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ACCT10002 Introduction to Financial Accounting

Summer 2023

Topic 6 Exercises

Note: A physical stocktake found a shortage of 2 soccer balls to the computer records

Required:

Using the moving weighted average cost assumption,

(i)   Complete the inventory record for the May transactions [5 marks]

(ii)  Prepare the required journal entries for the stock shortage [1 mark]

(iii) Calculate the cost of sales to cost of sales for May [2 marks]

(iv) Calculate the ending inventory valuation for May [1 mark]; and

(v)  Calculate the Gross Profit for May [1 mark].

[An answer Sheet is provided]

2.   Robertson Ltd uses the allowance method to record doubtful debts expense and concludes, using the percentage of accounts receivable method, that 1% of accounts receivable will become uncollectable. Accounts receivable are $650,000 at the end   of the year, and the Allowance for Doubtful Debts had an opening balance of $7,900 at the beginning of the year and during the year the actual bad debts written off were $3,000.

Required:

(a)  Prepare the adjusting journal entry to record doubtful debts expense for the year.

(b) If the Allowance for Doubtful Debts had an opening balance of $7,000 and actual bad debts during the year were $6,900 determine the amount to be reported for doubtful debts expense.