Ch 710 2.3 ar, xNGSched Purchase and us, ezto mheduxcation The following informa
ID: 2559812 • Letter: C
Question
Ch 710 2.3 ar, xNGSched Purchase and us, ezto mheduxcation The following information applies to the questions displayed below Roth Inc experienced the following transactions for 2016, ns first year of operations lssued common stock for S80.000 cash. 2. Purchased $245,000 of merchandise on account 3. Sold merchandise that cost $160.000 for $318.000 on account 4 Collected $264,000 cash from accounts recevable 5. Paid $230,000 on accounts payable. 6 Paid $66,000 of salanies expense for the year 7 Paid other operating expenses of 555000 8. Roth adjusted the accounts using the folowing information from an accounts receivable aging schedule Percent Likely to Past Due 0-30 31-60 61-90 Over 90 days 32.400 13.500 2.700 2 700 2700 05 10 20 50 3.00 points Required for a transactionievent, select "No journal entry required" in the first account fheld) Type here to search F4 FS F6 FB F3Explanation / Answer
a. Sl No. Account titles Debit Credit 1 Cash 80000 Common stock 80000 (Issued common stock for cash) 2 Inventory 245000 Accounts payable 245000 (Purchased merchandise on account) 3 Accounts receivable 318000 Sales 318000 (Sold merchandise on account) Cost of goods sold 160000 Inventory 160000 (Recorded cost of goods sold) 4 Cash 264000 Accounts receivable 264000 (Collected cash) 5 Accounts payable 230000 Cash 230000 (Paid cash) 6 Salary expense 66000 Cash 66000 (Paid salaries) 7 Operating expenses 55000 Cash 55000 (Paid other operating expenses) 8 Baddebt expense 3159 Allowance for doubtful accounts 3159 (Note:1) (Baddebt expenses accounted) Notes: 1. Computation of allowance for doubtful accounts: Number of days past due Amount % likely to be uncollectible Allowance Balance Current 32400 1 324 0-30 13500 5 675 31-60 2700 10 270 61-90 2700 20 540 Over 90 days 2700 50 1350 54000 3159 b. Income statement Sales 318000 Less:Cost of goods sold 160000 Gross profit 158000 Less:Expenses Operating expense 55000 Salary expense 66000 Baddebt expense 3159 124159 Net income 33841 Statement of changes in stockholder's equity Common stock Retained earnings Total equity Balance on January 1,2016 0 0 0 Issue of common stock 80000 0 80000 Net income 0 33841 33841 Balance on December 31,2016 80000 33841 113841 Balance sheet Assets: Cash (80000+264000-230000-66000-55000) -7000 Inventory (245000-160000) 85000 Accounts receivable (318000-264000) 54000 Less:allowance for doubtful accounts -3159 Accounts receivable (Net) 50841 Total assets 128841 Liabilities: Accounts payable (245000-230000) 15000 Total stockholder's equity 113841 Total liabilities & stockholder's equity 128841 Statement of cashflows Cashflow from operating activities: Net income 33841 Adjustment: Increase in inventory -85000 Increase in accounts receivable -50841 Increase in accounts payable 15000 -120841 Cash used in operating activities (A) -87000 Cashflow from investing activities (B) 0 Cashflow from financing activities: Issue of common stock © 80000 Net decrease in cash (A)+(B)+© -7000 Beginning balance of cash 0 Ending balance of cash -7000 c. Net realizable value of accounts receivable=50841