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 Topic: Becker Chapter 4 problems ( Topic Closed)
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berry0331
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| Posted: 21 Apr 2012 at 22:58 | IP Logged
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Question CPA-00617
Black Corp.'s accounts payable at December 31 Year 1, totaled $900,000
before any necessary year-end adjustments relating to the following
transactions:
• On December 27, Year 1, Black wrote and recorded checks to
creditors totaling $400,000 causing an overdraft of $100,000 in Black's
bank account at December 31, Year 1. The checks were mailed out on
January 10, Year 2.
• On December 28, Year 1, Black purchased and received goods for
$153,061, terms 2/10, n/30. Black records purchases and accounts
payable at net amounts. The invoice was recorded and paid January 3,
Year 2.
• Goods shipped F.O.B. destination on December 20, Year 1 from a
vendor to Black were received January 2, Year 2. The invoice cost was
$65,000.
At December 31, Year 1, what amount should Black report as total
accounts payable?
a. $1,515,000 b. $1,450,000 c. $1,153,061 d. $1,053,061
Explanation
Choice "b" is correct. $1,450,000 accounts payable at 12/31/Year 1.
For the recorded check of $400,000, can anyone explain what is the
overdraft of 100,000? For the recorded check of $400,000, can anyone
explain what the overdraft of 100,000 is all about?
Question CPA-05226
At June 30, Almond Co.'s cash balance was $10,012 before adjustments,
while its ending bank statement balance was $10,772. Check number 101
was issued June 2 in the amount of $95, but was erroneously recorded in
Almond's general ledger balance as $59. The check was correctly listed in
the bank statement at $95. The bank statement also included a credit
memo for interest earned in the amount of $35, and a debit memo for
monthly service charges in the amount of $50. What was Almond's
adjusted cash balance at June 30?
a. $9,598 b. $9,961 c. $10,048 d. $10,462
Explanation
Choice "b" is correct. Almond's adjusted cash balance is computed as
follows:
Adjusted cash balance = Unadjusted cash balance +/- bank errors +
credit memos - service charges
Adjusted cash balance = $10,012 - ($95 - $59) + $35 - $50 = $9,961
For the bank error, why is it a subtraction? I thought the company
instead of the bank recorded the wrong amount.
Question CPA-00040
Mare Co.'s December 31 balance sheet reported the following current
assets:
Cash $ 70,000
Accounts receivable 120,000
Inventories 60,000
Total $250,000
An analysis of the accounts disclosed that accounts receivable consisted
of the following:
Trade accounts $ 96,000
Allowance for uncollectible accounts (2,000)
Selling price of Mare's unsold goods out on consignment, at 130%
of cost, not included in Mare's ending inventory 26,000
Total $120,000
At December 31, the total of Mare's current assets is:
a. $224,000 b. $230,000 c. $244,000 d. $270,000
Choice "c" is correct, $244,000 total current assets.
After reading the answer, I still have no clue as to what it really means
for the "selling price of Mare's unsold goods...."
Any input is welcome:) Thanks!
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maryk
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| Posted: 22 Apr 2012 at 00:56 | IP Logged
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For the third question, the value of Marie's AR includes items out on consignment AS IF THEY HAD BEEN SOLD. This is not GAAP treatment. The value of these items should be included in inventory. Since they are valued at 130% of cost, the real cost can be determined as 26000/1.30 = 20,000. The final calculation of current assets is as follows:
70,000 cash
96,000 ar (trade accounts)
20,000 inventory on consignment (26000/1.30)
60,000 inventory given
(2,000) allowance for uncollectible accts.
_________
244,000
"Selling price of Marie's unsold goods" means the consignment inventory is recorded at its expected sales price which is projected to be 130% of cost. it should just be in inventory at cost.
__________________
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maryk
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| Posted: 22 Apr 2012 at 01:06 | IP Logged
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For question 2 on the bank error you want to work from the g/l bank balance and reconcile it to the bank statement. The company did record the amount wrong, so the difference of $36.00 still needs to be deducted from the checking account on the books (check written for 95 but recorded at 59). The interest needs to be added to the company's books and the service charges need to be deducted.
__________________
REG: 86
FAR: 86
AUD: 87
BEC: 75
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GibsonLP460
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| Posted: 11 Sep 2012 at 23:08 | IP Logged
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CPA-00617
An overdrawn checking account represents a liability on the
B/S, not a negative cash balance. In this case they were
trying to trick you into adding back the $400,000 A/P and
subtracting the resulting $100,000 liability from writing a
bad check. However, this question is flawed because the
checks weren't mailed out until Jan 10th of the the next
year so there is no way they could have caused an overdraft
in their bank account on Dec, 31. So the correct treatment
is to simply ignore the $100,000 overdraft since it hadn't
happened yet at the B/S date.
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