Financial Accounting2

Assignment Question(s): Total Marks 10 Chapter 7 to 10

Q1. Discuss with your own examples the two methods of accounting for account receivableswith cash discounts and the two methods for estimating bad debts. (2 Marks)

(Note: Numerical Examples must include Journal entry)

Answer

Q2. X Company has the following receivables classified into individually significant and all other receivables.

Individually significant P Company Q Company R Company S Company All other receivables	$ 65,000 95,000 75,000 35,000	270,000 425,000
Total receivables.		695,000

X company determines that P’s receivable is impaired by $20,000, and S’s receivable is totally impaired. Both Q’s and R’s receivables are not considered impaired. X company also determines that a composite rate of 2% is appropriate to measure impairment on all other receivables.

Required: Calculate the total impairment on accounts Receivable (1 Mark)

Answer:

Q3. Rex Company’s record of transactions for the month of September was as follows.

Purchase			Sales
Date	Quantity	Unit Price	Date	Units
Sep 1	(Balance on hand) 100	$5.00	Sep 5	300
Sep 4	400	5.10	Sep 12	200
Sep 11	300	5.30	Sep 27	800
Sep 18	200	5.35	Sep 28	150
Sep 26	600	5.60
Sep 30	200	5.80
Total	1,800			1,450
	Total units (ending inventory) 350

Instructions: (2 Marks)

Compute the ending inventory at September 30 on each of the following on periodic bases.

1. FIFO

2. LIFO

3. WA

Answer:

Q4. Explain the concept of LCNRV and its applicability to Agricultural Inventory and

Commodity Broker-Traders (1 Mark)

Answer:

Q5. Give numerical examples for Gross profit and retail Methods of Estimating ending Inventory. (2 Marks)

Q6. ABC Corporation borrowed SAR 150,000 at 10% interest from NCB Bank on Jan. 1, 2020, for specific purposes of constructing special-purpose equipment to be used in its operations. Construction on the equipment began on Jan. 1, 2020, and other general debt existing on Jan. 1, 2020 was:

SAR 200,000, 12%, 10-year bonds payable

SAR 100,000, 11%, 5-year note payable

The weighted-average accumulated expenditures was SAR 250,000.

Compute the Actual and Avoidable Interest and Pass journal entry for the appropriate interest to be capitalized. (2 Marks)