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Anettt [7]
3 years ago
11

Suzuki Supply reports the following amounts at the end of 2021 (before adjustment). Credit Sales for 2021 $ 260,000 Accounts Rec

eivable, December 31, 2021 55,000 Allowance for Uncollectible Accounts, December 31, 2021 1,100 (Credit) 3. Calculate the effect on net income (before taxes) and total assets in 2021 for each method. Suzuki estimates 12% of receivables and 3% of credit sales respectively will not be collected.
Business
1 answer:
Amiraneli [1.4K]3 years ago
7 0

Answer:

1. Suzuki estimates 12% of receivables: Net income (before taxes) in 2021 decreases by $5,500  and total assets in 2021 decreases by $5,500

2. Suzuki estimates 3% of credit sales: Net income (before taxes) in 2021 decreases by $7,800 and total assets in 2021 decreases by $7,800

Explanation:

1. Suzuki estimates 12% of receivables

Bad debts are estimated: 12% x $55,000 = $6,600

Before adjusting, Allowance for Uncollectible Accounts balance of $1,100 (credit).

Bad debts expense = $6,600  - $1,100 = $5,500

The entry will be made:

Debit Bad debts expense $5,500

Credit Allowance for Uncollectible Accounts $5,500

Net income (before taxes) in 2021 decreases by $5,500  and total assets in 2021 decreases by $5,500

2. Suzuki estimates 3% of credit sales

Bad debts are estimated: 3% x $260,000 = $7,800

The company uses the percentage of sales method.

Bad debts expense = $7,800

The entry will be made:

Debit Bad debts expense $7,800

Credit Allowance for Uncollectible Accounts $7,800

Net income (before taxes) in 2021 decreases by $7,800 and total assets in 2021 decreases by $7,800

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During 2018, TRC Corporation has the following inventory transactions.
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Answer:

Results are below.

Explanation:

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Jan. 1 Beginning inventory 48 $40 $1,920

Apr. 7 Purchase 128 42 5,376

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For the entire year, the company sells 427 units of inventory for $58 each.

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<u>1)</u>

<u>Under the FIFO (first-in, first-out) method, the ending inventory is calculated using the cost of the lasts units remaining in inventory.</u>

Ending inventory= 55*46= $2,530

COGS= 48*40 + 128*42 + 198*45 + 53*46= $18,644

Revenue= 427*58= $24,766

Gross profit= 24,766 - 18,644= $6,122

<u>2)</u>

<u>Under the LIFO (last-in, first-out) method, the ending inventory is calculated using the cost of the firsts units remaining in inventory.</u>

<u></u>

Ending inventory= 48*40 + 7*42= $2,214

COGS= 108*46 + 198*45 + 121*42= $18,960

Revenue= 427*58= $24,766

Gross profit= 24,766 - 18,960= $5,806

<u>3)</u>

<u>First, we need to calculate the weighted-average cost:</u>

weighted-average cost= (40 + 42 + 45 + 46) / 4= $43.25

Ending inventory= 55*43.25= $2,378.75

COGS= 427*43.25= $18,467.75

Revenue= 427*58= $24,766

Gross profit= 24,766 - 18,467.75= $6,298.25

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