Discounts, Bad debt, Bank Recon
During this year, Emi Co. had a total sales of $750,000 of which $225,000 was paid in cash. Based off of data from the previous year, the bad debt loss rate is 3%. What is the bad debt expense for the year?
$750,000 - $225,000 = $525,000 credit sales
$525,000 credit sales x 3% bad debt loss rate
= $157,500 bad debt expense
What is the total inventory cost formula?
invoice price + freight in + inspection costs + preparation costs - purchase returns and allowances - purchase discounts = total inventory cost
Basically any costs needed to bring inventory to a useable or salable condition and location (aka. for its intended use)
A building costs $500,000 and has a useful life of 50 years. It was acquired on 8/1 this year and has a residual value of $75,000. Find the depreciation expense for year 1 and year 8 using straight line depreciation.
SL dep. = (cost - residual value) x (1/useful life)
($500,000 - $75,000) x 1/50 = $8,500 yearly depreciation
$8,500/ 12 months = $708.33 x 5 months = $3,541.67
Year 1 depreciation expense = $3,541.67
Since it is SL depreciation, depreciation amount is the same for every year (12 months):
Year 8 depreciation expense = $8,500
What are some examples of internal controls?
segregation of duties, prescribed policies and procedures
What does 1/15, n/60 mean?
If I purchased $750,000 of inventory with these credit terms on 9/1 and paid on 9/8, how much would I save?
1% discount if you pay within 15 days, you must pay within 60 days.
I would save $7,500.
Beginning inventory: 6 units at $4/unit
Purchases:
January 14: 6 units at $5/unit
January 23: 8 units at $6/unit
If 5 units units were left under the average cost method for $10 each, what is the cost of goods sold?
(6 units x $4 + 6 units x $5 + 8 units x $6)/20 units
= $5.10 per unit
20 units in inventory - 5 left = 15 sold
15 units x $5.10 per unit = $76.5 COGS
A car was purchased for $100,000. It should last for 10 years which should be 250,000 miles. At the end of its life, it should be able to be sold for $5,000 in scrap parts. Only 25,000 miles were used this year. Find the depreciation expense using units of production. Record the journal entry.
UOP depreciation = ((cost - residual value)/ estimated total production) x actual production
(($100,000 - $5,000)/250,000) x 25,000 = $9,500
DR. Depreciation expense $9,500
CR. Accumulated depreciation $9,500
What does FOB shipping point and FOB destination mean?
If Emi Co. shipped Moussa Inc. $500 in goods on 12/26/2024 and it arrived on 1/02/25, under FOB destination, will Moussa include the inventory in 2024 inventory?
FOB shipping point - goods change ownership when they are shipped
FOB destination - goods change ownership when they are received
Since the goods are FOB destination, they change ownership on 1/02/25. Moussa will NOT include the inventory in 2024 inventory
What is the life of a patent? copyright? trademark?
patent = 20 years
copyright = life of author + 70 years
trademark = 10 years
Emi Co. sold $5,000 worth of stickers on account. Credit terms were 4/5, n/30. $100 in discounts had to be issued because stickers were damaged in the mail. $2,000 of sales were paid within the discount period. It is expected that $500 worth of stickers will be returned.
What is the net sales?
Sales revenue: $5,000
Less:
Credit card discounts: ($80)
Sales discounts: ($100)
Sales returns and allowances: ($500)
Net sales: $4,320
If ending inventory is understated by $15,000, what is the effect on the current year and next year?
(hint: look at this years cogs and next years beg. inv and cogs)
Current year:
COGS overstated $15,000
Next year:
Beg. inv understated $15,000
COGS understated $15,000
In order to make smiskis, Emi CO. had to purchase a new machine for $450,000. Its useful life is 4 years. It should be able to produce 300,000 figures and the machine has a residual value of $12,500. Find the depreciation expense for year 3 using Double declining balance. What is the accumulated depreciation?
DDB depreciation = (cost - accumulated depreciation) x (2/useful life)
No accumulated depreciation in year 1
($450,000 - $0) x (2/4) = $225,000 depreciation expense for yr.1
($450,000 - $225,000) x (2/4) = $112,500 depreciation expense for yr.2
($450,000 - $337,500) x (2/4) = $56,250 depreciation expense for yr.3
Accumulated depreciation = $225,000 + $112,500 + $56,250 = 393,750
During the year, we sold 200 units of beginning inventory, 150 from the purchase on 10/14, and 300 from the purchase on 10/25. Please record the Ending inventory in $ under Specific ID.
Beg. inv. - 500 units at $6 each
10/14 - Purchased 200 units at $7 each
10/25 - Purchased 400 units at $9 each
COGAS: (500 units x $6 each) + (200 units x $7 each) + (400 units x $9 each) = $8,000
COGS: (200 units x $6 each) + (150 units x $7 each) + (300 units x $9 each)= $4,950
Ending inventory: $8,000 - $4,950 = $3,050
Moussa Inc. needs to record their bad debt expense for the year. Please help them record the bad debt expense for the year.
Not yet due $176,000
Up to 90 days past due $ 98,000
Over 90 days past due $ 30,000
The estimated percentage uncollectible for each category is 3%, 10%, and 14% respectively.
Additionally, the beginning balance of allowance for doubtful accounts was $25,000 and Moussa Inc. wrote off recorded $10,000 in write offs.
($176,000 x 3%) + ($98,000 x 10%) + ($30,000 x 14%) = $19,280 est. amount uncollectible
Estimated ending balance in allowance for doubtful accounts
- balance in allowance for doubt accounts before the bad debt expense adjustment
= Bad debt expense for the year
$19,280 - ($25,000 - $10,000) = $4,280
Beginning inventory: 5 units at $10/unit
Purchases:
January 14: 4 units at $12/unit
January 23: 2 units at $15/unit
If 10 units were sold under the LIFO method for $20 each, what is the cost of goods sold?
Beg inv. + purchases - ending inv. = COGS
$50 + ($48 + $30) - $10 = $118
Please record the AJE on 12/31/2025 for a patent that was purchased on 1/1/2025 for $20,000.
Patent life = 20 years
Amortization = straight line depreciation, no residual value
$20,000 / 20 years = $1,000 amortization expense
Dr. Amortization expense $1,000
Cr. Patent $1,000
Emi Co. reviewed their asset, the "Boba Maker 3000", for impairment and found the following information:
Net book value $812,000
Estimated future cash flows $940,000
Fair value $840,000
Please test for impairment and record the impairment if any.
Step 1: test for impairment
Asset is impaired IF net book value > estimated future cash flows
In this question, $812,000 NBV < $940,000 est. future cash flows
This means that there is NO IMPAIRMENT. We don't do anything else.
Ending cash balance per books: $150,000
Bounced check: $20,000
Deposits in transit: $50,000
Interest paid by bank: $34,000
Service charge: $300
Outstanding checks: $4,000
What is the ending cash balance per bank statement
Ending cash balance per books + interest paid by bank - NSF check - service charges = Ending correct cash balance per book
$150,000 + $34,000 - $20,000 - $300 = $163,700
Book side = Bank side
Ending correct cash balance per bank statement = $163,700
Ending correct cash balance per bank statement + outstanding checks - deposits in transit = Ending cash balance per bank statement
$163,700 + $4,000 - $50,000 = $117,700
Ending cash balance per bank statement = $117,700
Beginning inventory: 1 unit at $60/unit
Purchases:
January 14: 5 units at $45/unit
January 23: 2 units at $40/unit
Under the FIFO method, each unit was sold for $80 each. The cost of goods sold was $240. How many units were left in ending inventory? What is the dollar value?
Beg inv. + purchases - COGS = ending inventory
$60 + ($225 + $80) = $365
$240 - $60 - $45 - $45 - $45 - $45 = $0
3 units were left. 1 @ $45, 2 @ $40
$365 - $240 = $125
Kiet Inc. purchased their competitor business and acquired all of their assets (and liabilities) for $1,500,000. The assets total to $1,050,000 and the liabilities associated with those assets total to $430,000. Please calculate the goodwill.
Net asset = Total assets - Total liabilities associated with assets
$1,050,000 - $430,000 = $620,000
Goodwill = Purchase price - Net Assets = $1,500,000 - $620,000 = $880,000
What does the fraud triangle consist of?
Opportunity, Pressure, Rationalization