In: Accounting
Use the following information regarding ABC Co. in 2020 (assume this is the first year of operations for ABC Co., and assume ABC pays cash unless noted otherwise). Assume ABC 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 ABC $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.
What is ABC’s bad debt expense for 2020?
Group of answer choices
$176
$4,000
$400
$320
None of the above.
What is cost of goods sold for 2020?
Group of answer choices
$8,000
None of the above.
$2,400
$5,600
$2,000
What amount is reported on ABC’s 2020 Balance Sheet related to Property, Plant, & Equipment, assuming ABC depreciates beginning with the month of acquisition?
Group of answer choices
$63,875
$59,500
$51,167
None of the above.
$58,847
What is the journal entry related to the 3/1 sale of inventory?
Group of answer choices
Accounts Receivable 8,000
Sales 8,000
Cash 8,000
Sales 8,000
Accounts Receivable 8,000
Inventory 8,000
Cost of Goods Sold 2,000
Sales 2,000
No entry required
Accounts Receivable 8,000
Sales 8,000
Cost of Goods Sold 2,000
Inventory 2,000
1. What is ABC’s bad debt expense for 2020?
Correct option is
$176
Working:
3/1 sales | $ 8,000.00 | =500*16 |
7/1 sales | $ 2,000.00 | =100*20 |
Total | $ 10,000.00 | |
Less: Cash received | $ 5,600.00 | =8000*70% |
Balance account receivable | $ 4,400.00 | |
4% bad debts | $ 176.00 | =4400*4% |
2. What is cost of goods sold for 2020
Correct oprtion is :
$2,400
Working :
3/1 sales | 2000 | =500*4 |
7/1 sales | 400 | =100*4 |
Total | 2400 |
3. What amount is reported on ABC’s 2020 Balance Sheet related to Property, Plant, & Equipment, assuming ABC depreciates beginning with the month of acquisition
Correct option is :
$59,500
Working:
Purchase cost | $ 60,000.00 |
Add: installment | $ 10,000.00 |
Total cost | $ 70,000.00 |
Salvage value | $ 7,000.00 |
Life | 6 |
Straight line depreciation | = (cost - Salvage value) / life |
Depreciation | $ 10,500.00 (70000-7000)/6 |
Balance At end of 2020 | $ 59,500.00 (70000-10500) |
4. What is the journal entry related to the 3/1 sale of inventory
Correct Option is :
Accounts Receivable 8,000
Sales 8,000
Cost of Goods Sold 2,000
Inventory 2,000
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