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Ellen, Doctoral Degree
Category: Multiple Problems
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Experience:  Lawyer, Accountant and Researcher
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Acct multiple problems.

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1. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): · 40 units at $100; · 70 units at $80; and · 170 units at $60. Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the average cost method (rounded)?


2. (TCO 5) Describe what is meant by unearned revenues, and give two examples.


1. (TCO 7) A company's investment in receivables is affected by several related variables. Give an example of this interrelationship.



2. Briefly describe why companies that use perpetual inventory systems must still perform physical inventories.

(TCO 4) You are the independent accountant assigned to the audit of Neophyte Company. The company's accountant, a graduate of Rival State University, has prepared financial statements that contained the following questionable items:
a. The balance sheet reports land at $100,000. Included in this amount is a piece of property held for speculation at a cost of $30,000.
b. Current liabilities include $50,000 for long-term debt that comes due in three months. The company has received a suitable firm commitment to refinance the debt for five years and intends to do so.
c. Investments in marketable securities include $20,000 in short-term, high-grade commercial paper which is a cash equivalent.

Please discuss how the above items should be classified and accounted for.


Thank you so much for your question

Here are my answers for comparison with your own:

1. 707
[(40 x $100) + (70 x $80) + (170 x $60)] = $19,800  280 units = $70.71 per unit

2. Unearned revenues are inflows of resources before the earnings process is complete. Examples include magazine subscriptions received in advance by a publishing firm or rent received in advance by property leasing firm. A liability exists because of the obligation to provide the service.

I see you asked additional questions that were not visible on my screen. I will answer those questions now

1 A company's investment in receivables is influenced by several variables, including the level of sales, the nature of the product or service sold, and credit and collection policies. For instance, a change in credit policies could affect sales. In fact, more liberal credit policies--allowing customers a longer time to pay or offering cash discounts for early payment--often are initiated with the specific objective of increasing sales volume. Also, management's choice of credit and collection policies often involves trade-offs. For example, offering cash discounts may increase sales volume, accelerate customer payment, and reduce bad debts.

2. Perpetual inventory systems still require periodic physical inventories to verify the clerical accuracy of the data, and to reflect changes in inventories that are not reflected in the accounting records. These include factors like theft, product deterioration and obsolescence

a) Land for a future warehouse site should be listed under investment or other assets.
b) Debt to be refinanced under these circumstances should be classified as long-term liabilities.
c) These items should be reported with cash under the category of cash and cash equivalents

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