mikesgirl
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| Posted: 14 Jan 2009 at 21:24 | IP Logged
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I'm studying for FAR and maybe I'm really tired but the following question has me stumped. This is from the F4 Working Capital homework.
Mare Co.'s December 31, 1993, 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, 1993, the total of Mare's current assets is:
They say the answer is $244,000, and here is the reasoning:
Selling price of consigned goods 26,000 ÷ 130% =
Cost of consigned goods 20,000 100
Unrealized profit 6,000 30%
Current assets prelim aJE final
cash 70,000 70,000
accts rec'able (net) 120,000 (26,000) 94,000
inventories 60,000 20,000 80,000
Total 250,000 (6,000) 244,000
I completely understand the adjustments to inventory for the consignment goods. Where are they getting the $26,000 AJE for A/R? Does it have to do with the $26,000 in consigned goods that were included in A/R? Why are they leaving out the $2,000 allowance for uncollectible accounts?
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Topic: Help please with Becker question
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