Accounts Receivable, Inventory, Long-lived Assets, Bonds

Topics: Depreciation, Generally Accepted Accounting Principles, Accounts receivable Pages: 6 (1121 words) Published: November 3, 2014
(Accounts Receivable, Inventory, Long-lived Assets, Bonds)

1. GNC has the following information regarding the inventory of its Super Mega, a multivitamins. Assume GNC uses periodic inventory system each quarter and FIFO. a. On July 1, GNC had 200 bottles of Super Mega in stock. Each bottle costs $3. b. On July 15, GNC purchased 5,000 bottles of Super Mega for $25,000 from a supplier, paid $10,000 in cash and the rest was on credit. c. On August 15, GNC purchased another 1,000 bottles of Super Mega for $6 per bottle on credit. d. On August 28, GNC sold 1,500 bottles of Super Mega for $10 per bottle. GNC received $10,000 in cash and the remaining balance would be due within one month. e. On September 22, GNC sold 1,200 bottles of Super Mega for $11 per bottle in cash. f. At the end of the third quarter, GNC counted its Super Mega inventory and found it had 3,200 bottles remaining.

What is the COGS in the third quarter for GNC? What is the ending inventory value?

Ending inventory has 3,200 units. 1,000x $6 +2,200x$5=17,000 Beginning inventory (200x$3) + purchases ($25,000+1,000x$6)-COGS= Ending inventory ($17,000), that is, COGS=$14,600
What is the inventory turnover ratio for GNC in the third quarter?

COGS/Average Inventory= $146,000/[(600+17,000)/2]=1.66 (different rounding is OK)

What would be the inventory turnover ratio for GNC in the third quarter if GNC were using perpetual inventory system and LIFO? Assume there was no physical count at the end of the quarter. COGS=(1,000x$6+500x$5)+(1,200x$5)=$14,500

Ending inventory= 200x$3+3,300x$5=17,100
Inventory turnover ratio= COGS/average inventory= 14,500/[(600+17,100)/2]=1.64 (different rounding is OK)

2. At the end of 2011, using aging of accounts receivable, Hammon Co. estimated that it needs $5,000 in allowance for doubtful account, and it had $1,000 previous credit balance from 2010. On May 4, 2012, Hammon decided that $500 became uncollectible and should be written off. What should be the balance of allowance for doubtful account after the May 4, 2012 write off?

5,000-500=$4,500

Assume now that Hammon uses percentage of sales method instead. Hammon’s 2011 sales is $100,000 and Hammon estimated 5% would be uncollectible. Hammon had $1,000 previous credit balance from 2010. On May 4, 2012, Hammon decided that $500 became uncollectible and should be written off. What should be the balance of allowance for doubtful account after the May 4, 2012 write off?

1,000+100,000x5%-500=$5,500

3. Assume that Squirrel Hill Inc. uses the indirect method to compute cash provided by operating activities. The following information is for the accounting period, January 1, 2009 – December 31, 2009

Net income
Depreciation expense
Accounts receivable balance (Jan. 1)
Accounts receivable balance (Dec. 31)
Inventory balance (Jan. 1)
Inventory balance (Dec. 31)
PPE balance (Jan. 1)
PPE balance (Dec. 31)
Accounts payable balance (Jan. 1)
Accounts payable balance (Dec. 31)
Interest payable balance (Jan. 1)
Interest payable balance (Dec. 31)
Bonds payable balance (Jan. 1)
Bonds payable balance (Dec. 31)
Contributed capital balance (Jan. 1)
Contributed capital balance (Dec. 31)$800,000
$??????
$75,000
$60,000
$123,000
$135,000
$400,000
$600,600
$65,000
$40,000
$37,000
$48,000
$600,000
$480,000
$450,000
$470,000

Assume the cash flow from operations totals $860,000, what must have been the amount of Depreciation expense for this period?

Net income $800,000 +Decrease in accounts receivable +15,000 - Increase in inventory - 12,000 - Decrease in accounts payable - 25,000 + Increase in interest payable +11,000 Cash flow...
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