Review Problems For Exam 2 Problem 1 periodic inventory Sassicaia Inc had the following transactions in 2011 January 1 April 3 June 13 August 7 Beg Inv Purchased Purchased Purchased 500 units 8 00 each 750 units 10 00 each 450 units 12 00 each 300 units 15 00 each November 10 Sold 1 350 units 32 00 each 1 What is net income in 2011 if Sassicaia uses FIFO 2 What is ending inventory on the December 31 2011 Balance Sheet using average cost 3 What is gross margin gross profit if Sassicaia uses LIFO Problem 2 perpetual inventory Widgets Inc had the following transactions in 2011 All sales and purchases are made on account On January 1 2011 Widgets had a balance in Accounts Receivable of 15 000 and a balance in Allowance for Doubtful accounts of 500 Widgets purchased a delivery truck on January 1 2009 for 21 000 The truck has a useful life of 4 years and a salvage value of 6 000 Widgets uses the double declining balance method of depreciation We sold the equipment on Dec 31 2011 for 5 000 On Dec 1st Widgets bought 2500 worth of inventory 125 units 10 10 n 30 and paid 9 days later Total shipping cost for inventory was 250 Shipping terms were FOB Destination On Dec 15 Widgets sold 100 units of inventory for 50 a unit with terms 5 10 n 30 Total shipping cost for sales was 400 Shipping terms were FOB Destination On Dec 20 Widgets received payment for merchandise Widgets wrote off a customer s account of 350 Received 25 000 for partial payment of accounts receivable Reinstated a customer s account of 250 Widgets estimates that 4 of its ending accounts receivable balance will be uncollectible Widgets uses the allowance method to account for bad debts REQUIRED 1 What is the book value of the delivery truck on the December 31 2010 Balance Sheet 2 What is the cash net realizable value of Accounts Receivable on the December 31 2011 Balance Sheet If Widgets sold the delivery truck on January 1 2012 for 6 500 what would be the gain or loss and what would be the cash flow 3 4 What is the amount of inventory on the balance sheet for 2011 5 What is gross profit Net income for 2011
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