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.