problem b 6 gross profit method on december 31 2017 the entire inventory of clementi 4314638

 

Problem B-6Gross Profit Method

On December 31, 2017, the entire inventory of Clementine Corp.was destroyed by a flood. Sales and purchases for the year had been $2.6 million and $1.2 million, respectively. The beginning inventory (Jan 1, 2017) was $450,000.In the past,Clementine’s gross profit has averaged 40%.Clementine uses the periodic inventory system.

Instructions

a.Calculate the estimated cost of inventory destroyed.

b.Preparejournal entries at December 31, 2017 to close the sales and related cost of goods sold accounts.

*Problem B-7 Bank Reconciliation

Following is the general format of a bank reconciliation with the various categories numbered (1) through (4).

Balance per bank statement$XX,XXX

Items to be added:(1)

Items to be deducted:     (2)

Corrected bank balance $YY,YYY

Balance per books$AA,AAA

Items to be added:(3)

Items to be deducted:     (4)

Corrected cash balance$YY,YYY

Instructions

a.To the left of the following items, write the number of the place in which the reconciling items would appear on a November bank reconciliation. If any items would not appear on the bank reconciliation, put an NA beside the item.

____              1.The October bank service charge of $25 was recorded in the books in November.

____              2.An NSF cheque in for $450 was returned with the November bank statement.This cheque will be redeposited in December.The firm has not yet made an entry for this.

____              3.The first $5,000 deposit shown on the November bank statement was recorded in the books on October 31.

____              4.The November service charge of $21 is included on the November bank statement.

____              5.The bank collected a $4,500 note receivable for the firm during November plus $125 interest.The firm has not yet recorded this receipt.

____              6.$15,000 of cheques written in November have not cleared the bank by November 30.

____              7.All $18,000 of cheques written in October, which had not cleared the bank at October 31, cleared the bank in November.

____              8.A cheque written in November was recorded in the books at $1,330.However, this cheque cleared the bank in November for $1,303 (which was the correct amount).This cheque was issued as a payment on account.

____              9.A $15,000 deposit in transit at November 30 is included in the books, but does not show on the bank statement.

____              10.The bank, in error, credited the firm’s account for $300 in November for another firm’s deposit.

b.Prepare any journal entries required by the information contained in a. above.