Acker Supply completed the following transactions during December of the current year. Acker records unearned items initially as revenue. The company uses the accounts Gift Cards Outstanding and Breakage Revenue to account for gift card transactions. The sales tax rate is 6.0%. A cash receipts journal, general journals, and amortization schedules for installment notes are provided in the Recycling Problems Working Papers.

Instructions:

Journalize any adjusting or reclassification entries that should be reversed. Use page 17 of a general journal.

Acker Supply completed the following transactions during December of the current year. Acker records unearned items initially as revenue. The company uses the accounts Gift Cards Outstanding and Breakage Revenue to account for gift card transactions. The sales tax rate is 6.0%. A cash receipts journal, general journals, and amortization schedules for installment notes are provided in the Recycling Problems Working Papers.

Instructions:

On December 31, Acker Supply has $148,948.25 of installment notes receivable outstanding. Of that amount,$46,184.50 is expected to be collected during the next fiscal period. Record the reclassification entry using page 16 of a general journal.

Townsend, Inc., uses the allowance method of recording uncollectible accounts expense. The following information was obtained from Townsend's records for the current year:

$$\begin{array}{lcc} & \text { January 1 } & \text { December 31 } \\ \text { Accounts receivable } & \$ 72,184.68 & \$ 79,118.47 \\ \text { Allowance for doubtful accounts } & 4,918.25 & 6,047.49 \\ \text { Net sales on account } & - & 944,807.15\end{array}$$

A general journal and cash receipts journal are provided in the Recyeling Problems Working Papers. Instructions:

Compute the accounts receivable turnover and days' sales in accounts receivable.

A portion of Lester Company's voucher processing system is described in the following narrative. Jamal Burke, the accounting assistant, opens the mail and records all vendor invoices in the voucher register. He stamps each invoice and writes the voucher number, account number, and target payment date in the spaces provided. He then files the invoices in an Unpaid Invoices folder by the vendor's name.

Every day, Donna Ervin, the cashier, removes the invoices to be paid that day from the Unpaid Invoices folder. She prepares a check for each invoice and records the checks in a cash payments journal. The check is forwarded to the owner, John Lester, for signing. He returns the signed checks to Donna Ervin to be mailed to the vendors. She attaches the check copy to the invoice and files the invoice by vendor in the Paid Invoices file.

Instructions:

Journalize the following transactions completed during July of the current year. Use page 7 of a voucher register and page 8 of a check register provided in the Recycling Problems Working Papers.

Boardroom Designs installs electronic presentation and sound systems. The company is organized based on the two categories of customers it serves: Commercial and Education. A partial payroll register for the pay period ended July 8, 20-, a blank earnings record form, page 10 of a cash payments journal, and page 7 of a general journal are provided in the Recycling Problems Working Papers. Use the appropriate withholding tax tables shown in Chapter 3 to determine the federal income tax. Deductions for all employees are 2% of total earnings for state income tax, 6.2% for social security tax, and 1.45% for Medicare tax.

Instructions:

Complete the payroll register by totaling each amount column.

On December 31 of the current year, Hinshaw, Inc., took a physical inventory. Units in the December 31 inventory and the market prices are shown below.

$$\begin{array}{lcc}\textbf { Stock Item } & \textbf { Quantity of Units on Hand } & \textbf { Market Price } \\ \text { AC-23 } & 37 & \$ 52.25 \\ \text { XT-67 } & 107 & 8.85 \\ \text { HP-435 } & 26 & 12.30\end{array}$$

Instructions:

Calculate the corporation's estimated ending inventory using the gross profit method of estimating inventory. The corporation's records show the following on December 31 of the current year.

Information taken from Quest Corporation's financial statements is provided in the Recycling Problems Working Papers.

Instructions:

Calculate the ratio and measure for the current year and the prior year. Round percentage calculations to the nearest 0.1%, dollar amount to the nearest $0.01, and ratio to the nearest tenth. Use the results to determine whether the trend between the prior year and the current year appears to be favorable, unfavorable, or neutral. Give reasons for your responses.

Quick ratio

Shellie Pharr and Geneva Rogers are partners in Pheva Interiors. On January 1 of the current year, the partners' equities were Shellie, $24,480.00, and Geneva,$28,650.00. The net income for the year is $62,300.00. Statement paper and a general journal are provided in the Recycling Problems Working Papers.

Instructions:

Journalize the entries to close Income Summary and the owners' equity accounts.

Prove and rule the cash receipts journal of K&D Flooring. Post the totals to the general ledger.

Use the income statement to calculate the breakeven point in sales dollars and in unit sales for May. (Round to the next whole number of units.)

$$\begin{array}{lr} \text { Net Sales (units) } & 180 \\ \text { Sales Price (per unit) } & \$ 375.00 \\ \text { Cost of Merchandise Sold (per unit) } & \$ 230.00 \\ \text { Selling Expenses: } & \\ \hspace{10pt} \text { Sales Commission (per unit) } & \$ 12.50 \\ \hspace{10pt} \text { Delivery Cost (per unit) } & \$ 7.50 \\ \hspace{10pt} \text { Other Variable Selling Expenses (per unit) } & \$ 9.10 \\ \hspace{10pt} \text { Other Fixed Selling Expenses } & \$ 3,225.00 \\ \text { Administrative Expense: } & \$ 600.00 \\ \hspace{10pt} \text { Rent Expense } & \$ 225.00 \\ \hspace{10pt} \text { Insurance Expense } & \$ 3.40 \\ \hspace{10pt} \text { Other Variable Administrative Expenses (per unit) } & \$ 7,950.00 \\ \hspace{10pt}\text { Other Fixed Administrative Expenses } & \end{array}$$

On December 31, 20X2, the accounting records of XYZ Corporation show the following unit sales for 20X2.

$$\begin{array}{llll}\text { 1st quarter } & 41,200 \text { units } & \text { 3rd quarter } & 45,800 \text { units } \\ \text { 2nd quarter } & 43,000 \text { units } & \text { 4th quarter } & 70,000 \text { units }\end{array}$$

The following are additional actual amounts for the 4th quarter of 20X2.

$$\begin{array}{lr}\text { Sales }(70,000 \text { units } @ \$ 5.20) & \$ 364,000 \\ \text { Purchases ( } 58,800 \text { units @ } \$ 2.80) & \$ 164,640 \\ \text { Ending inventory } & 24,700 \text { units }\end{array}$$

Management has established a unit sales goal of 240,000 units for 20X3 and 50,000 units for the first quarter of 20X4. The sales manager, after reviewing price trends and checking with the company's merchandise suppliers, projects that the unit cost of merchandise will stay at the 20X2 price, $2.80 per unit, through 20X3. Because of stable costs, the company will be able to keep its unit sales price at$5.20 through 20X3.

After considering the time required to reorder merchandise, the sales manager requests that 50.0% of each quarter's unit sales be available in the prior quarter's ending inventory.

Expenses are projected as shown below. Except where noted, percentages are based on quarterly projected net sales. For these items, calculate each quarter's amount by multiplying the percentage times that quarter's net sales. Calculate the annual total by adding the four quarterly amounts. When a dollar amount is given, the total amount should be divided equally among the four quarters.

Interest expense for each quarter is projected to be $900.00.

Federal income taxes are calculated using the tax rate table shown in this chapter. Equal quarterly income tax payments are based on the projected annual federal income tax expense.

Additional information is as follows:

a. The balance of cash on hand on January 1, 20X3, is$45,080.00.

b. In each quarter, cash sales are 20.0% and collections of accounts receivable are 25.0% of the projected net sales for the current quarter. Collections from the preceding quarter's net sales are 54.5% of that quarter. Uncollectible accounts expense is 0.5% of net sales.

$$\begin{aligned} &\textbf { Selling Expenses }\\ &\begin{array}{lr} \text { Advertising Expense } & 1.2 \% \\ \text { Delivery Expense } & 0.7 \% \\ \text { Depreciation Expense-Delivery } & \\ \quad \text { Equipment } & \$ 8,400 \\ \text { Depreciation Expense-Store } & \\ \quad \text { Equipment } & \$ 3,600 \\ \text { Miscellaneous Expense-Sales } & 0.2 \% \\ \text { Salary Expense-Sales } & 5.4 \% \\ \text { Supplies Expense-Sales } & 0.8 \% \end{array} \end{aligned}$$

$$\begin{aligned} &\textbf { Administrative Expenses }\\ &\begin{array}{lr} \text { Depreciation Expense-Office Equipment } & \$ 2,880 \\ \text { Insurance Expense } & \$ 7,280 \\ \text { Miscellaneous Expense–Administrative } & \$ 4,800 \\ \text { Payroll Taxes Expense } & 12.0 \% \text { of salaries } \\ \text { Rent Expense } & \$ 13,280 \\ \text { Salary Expense-Administrative } & \$ 52,000 \\ \text { Supplies Expense-Administrative } & \$ 3,600 \\ \text { Uncollectible Accounts Expense } & 0.5 \% \\ \text { Utilities Expense } & 1.5 \% \end{array} \end{aligned}$$

c. In each quarter, cash payments for cash purchases are 10.0% and for accounts payable 50.0% of the purchases for the current quarter. Cash payments for purchases of the preceding quarter are 40.0% of that quarter.

d. In the first quarter, $24,000 will be borrowed on a promissory note and equipment costing$35,000 will be purchased for cash. In each quarter, dividends of $30,000 will be paid in cash. In the fourth quarter, the promissory note plus interest will be paid in cash,$25,920.

Instructions:

Prepare the following budget schedules for the year ended December 31, 20X3. Round percentage amounts to the nearest 0.1%, unit amounts to the nearest 100 units, and dollar amounts to the nearest $10.

Prepare a selling expenses budget schedule (Schedule 3).

Tiffin, Inc., completed the following transactions during the current year. Tiffin initially records supplies and insurance as expenses, records advertising as a prepaid expense, and maintains a liability account for estimated warranty expenses. Source documents are abbreviated as follows: check, C; memorandum, M; receipt, R.

Instructions:

Journalize the appropriate reversing entries on January 1 of the next year.

Prove and rule the cash payments journal of Boardtown Station. Post the totals.

Complete the cost sheet, recording factory overhead of Hammond Corporation at the rate calculated in part (1).