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Unformatted text preview: Question: CACL-0001 Rogo Corp.'s trial balance reflected the following account balances at December 31, 2007: Accounts receivable (net) $16,000 Short-term investments 5,000 Accumulated depreciation on equipment and furniture 15,000 Cash 11,000 Inventory of merchandise 30,000 Equipment and furniture 25,000 Patent 4,000 Prepaid expenses 1,000 Land held for future business site 18,000 In Rogo Corp.'s December 31, 2007 balance sheet, the current assets total is Answers A : $81,000 B : $73,000 C : $67,000 D : $63,000 Answer Explanations This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. D. Answer D is correct. Current assets are cash and other assets that are expected to be converted into cash, sold, or consumed either in 1 year or in the operating cycle, whichever is longer. Included in this category are cash, temporary investments in marketable securities, short-term receivables, inventories, and prepaid expenses. In this case, total current assets are $63,000. Accounts receivable (net) $16,000 Short-term investments 5,000 Cash 11,000 Inventory of merchandise 30,000 Prepaid expenses 1,000 Total $63,000 Equipment and furniture ($25,000) and accumulated depreciation ($15,000) are reported in the property, plant, and equipment section. Patent ($4,000) is reported as an intangible asset, (always long-term), and land held for future business site ($18,000) is reported as a long-term investment. Question: CACL-0002 On the December 31, 2007 balance sheet of the Stat Company, the current assets were comprised of the following items: Cash $ 70,000 Accounts receivable 120,000 Inventories 60,000 An examination of the accounts revealed that the accounts receivable were composed of the following items: Trade accounts $ 93,000 Allowance for uncollectible accounts (2,000) Claim against shipper for goods lost in transit (11/07) 3,000 Selling price of unsold goods sent by Stat on consignment at 130% of cost (and not included in Stat's ending inventory) 26,000 $120,000 What is the correct amount of current assets as of 12/31/07? Answers A : $221,000 B : $224,000 C : $244,000 D : $250,000 Answer Explanations This answer is incorrect. Refer to the correct answer explanation. This answer is incorrect. Refer to the correct answer explanation. C. Answer C is correct. The additional detail of accounts receivable indicates that goods out on consignment are included in accounts receivable at their selling price. Consignment goods should be included in inventory at their cost. Since the selling price of the consigned goods is 130% of cost, the cost of the $26,000 of goods at retail is $20,000 ($26,000/130%). Accounts receivable should be reduced to $94,000 ($120,000 $26,000), and inventory should be increased to $80,000 ($60,000 + $20,000)....
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