TVM ProblemsPurchases and SalesBondsExam II ReviewNOTICE: We strongly suggest that you look over the material before the review session.The review sessions will be held Sunday, April 13th from 3:00-6:00pm in the KansasWoodruff Auditorium as well as Tuesday, April 15th during normal ACCT 200 lecture (youonly need to attend one of these sessions). The exam will be held on Wednesday, April 16thfrom 5:45-7:45 PM Miscellaneous Questions:1. How do you compute gross margin?2. What type of account is COGS?3. Explain COGS.1Bank Reconciliation (also see your lab notes!)The following information applies to The Barnes Company:Balance per Bank Statement, 12-31-02: $45,000Balance per Books, 12-31-02: $38,650Other information:Deposits in Transit: $10,000Outstanding Checks: $15,700Interest collected by bank on Barnes’s behalf: $ 1,000Bank Service Charge: $ 50A check that Kaufman Co. gave to Barnes bounced.The check was written for $300. Barnes believes that Kaufman Co. will pay her back promptly.Prepare a bank reconciliation and the appropriate journal entries.2Petty CashAaron’s Murals Inc. created a $300 imprest petty cash account July 1, 2002 with Andrew as the fund custodian. During July, Andrew authorized and paid the following petty cash tickets:1 Staples $10.002 Dinner w/ client 25.003 Postage 20.004 Taxi 15.00At the end of July, $230 is left in the petty cash box.A) Show entry to establish the fund.B) Show the entry needed to replenish the fundC) Show the entry to increase the fund to $350 3InventoryThirsty Sarah owns a store that had a beginning inventory of 32 cases of Plastic Bottle Tequila that cost $7.00 each. During the first month of operations the store purchased inventory as follows:Purchase No. 1 35 @ $8.00Purchase No. 2 20 @ $7.50Purchase No. 3 38 @ $8.50The ending inventory consists of 42 cases of tequila.Calculate ending inventory and cost of goods sold.Ending Inventory Cost of Goods Solda) Weighted-average cost ______________ ________________b) FIFO cost ______________ ________________c) LIFO cost ______________ ________________4Estimating InventoryGross Margin MethodThe following information is available for Pisklo’s Super Supplies Inc. for 2006:Beginning Inventory $35,000Net Purchases 80,000Net Sales 150,000Historically, gross margin is 40% of sales. Estimate ending inventory using the gross margin method.Retail MethodThe following information is available for Jordan’s Emporium for 2006:Cost RetailBeginning Inventory 20,000 28,000Purchases 63,000 75,000Cost of Goods Available 83,000 103,000Sales 82,000Calculate ending inventory at cost using the retail method.5LCMAt the beginning of the 2007 season, Scott had 100 burritos costing $7 each. During the season, Scott bought additional 200 burritos at $10 each. Also during the year, many imitation burritos were sold, driving down the value of the originals. At the end of the year, there were 150 burritos left which could be sold for $1 each. 1. What are Costs of Goods Sold before applying lower-of-cost-or-market (LCM) concept using FIFO and FIFO assumptions?2. Using FIFO assumption apply LCM? Use T-accounts please.Basket PurchaseKristi’s Rockstar Co. purchased a spinning drum set, a gold-plated microphone set, and lighting equipment for a lump-sum payment of $60,000. The company hired an appraiser todetermine the fair market value of the individual assets. The fair market value of the drum set is $20,000, the microphone set is $16,000, and lighting equipment is $44,000. Make the required journal entry to record the purchase.6DepreciationCaty’s Jukebox Company purchased equipment on 1/1/00 for $500,000. The estimated residual value is 5% of the purchase price and estimated useful life is 10 years. The company also estimated that the equipment would produce 500,000 units over its useful life. In year one, the company produced 47,500 units and in year two, the company produced 43,250 units.Compute the depreciation expense for the first two years using the following methods:a. Straight-Line Methodb. Double-Declining Balance Methodc. Sum-of-the-years-digits Methodd. Units of Production Method7e. Assume Caty’s uses double declining balance depreciation (disregard parts a, c, and d). On July 1, 2001, they exchange the equipment for similar equipment. The new (similar) equipment had a market value of $480,000. Caty’s also paid $100,000 in cash for the new equipment.Make the journal entry for the exchange.f. Disregard part e. Assume instead that the company sells the equipment for $300,000 cashon July 1, 2002. Prepare the journal entry for this transaction assuming the company used straight-line depreciation.8Accounts Receivable and Bad DebtsNOTE: All portions should be worked independently.Nathan’s Money Co. estimates bad debts at the end of each month using the percentage of credit sales method. The company had credit sales of $250,000 for the month of July and estimates that 8% of those will be uncollectible. On July 31, the balance in Accounts Receivable was $325,000, and the balance in Allowance for Bad Debts was $2,500.a. Prepare the journal entry for July’s bad debt expense.b. On August 13, the company wrote off accounts totaling $16,000. Prepare any necessary journal entries.c. In September, Andrew’s Plumbing sent a check for $3,000. This account had been writtenoff as uncollectable on August 13. Prepare any necessary journal entries.d. On December 31, the balance sheet for Nathan’s Co. shows the following amounts:Accounts Receivable 240,000Allowance for Bad Debts 8,500The company adjusts its Allowance for Bad Debts account at the end of the year base on the aging method. The company’s accountant provided the following information:Days Outstanding Receivable Amount Estimated Allowance EstimateUncollectable < 30 100,000 2% 2,000 30-60 80,000 6% 4,800 61-90 40,000 8% 3,200 > 90 20,000 16% 3,200Provide the appropriate entry to adjust bad debt expense:9TVM ProblemsFill in the blanks below!Part A Part B (semi-annual) Part CPV ????? 55,000 n/a!Interest Rate 12% 6% 8%Years 5 8 15FV n/a! ????? $100,000Payment $5,000 n/a! ?????Long TVM ProblemAssume you will retire in 40 years and live 20 more years after that. Your annual spending requirements (during retirement) will be $80,000 per year at the end of each year. If the appropriate interest rate is 8%, how much must you invest today to fund