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Assignment 3 Acct201

The document provides instructions for a financial accounting assignment. It includes 3 questions asking students to prepare journal entries for purchases and returns, estimating inventory amounts, and recording an equipment exchange transaction between two companies.

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karelimmanuelshangraihan
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54 views

Assignment 3 Acct201

The document provides instructions for a financial accounting assignment. It includes 3 questions asking students to prepare journal entries for purchases and returns, estimating inventory amounts, and recording an equipment exchange transaction between two companies.

Uploaded by

karelimmanuelshangraihan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment 3 Marks 3.

75 (10 Points)
Course
Financial Accounting Code ACCT 201
Title
Submissio
Uploading End week 10 End week 11
n
Date Sat 10/11/2018 Dates Sat 17/11/2018

Instructions:

- The answers must be in English.


- Students must include their details (Name, Student ID, CRN, Date
of submission)
- Answer the ALL questions.
- Do NOT write the questions in the answer papers JUST write
the question number.
- Assignments should be submitted in MS Word format
- Font should be Times New Roman with 14 points.
- You are required to work in this assignment individually.
- You should submit the assignment via the Blackboard System.
- Students, who submit assignments after deadline, will get ZERO.
- If you engaged in plagiarism, you will get ZERO marks in the
assignment.

Q.1 Dill Co. records purchases at net amounts and uses periodic inventories. Prepare
entries for the following: (3 marks)

June 11 Purchased merchandise on account, $5,000, terms 2/10, n/30.


15 Returned part of June 11 purchase, $800, and received credit on account.
30 Prepared the adjusting entry required for financial statements.

Answer to Q1
Date Accounts Dr. Cr.
June 11 Purchase ($5,000×98%) 4,900
Accounts Payable 4,900

1
June 15 Accounts Payable ($800×98%) 784
Purchase returns and allowance 784
June 30 Accounts Payable ($4,900 – 784) 4,116
Purchase discount forfeited 84
Cash ($4,116 ÷ 98%) 4,200

Q.2 XYZ Co. prepares monthly income statements. Inventory is counted only at year
end; thus, month-end inventories must be estimated. All sales are made on account.
The rate of mark-up on cost is 25%. The following information relates to the month of
May.

Accounts receivable, May 1 21,000


Accounts receivable, May 31 27,000
Collections of accounts during May 90,000
Inventory, May 1 45,000
Purchases during May 58,000

Instructions

2
Calculate the estimated cost of the inventory on May 31. (3 marks)
Answer to Q2

Inventory, May 1 45,000


(+) Purchase during May 58,000
(=) Cost of goods available 103,000
(-) Cost of goods sold
Sales revenue 96,000
(-) Gross Profit (96,000 × 20%) 19,200
76,800
(=) Estimated Cost of inventory 26,200

Accounts receivable
90,000 Collections 21,000 Balance May 1
96,000 Sales Revenue

27,000 Balance May 31

21,000 + Sales revenue – 90,000 = 27,000


Sales revenue = 27,000 – 21,000 + 90,000 = 96,000

Mark−up on cost 25 %
Mark-up on sales = = = 20%
100+ Mark−up on cost 100+25 %

Q3. Ramirez Company exchanged equipment used in its manufacturing operations


plus $6,000 in cash for similar equipment used in the operations of Kennedy
Company. The following information pertains to the exchange.

Ramirez Co Kennedy Co
Equipment (cost) 84,000 $84,000
Accumulated depreciation 57,000 30,000
Fair value of equipment 40,500 46,500
Cash given up 6,000

Instructions
Prepare the journal entries to record the exchange on the books of both companies.
Assume that exchange lacks commercial substance. (4 marks)

3
Answer to Q3

Date Accounts Dr. Cr.


Accumulated Depreciation 57,000
Equipment (New) 33,000
Equipment (Old) 84,000
Cash 6,000

1- Book Value = Cost – Accumulated Depreciation


= 84,000 – 57,000 = 27,000
2- Gain or Loss = Fair Value – Book Value
= $40,500 – $27,000 = $13,500 Gain (Not Recorded)
3- Cost of new = Fair Value-old + Cash paid – Gain
= $40,500 + $6,000 - $13,500 = $33,000

Date Accounts Dr. Cr.


Accumulated Depreciation 30,000
Equipment – new 40,500
Cash 6,000
Loss on sale of equipment 7,500
Equipment – Old 84,000

1- Book Value = Cost – Accumulated Depreciation


= 84,000 – 30,000 = 54,000
2- Gain or Loss = Fair Value – Book Value

4
= $46,500 – $54,000 = -$7,500 Loss
3- Cost of new = Fair Value-old - Cash received
= $46,500 - $6,000 = $40,500

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