The Nokia (www.Nokia.com) is a leading global manufacturer of mobile devices and services. The following selected data is available from Nokia’s financial statements.

(Euro millions)	Current Year	Prior Year
Current assets	23,613	24,470
Current liabilities	15,188	20,355

Required
1. Calculate Nokia’s current ratio for both the current year and the prior year.
2. Comment on any change from the prior year to the current year for the current ratio.

The Reuschel Company began 2018 with inventory of 10,000 units at a cost of $\$ 7$ per unit. During 2018, 50,000 units were purchased for $\$ 8.50$ each. Sales for the year totaled 54,000 units leaving 6,000 units on hand at the end of 2018. Reuschel uses a periodic inventory system and the LIFO inventory cost method. Required:

1. Calculate cost of goods sold for 2018 .
2. From a financial reporting perspective, what problem is created by the use of LIFO in this situation? Describe the disclosure required to report the effects of this problem.

Fox Company purchased items of inventory as follows:
May3100 units @ $\$ 3.05$
May10 150 units @ $\$ 3.10$
May15120 units@$3.15
By the end of the month of May, Fox had sold 125 units. If the company uses the average-cost method of accounting for inventory, what is the amount of the ending inventory?

A company started its fiscal year with inventory of $186,000. Purchases and cost of goods sold for the year were$945,000 and $982,000, respectively. What was the amount of ending inventory?

Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company uses a periodic inventory system and the LIFO cost method for its grill inventory. Cast Iron's December 31, 2018, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):

The replacement cost of the grills throughout 2019 was$\$1,000$. Cast Iron sold 27,000 grills during 2019 . The company's selling price is set at $200 \%$ of the current replacement cost. Required:

1. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2019 assuming that Cast Iron purchased 28,000 units during the year.
2. Repeat requirement 1 assuming that Cast Iron purchased only 15,000 units.
3. Why does the number of units purchased affect your answers to the above requirements?
4. Repeat requirements 1 and 2 assuming that Cast Iron uses the FIFO inventory cost method rather than the LIFO method.
5. Why does the number of units purchased have no effect on your answers to requirements 1 and 2 when the FIFO method is used?

Swathmore Clothing Corporation grants its customers 30 days' credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying $3 \%$ times the amount of credit sales for the month. At the fiscal year-end of December 31 , an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly.

At the end of 2017 , accounts receivable were $\$ 574,000$ and the allowance account had a credit balance of $\$ 54,000$. Accounts receivable activity for 2018 was as follows:

$$\begin{array}{lr}\\ \text{Beginning balance}&\$574,000\\ \text{Credit sales}&2,620,000\\ \text{Collections}&(2,483,000)\\ \text{Write-offs}&\underline{(68,000)}\\ \text{Ending balance}&\underline{\underline{\$643,000}} \end{array}$$

The company’s controller prepared the following aging summary of year-end accounts receivable:

Required:

1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year.
2. Prepare the necessary year-end adjusting entry for bad debt expense.
3. What is total bad debt expense for 2018 ? How would accounts receivable appear in the 2018 balance sheet?

Samson Wholesale Beverage Company regularly factor its accounts receivable with the Milpitas Finance Company. On April 30, 2021, the company transferred $800,000 of accounts receivable to Milpitas. The transfer was made without recourse. Milpitas remits 90% of the factored amount and retains 10%. When Milpitas collects the receivables, it remits to Samson the retained amount less a 4% fee (4% of the total factored amount). Samson estimates the fair value of the last 10% of its receivables to be$60,000.

Prepare the journal entry for Samson Wholesale Beverage for the transfer of accounts receivable on April 30, assuming the sale criteria are met.

At the end of the first year of operations, Mayberry Advertising had accounts receivable of $20,000. Management of the company estimates that 10% of the accounts will not be collected. What adjustment would Mayberry Advertising record for Allowance for Uncollectible Accounts?

Esquire Inc. uses the LIFO method to value its inventory. Inventory at January 1, 2016, was $500,000 (20,000 units at$25 each). During 2016, 80,000 units were purchased, all at the same price of $30 per unit. 85,000 units were sold during 2016. Esquire uses a periodic inventory system. Calculate the December 31, 2016, ending inventory and cost of goods sold for 2016.

On December 28, 2016, Videotech Corporation (VTC) purchased 10 units of a new satellite uplink system from Tristar Communications for $25,000 each. The terms of each sale were 1/10, n/30. VTC uses the gross method to account for purchase discounts and a perpetual inventory system. VTC paid the net-of-discount amount on January 6, 2017. Prepare the journal entries on December 28 and January 6 to record the purchase and payment.

Explain a company’s operating cycle.

The following inventory transactions took place near December 31, 2016, the end of the Rasul Company’s fiscal year-end: 1. On December 27, 2016, merchandise costing $2,000 was shipped to the Myers Company on consignment. The shipment arrived at Myers’s location on December 29, but none of the merchandise was sold by the end of the year. The merchandise was not included in the 2016 ending inventory. 2. On January 5, 2017, merchandise costing$8,000 was received from a supplier and recorded as a purchase on that date and not included in the 2016 ending inventory. The invoice revealed that the shipment was made f.o.b. shipping point on December 28, 2016. 3. On December 29, 2016, the company shipped merchandise costing $12,000 to a customer f.o.b. destination. The goods, which arrived at the customer’s location on January 4, 2017, were not included in Rasul’s 2016 ending inventory. The sale was recorded in 2016. 4. Merchandise costing$4,000 was received on December 28, 2016, on consignment from the Aborn Company. A purchase was not recorded and the merchandise was not included in 2016 ending inventory. 5. Merchandise costing $6,000 was received and recorded as a purchase on January 8, 2017. The invoice revealed that the merchandise was shipped from the supplier on December 28, 2016, f.o.b. destination. The merchandise was not included in 2016 ending inventory. Required: State whether Rasul correctly accounted for each of the above transactions. Give the reason for your answer.

Altira Corporation uses a periodic inventory system. The following information related to its merchandise inventory during the month of August 2018 is available:

Aug. 1 Inventory on hand-2,000 units; cost $\$ 6.10$ each. $~~~~~~~$ 8 Purchased 10,000 units for $\$ 5.50$ each. $~~~~~$ 14 Sold 8,000 units for $\$ 12.00$ each. $~~~~~$ 18 Purchased 6,000 units for $\$ 5.00$ each. $~~~~~$ 25 Sold 7,000 units for $\$ 11.00$ each. $~~~~~$ 31 Inventory on hand-3,000 units.

Required: Determine the inventory balance Altira would report in its August 31, 2018, balance sheet and the cost of goods sold it would report in its August 2018 income statement using each of the following cost flow methods:

1. First-in, first-out (FIFO)
2. Last-in, first-out (LIFO)
3. Average cost

John’s Specialty Store uses a perpetual inventory system. The following are some inventory transactions for the month of May:

1. John’s purchased merchandise on account for $5,000. Freight charges of$300 were paid in cash.

2. John’s returned some of the merchandise purchased in (1). The cost of the merchandise was $600 and John’s account was credited by the supplier.

3. Merchandise costing$2,800 was sold for $5,200 in cash.

Prepare the necessary journal entries to record these transactions.