for full credit)?

Complete below the adjusting journal entry necessary for inventory:

The company has estimated, based on historical information, that 4.4% of its accounts receivable will ultimately not be collected. Therefore, they provide an allowance for bad debts at that level.

Calculate the appropriate amount for the allowance at December 31, 2016.

Accounts receivable balance per the unadjusted trial balance 42,400

Estimated allowance amount (Round answer to the nearest dollar and show your calculation below for full credit).

Amount of adjustment needed to the allowance account (Show your calculation below to receive full credit).

Complete below the adjusting journal entry necessary for the allowance for bad debts:

5) On July 31, 2016 the company purchased new warehouse equipment in the amount of $50,000. No depreciation has been recorded yet in 2016 for this new asset. It is estimated to have a useful life of 7 years and a salvage value of $4,700. What is the depreciation expense for 2016 using the straight-line method? (Round answer to the nearest dollar and show your calculation below for full credit).

Complete below the adjusting journal entry necessary for depreciation:

6) The company issued a $75,000 bond dated August 1, 2016 to finance the purchase of warehouse equipment and provide the company additional cash. The bond has a contractual interest rate of 6.7% and was issued at par. The bond matures in 10 years and pays interest on July 31 and January 31 each year. What is the amount of interest to be accrued at December 31, 2016? (Round answer to nearest dollar and show your calculation below for full credit)

Complete below the adjusting journal entry necessary for accrued interest:

Solutions

Expert Solution

Cost of ending inventory = $73,730.

Working:

Ending inventory 17728 units
Valuation:
Units unit cost value
7500 $4.50 $33,750
6500 $4.00 $26,000
3728 $3.75 $13,980
$73,730
Adjustment entry for inventory
Account Title Debit Credit
Cost of goods sold 3000
Inventory 3000

Estimated allowance amount = $1,866

Working:

Accounts receivable per
unadjusted trial balance 42400
Allowance percentage 4.40%
Allowance amount 1866
Adjustment entry for allowance for doubtful accounts
Account Title Debit Credit
Bad debts 1866
Allowance for bad debts 1866

5.

Depreciation expense 3236

Working:

Cost of the equipment 50000
Salvage value 4700
Depreciable value 45300
Date of purchase Jul-01
Estimated life - years 7
Annual depreciation 6471
Period of use in first year 6 months
Depreciation for first year 3236
Adjustment entry for depreciation expense
Account Title Debit Credit
Depreciation Expense 3236
Accumulated Depreciation 3236

6.

Interest accrued as at Dec.31,2016 2094

Working:

Face value of bond 75000
Coupon rate 6.70%
Interest payment Semi-annual
Interest amount for each instalment 2513
Date of issue 8/1/2016
Period upto Dec.31, 2016 5 months
Interest accrued as at Dec.31,2016 2094
Adjustment entry for interest expense on Dec.31., 2016
Account Title Debit Credit
Interest expense 3236
Interest payable 3236

ekkarill92 answered 1 year ago
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