Accounting: Answers to Questions on Allowance for Doubtful Debts, Cost of Goods Sold and Depreciation

This article provides answers to questions on allowance for doubtful debts, cost of goods sold and depreciation in accounting. It includes depreciation schedules under straight line and diminishing value methods, gain or loss calculations, and more.

Running head: ACCOUNTING
Accounting
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Author’s Note:

1ACCOUNTING
Table of Contents
Answer to Question 1:................................................................................................................2
Requirement a:.......................................................................................................................2
Requirement b:.......................................................................................................................2
Answer to Question 2:................................................................................................................3
Requirement a:.......................................................................................................................3
Requirement b:.......................................................................................................................4
Answer to Question 3:................................................................................................................5
Requirement a:.......................................................................................................................5
Requirement b:.......................................................................................................................5
Answer to Question 4:................................................................................................................6
Bibliography:..............................................................................................................................8

2ACCOUNTING
Answer to Question 1:
Requirement a:
Date Particulars Amount Date Particulars Amount
31-Dec To, Accounts Receivable 41300 01-Jan By, Balance b/d 84290
31-Dec To, Balance c/d (Balancing) 71840 31-Dec By, Bad Debt Recovery A/c. 600
By, Bad Debt Expenses A/c. 28250
113140 113140
Allowance for Doubtful Debts A/c. (under Percentage of Sales Method):
Requirement b:
Date Particulars Amount Date Particulars Amount
31-Dec To, Accounts Receivable 41300 01-Jan By, Balance b/d 84290
31-Dec To, Balance c/d 73240 31-Dec By, Bad Debt Recovery A/c. 600
By, Bad Debt Expenses A/c.
(Balancing) 29650
114540 114540
Allowance for Doubtful Debts A/c. (under Aging Method):

3ACCOUNTING
Answer to Question 2:
Requirement a:
Date Unit Rate Amount Unit Rate Amount Unit Rate Amount
January 3000 $ 42.00 $ 1,26,000
January 9000 $ 44.50 $ 4,00,500 3000 $ 42.00 $ 1,26,000
9000 $ 44.50 $ 4,00,500
3000 $ 42.00 $ 1,26,000 3000 $ 44.50 $ 1,33,500
6000 $ 44.50 $ 2,67,000
February 3000 $ 44.15 $ 1,32,450 3000 $ 44.50 $ 1,33,500
3000 $ 44.15 $ 1,32,450
3000 $ 44.50 $ 1,33,500 2000 $ 44.15 $ 88,300
1000 $ 44.15 $ 44,150
March 65000 $ 45.50 $ 29,57,500 2000 $ 44.15 $ 88,300
65000 $ 45.50 $ 29,57,500
2000 $ 44.15 $ 88,300 15000 $ 45.50 $ 6,82,500
50000 $ 45.50 $ 22,75,000
April 9000 $ 45.50 $ 4,09,500 6000 $ 45.50 $ 2,73,000
May 3000 $ 45.50 $ 1,36,500 3000 $ 45.50 $ 1,36,500
June 60000 $ 46.15 $ 27,69,000 3000 $ 45.50 $ 1,36,500
60000 $ 46.15 $ 27,69,000
3000 $ 45.50 $ 1,36,500 42000 $ 46.15 $ 19,38,300
18000 $ 46.15 $ 8,30,700
July 34000 $ 46.20 $ 15,70,800 42000 $ 46.15 $ 19,38,300
34000 $ 46.20 $ 15,70,800
32000 $ 46.15 $ 14,76,800 10000 $ 46.15 $ 4,61,500
34000 $ 46.20 $ 15,70,800
August 10000 $ 46.15 $ 4,61,500 25000 $ 46.20 $ 11,55,000
9000 $ 46.20 $ 4,15,800
September 17500 $ 46.20 $ 8,08,500 7500 $ 46.20 $ 3,46,500
October 30000 $ 47.40 $ 14,22,000 7500 $ 46.20 $ 3,46,500
30000 $ 47.40 $ 14,22,000
7500 $ 46.20 $ 3,46,500 25000 $ 47.40 $ 11,85,000
5000 $ 47.40 $ 2,37,000
November 1000 $ 48.11 $ 48,110 25000 $ 47.40 $ 11,85,000
1000 $ 48.11 $ 48,110
8000 $ 47.40 $ 3,79,200 17000 $ 47.40 $ 8,05,800
1000 $ 48.11 $ 48,110
December 4000 $ 48.25 $ 1,93,000 17000 $ 47.40 $ 8,05,800
1000 $ 48.11 $ 48,110
4000 $ 48.25 $ 1,93,000
10000 $ 47.40 $ 4,74,000 7000 $ 47.40 $ 3,31,800
1000 $ 48.11 $ 48,110
4000 $ 48.25 $ 1,93,000
Total Cost of Goods Sold 197000 $ 90,46,450
Total Ending Inventory 12000 $ 5,72,910
Cost of Goods Sold and Ending Inventory under FIFO Method:
Purchase Cost of Goods Sold Balance

4ACCOUNTING
Requirement b:
Date Unit Rate Amount Unit Rate Amount Unit Rate Amount
January 3000 $ 42.00 $ 1,26,000
January 9000 $ 44.50 $ 4,00,500 3000 $ 42.00 $ 1,26,000
9000 $ 44.50 $ 4,00,500
12000 $ 43.88 $ 5,26,500
9000 $ 43.88 $ 3,94,875 3000 $ 43.88 $ 1,31,625
February 3000 $ 45.15 $ 1,35,450 3000 $ 43.88 $ 1,31,625
3000 $ 45.15 $ 1,35,450
6000 $ 44.51 $ 2,67,075
4000 $ 44.51 $ 1,78,050 2000 $ 44.51 $ 89,025
March 65000 $ 45.50 $ 29,57,500 2000 $ 44.51 $ 89,025
65000 $ 45.50 $ 29,57,500
67000 $ 45.47 $ 30,46,525
52000 $ 45.47 $ 23,64,467 15000 $ 45.47 $ 6,82,058
April 9000 $ 45.47 $ 4,09,235 6000 $ 45.47 $ 2,72,823
May 3000 $ 45.47 $ 1,36,412 3000 $ 45.47 $ 1,36,412
June 60000 $ 46.15 $ 27,69,000 3000 $ 45.47 $ 1,36,412
60000 46.15 $ 27,69,000
63000 $ 46.12 $ 29,05,412
21000 $ 46.12 $ 9,68,471 42000 $ 46.12 $ 19,36,941
July 34000 $ 46.20 $ 15,70,800 42000 $ 46.12 $ 19,36,941
34000 46.2 $ 15,70,800
76000 $ 46.15 $ 35,07,741
32000 $ 46.15 $ 14,76,944 44000 $ 46.15 $ 20,30,797
August 19000 $ 46.15 $ 8,76,935 25000 $ 46.15 $ 11,53,862
September 17500 $ 46.15 $ 8,07,704 7500 $ 46.15 $ 3,46,159
October 30000 $ 47.40 $ 14,22,000 7500 $ 46.15 $ 3,46,159
30000 $ 47.40 $ 14,22,000
37500 $ 47.15 $ 17,68,159
12500 $ 47.15 $ 5,89,386 25000 $ 47.15 $ 11,78,772
November 1000 $ 48.11 $ 48,110 25000 $ 47.15 $ 11,78,772
1000 $ 48.11 $ 48,110
26000 $ 47.19 $ 12,26,882
8000 $ 47.19 $ 3,77,502 18000 $ 47.19 $ 8,49,380
December 4000 $ 48.25 $ 1,93,000 18000 $ 47.19 $ 8,49,380
4000 $ 48.25 $ 1,93,000
22000 $ 47.38 $ 10,42,380
10000 $ 47.38 $ 4,73,809 12000 $ 47.38 $ 5,68,571
Total Cost of Goods Sold 197000 $ 90,53,789
Total Ending Inventory 12000 $ 5,68,571
Purchase Cost of Goods Sold Balance
Cost of Goods Sold and Ending Inventory under Weighted Average Method:

5ACCOUNTING
Answer to Question 3:
Requirement a:
2005 2006 2007 2008 2009 2010 2011 2012
Beginning Net Book Value $ 5,10,000 $ 4,55,000 $ 3,89,000 $ 3,23,000 $ 2,57,000 $ 1,91,000 $ 1,25,000 $ 59,000
Depreciation for the year $ 55,000 $ 66,000 $ 66,000 $ 66,000 $ 66,000 $ 66,000 $ 66,000 $ 11,000
Net Book Value $ 4,55,000 $ 3,89,000 $ 3,23,000 $ 2,57,000 $ 1,91,000 $ 1,25,000 $ 59,000 $ 48,000
Depreciation Shedule under Straight Line Method:
2005 2006 2007 2008 2009 2010 2011 2012
Beginning Net Book Value $ 5,10,000 $ 3,82,500 $ 2,67,750 $ 1,87,425 $ 1,31,198 $ 91,838 $ 64,287 $ 45,001
Depreciation for the year $ 1,27,500 $ 1,14,750 $ 80,325 $ 56,228 $ 39,359 $ 27,551 $ 19,286 $ 2,250
Net Book Value $ 3,82,500 $ 2,67,750 $ 1,87,425 $ 1,31,198 $ 91,838 $ 64,287 $ 45,001 $ 42,751
Depreciation Shedule under Diminishing Value Method:
Requirement b:
Amount Amount Amount
Sales Value 40000 60000 80000
Net Book Value $ 48,000 $ 48,000 $ 48,000
Gain/(Loss) ($ 8,000) $ 12,000 $ 32,000
Amount Amount Amount
Sales Value 40000 60000 80000
Net Book Value $ 42,751 $ 42,751 $ 42,751
Gain/(Loss) ($ 2,751) $ 17,249 $ 37,249
Gain or Loss under Straight Line Method:
Gain or Loss under Diminishing Value Method:

6ACCOUNTING
Answer to Question 4:
Cash Flow Statement:
Particulars Amount
Cash Flow from Operating Activities:
Net Profit for the period 475000
Amortization/Depreciation Expense 260000
Impairment Expense 115000
Change in Accounts Payable -26000
Change in Accounts Receivable 90000
Change in Accrued Expenses 20000
Change in Income Tax Payable -50000
Change in Interest Payable 5000
Change in Inventory -45000
Change in Prepaid Expenses 45000
Net Cash Inflow/(Outflow) from Operating Activity 889000
Cash Flow from Investing Activities:
Sale of Land 180000
Sale of Building 45000
Purchase of PP&E -475000
Sale of Intangible Assets 20000
Purchase of Short Term Investment -30000
Net Cash Inflow/(Outflow) from Investing Activity -260000
Cash Flow from Financing Activities:
Bonds Isssued 85000
Issue of Shares 95000
Reapyment of Mortgage -50000
Payment for Preferred Stock -45000
Purchase of Treasury Stock -80000
Dividend Payment -289000
Net Cash Inflow/(Outflow) from Investing Activity -284000
Net Increase/(Decrease) in Cash Balance 345000
Add: Opening Cash Balance 60000
Closing Cash Cash Balance 405000
Workings:

7ACCOUNTING
Particulars 2013 2014 Change
Accounts Payable 210000 184000 -26000
Accounts Receivable 420000 330000 -90000
Accrued Expenses 140000 160000 20000
Accumulated Depreciation 290000 445000 155000
Allowance for Doubtful Debts 25000 30000 5000
Bonds Payable 605000 690000 85000
Common Stock 410000 505000 95000
Income Tax Payables 80000 30000 -50000
Intangible Assets 60000 40000 -20000
Interest Payable 20000 25000 5000
Inventory 370000 415000 45000
Mortgage Payable 180000 130000 -50000
Plant, Property & Equipment 1050000 1525000 475000
Preferred Stock 155000 110000 -45000
Preapid Expenses 50000 5000 -45000
Retained Earnings 270000 456000 186000
Short Term Investment 50000 80000 30000
Treasury Stock 80000 80000
Change in Assets & Liabilities:
Net Profit and Dividend Payment:
Particulars Amount
Sales Revenue 2430000
Less: Cost of Goods Sold 940000
Gross Profit 1490000
Gain on Sale of Assets 110000
Total Income 1600000
Amortization/Depreciation Expense -260000
Loss on Sale of Assets -75000
Operating Expense -365000
Impairment Expense -115000
EBIT 785000
Interest Expense -90000
EBT 695000
Income Tax Expense -220000
Net Profit for the period 475000
Increase in Retained Earnings 186000
Dividend Paid 289000

8ACCOUNTING
Bibliography:
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.
Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education