Reference no: EM131747933

QUESTION 1 -     

a. Apollo Group, Inc., parent of University of Phoenix, is a for-profit provider of higher education. In general, this industry has a high percentage of uncollectible accounts from students who can't ultimately pay tuition. If write-offs in 2012 were $245,255, what journal entry did Apollo make in 2012 to record bad debt expense?

b. In 2012, Apollo earned tuition revenue of $4,733,000. Assume all of this was on account. If write-offs were $245,255, how much cash did Apollo collect in 2012 from students for tuition?

QUESTION 2 -

1. The U.S Postal Service (USPS) delivers mail to 153 million addresses in every state, city and town in the country. In September 2014, a customer purchases a standard roll of 100 Forever stamps for $49 cash from USPS.  The customer can use the Forever stamps at any time to mail a letter regardless of the current postal rate. The postal service estimates that 5% of forever stamps are never used. Indicate when the organization should record revenue and provide a reason for your answer.

QUESTION 3 -

1. On January 1, 2011, RCK Eye Center purchased a $240,000 laser.  The company depreciated the laser straight line using a 7 year useful life and a salvage value of $30,000.  On January 1, 2014, the company replaced the main power source of the laser at a cost of $35,000.  Following this replacement, the useful life was extended to a total life of 13 years (i.e., the replacement extended the useful life by 6 years) and salvage value is now estimated at $15,000.  Please provide the journal entry that RCK Eye Center will record in 2014 for depreciation related to the laser (show any work).

QUESTION 4 -

1. Kimball International Inc. uses the LIFO method of accounting for inventory.  In its 2012 inventory footnote Kimball reported a LIFO reserve of $19,500 and $21,100 at June 30, 2012 and 2011, respectively.

Selected data from the financial statements is below

	2012	2011
Total inventory	$89,489	$76,146
Net Sales	923,636	895,912
Cost of Sales	664,311	645,591
Gross Profit	259,325	250,321
Earnings per Share	$2.15	$1.96

a. Compute the inventory amount at June 30, 2012 for Kimball International Inc. assuming that it had used the FIFO method of accounting for inventory.

b. Does Kimball's use of LIFO rather than FIFO affect its cash flows? Explain briefly.

QUESTION 5 -

Scholastic Corp. is a children's media company. It maintains over 5,000 titles (e.g., Hunger Games, Captain Underpants) and has the exclusive U.S. rights to the Harry Potter book series.

The following information was included on Scholastic's 2014 financial statements. This is not a trial balance. It is a list of accounts as they appeared on the balance sheet and income statement as of and for the year ended May 31, 2014. All amounts represent normal balances (e.g., accounts payable has a credit balance of $120). (Note: Retained earnings is ending retained earnings)

Accounts payable	$     120		Long-term debt	$     345
Accounts receivable	340		Loss from discontinued operations	6
Accumulated depreciation	455		Other accrued expenses	235
Allowance for doubtful accounts	26		Prepaid expenses	126
Cash	195		Prepublication costs*	160
Common stock	510		Property, plant and equipment	785
Copyrights and trademarks	250		Retained earnings	724
Cost of goods sold	1,000		Revenues	2,150
Deferred revenue	45		Royalties payable	95
Depreciation	90		SGA expense	875
Interest expense	15		Tax expense	62
Inventory	295		Treasury stock	404

* Scholastic capitalizes the art, pre-press and editorial costs incurred in the creation of the master copy of a book ("prepublication costs"). Prepublication costs are amortized (as part of cost of goods sold) over a three year period once the title is available for sale.

Scholastic declared dividends of $14 during the year ended May 31, 2014.  (1) What is net income for fiscal year 2014? (2) What is retained earnings at May 31, 2013?

QUESTION 6 -

1. Scholastic Corp. is a children's media company. It maintains over 5,000 titles (e.g., Hunger Games, Captain Underpants) and has the exclusive U.S. rights to the Harry Potter book series.

The following information was included on Scholastic's 2014 financial statements. This is not a trial balance. It is a list of accounts as they appeared on the balance sheet and income statement as of and for the year ended May 31, 2014. All amounts represent normal balances (e.g., accounts payable has a credit balance of $120). (Note: Retained earnings is ending retained earnings)

Accounts payable	$120		Long-term debt	$345
Accounts receivable	340		Loss from discontinued operations	6
Accumulated depreciation	455		Other accrued expenses	235
Allowance for doubtful accounts	26		Prepaid expenses	126
Cash	195		Prepublication costs*	160
Common stock	510		Property, plant and equipment	785
Copyrights and trademarks	250		Retained earnings	724
Cost of goods sold	1,000		Revenues	2,150
Deferred revenue	45		Royalties payable	95
Depreciation	90		SGA expense	875
Interest expense	15		Tax expense	62
Inventory	295		Treasury stock	404

* Scholastic capitalizes the art, pre-press and editorial costs incurred in the creation of the master copy of a book ("prepublication costs"). Prepublication costs are amortized (as part of cost of goods sold) over a three year period once the title is available for sale.

Prepare the Balance Sheet at May 31, 2014.

QUESTION 7 -

Scholastic permits customers to return any item for any reason within 60 days of sale. Scholastic estimates that 20% of its sales in May 2014 will be returned in July 2014. According to GAAP, does Scholastics record the effect of these returned products on its income statement in 2014 or 2015? Briefly explain why.

QUESTION 8 -

Scholastic Corp. is a children's media company. It maintains over 5,000 titles (e.g., Hunger Games, Captain Underpants) and has the exclusive U.S. rights to the Harry Potter book series.

The following information was included on Scholastic's 2014 financial statements. This is not a trial balance. It is a list of accounts as they appeared on the balance sheet and income statement as of and for the year ended May 31, 2014. All amounts represent normal balances (e.g., accounts payable has a credit balance of $120). (Note: Retained earnings is ending retained earnings)

Accounts payable	$120		Long-term debt	$345
Accounts receivable	340		Loss from discontinued operations	6
Accumulated depreciation	455		Other accrued expenses	235
Allowance for doubtful accounts	26		Prepaid expenses	126
Cash	195		Prepublication costs*	160
Common stock	510		Property, plant and equipment	785
Copyrights and trademarks	250		Retained earnings	724
Cost of goods sold	1,000		Revenues	2,150
Deferred revenue	45		Royalties payable	95
Depreciation	90		SGA expense	875
Interest expense	15		Tax expense	62
Inventory	295		Treasury stock	404

* Scholastic capitalizes the art, pre-press and editorial costs incurred in the creation of the master copy of a book ("prepublication costs"). Prepublication costs are amortized (as part of cost of goods sold) over a three year period once the title is available for sale.

In fiscal year 2014, $1,350 of sales related to license products. The inventory cost Scholastic $580 to manufacture.  Additionally, Scholastic pays 7% royalties on these sales.  Scholastic incurs royalty expense for the use of certain intellectual property (e.g., when it sells a Star Wars book). This expense is included as part of cost of goods sold. Assume Scholastic has not paid any cash royalties related 2012 yet.

Prepare the journal entries that Scholastic made in 2014 (1) related to the sale of the licensed products and (2) record royalty expense.

QUESTION 9 -

Nike and Under Armour both sell sports apparel.  Nike has a May 31 year end while Under Armour has a December 31 year end.  For both companies, shipments to sporting goods retailers occur mostly in December.  Both companies offer 60-day credit terms to retailers.  Based on reported information from each company's annual report, all else equal, would you expect Nike to have a (1) higher or lower Accounts Receivable Turnover and (2) higher or lower Days to Collect than Under Armour? Explain briefly.