FINAL EXERCISE REVISION

CHAP 6: INVENTORIES
Gerald D. Englehart Company has the following inventory, purchases, and sales data for the month of
March.

Inventory: March 1 200 units @ $4.00 $ 800

Purchases: March 10 500 units @ $4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Sales: March 15 500 units

March 25 400 units

The physical inventory count on March 31 shows 500 units on hand.

Instructions

Under a periodic inventory system, determine the cost of inventory on hand at March 31 and the cost of
goods sold for March under (a) FIFO, (b) LIFO, and (c) average-cost.

CHAP RECEIVABLES
The following selected transactions relate to Dylan Company.

Mar. 1 Sold $20,000 of merchandise to Potter Company, terms 2/10, n/30.

11 Received payment in full from Potter Company for balance due on existing accounts receivable.

12 Accepted Juno Company’s $20,000, 6-month, 12% note for balance due.

13 Made Dylan Company credit card sales for $13,200.

15 Made Visa credit card sales totaling $6,700. A 3% service fee is charged by Visa.

Apr. 11 Sold accounts receivable of $8,000 to Harcot Factor. Harcot Factor assesses a service charge of
2% of the amount of receivables sold.

13 Received collections of $8,200 on Dylan Company credit card sales and added finance charges of
1.5% to the remaining balances.

May 10 Wrote off as uncollectible $16,000 of accounts receivable. Dylan uses the percentage-of-sales
basis to estimate bad debts.

June 30 Credit sales recorded during the first 6 months total $2,000,000. The bad debt percentage is 1%
of credit sales. At June 30, the balance in the allowance account is $3,500 before adjustment.

July 16 One of the accounts receivable written off in May was from J. Simon, who pays the amount due,
$4,000, in full.

Instructions

Prepare the journal entries for the transactions. (Ignore entries for cost of goods sold.)
CHAP PPE
Numo Company purchased a new machine on October 1, 2017, at a cost of $145,000.

The company estimated that the machine will have a salvage value of $25,000.

The machine is expected to be used for 20,000 working hours during its 5-year life.

Instructions

Compute the depreciation expense under the following methods for the year indicated.

(a) Straight-line for 2017.

(b) Units-of-activity for 2017, assuming machine usage was 3,400 hours.

(c) Declining-balance using double the straight-line rate for 2017 and 2018.

CHAP LIABILITIES
Indiana Jones Company had the following selected transactions.

Feb. 1 Signs a $50,000, 6-month, 9%-interest-bearing note payable to CitiBank and receives $50,000 in
cash.

10 Cash register sales total $43,200, which includes an 8% sales tax.

28 The payroll for the month consists of salaries and wages of $50,000. All wages are subject to
7.65% FICA taxes. A total of $8,900 federal income taxes are withheld. The salaries are paid on March 1.

28 The company develops the following adjustment data.

1. Interest expense of $375 has been incurred on the note.

2. Employer payroll taxes include 7.65% FICA taxes, a 5.4% state unemployment tax, and a 0.8%
federal unemployment tax.

3. Some sales were made under warranty. Of the units sold under warranty, 350 are expected to
become defective. Repair costs are estimated to be $40 per unit.

Instructions

(a) Journalize the February transactions.

(b) Journalize the adjusting entries at February 28.

CHAP FINANCIAL STATEMENT ANALYSIS
The condensed financial statements of John Cully Company, for the years ended June 30, 2017 and
2016, are presented below.

Compute the following ratios for 2017 and 2016.

(a) Current ratio.

(b) Inventory turnover. (Inventory on 6/30/15 was $599)

(c) Profit margin.

(d) Return on assets. (Assets on 6/30/15 were $3,349.9.)

(e) Return on common stockholders’ equity. (Stockholders’ equity on 6/30/15 was $1,795.9.)

(f) Debt to assets ratio.

(g) Times interest earned.