Case A. Dr Pepper Snapple Group, Inc., is a leading integrated brand owner, bottler, and distributor of nonalcoholic beverages in the United States, Canada, and Mexico. Key brands include Dr. Pepper, Snapple, 7-UP, Mott’s juices, A&W root beer, Canada Dry ginger ale, Schweppes ginger ale, and Hawaiian Punch, among others.

The following represents selected data from recent financial statements of Dr Pepper Snapple Group (dollars in millions):

The company also reported bad debt expense of $4 million in 2011, $1 million in 2010, and $3 million in 2009.

1. Record the company’s write-offs of uncollectible accounts for 2011.

2. Assuming all sales were on credit, what amount of cash did Dr Pepper Snapple Group collect from customers in 2011?

3. Compute the company’s net profit margin for the three years presented. What does the trend suggest to you about Dr Pepper Snapple Group?

Case B. Samuda Enterprises uses the aging approach to estimate bad debt expense. At the end of 2014, Samuda reported a balance in accounts receivable of $620,000 and estimated that $12,400 of its accounts receivable would likely be uncollectible. The allowance for doubtful accounts has a $1,500 debit balance at year-end (that is, more was written off during the year than the balance in the account).

1. What amount of bad debt expense should be recorded for 2014?

2. What amount will be reported on the 2014 balance sheet for accounts receivable?

Case C. At the end of 2015, the unadjusted trial balance of Samuels, Inc., indicated $6,530,000 in Accounts Receivable, a credit balance of $9,200 in Allowance for Doubtful Accounts, and Sales Revenue (all on credit) of $155,380,000. Based on knowledge that the current economy is in distress, Samuels increased its bad debt rate estimate to 0.3 percent on credit sales.

1. What amount of bad debt expense should be recorded for 2015?

2. What amount will be reported on the 2015 balance sheet for accounts receivable?

Case D. Stewart Company reports the following inventory records for November 2014:

Selling, administrative, and depreciation expenses for the month were $16,000. Stewart’s tax rate is 30 percent.

1. Calculate the cost of ending inventory and the cost of goods sold under each of the following methods:

a. First-in, first-out.

b. Last-in, first out.

c. Weighted average (round unit cost to the nearest penny.)

2. Based on your answers in requirement (1)

a. What is the gross profit percentage under the FIFO method?

b. What is net income under the LIFO method?

c. Which method would you recommend to Stewart for tax and financial reporting purposes?

Explain your recommendation.

3. Stewart applied the lower of cost or market method to value its inventory for reporting purposes at the end of the month. Assuming Stewart used the FIFO method and that inventory had a market replacement value of $19.50 per unit, what would Stewart report on the balance sheet for inventory? Why?

Case E. Matson Company purchased the following on January 1, 2014:

• Office equipment at a cost of $60,000 with an estimated useful life to the company of three years and a residual value of $15,000. The company uses the double-declining-balance method of depreciation for the equipment.

• Factory equipment at an invoice price of $880,000 plus shipping costs of $20,000. The equipment has an estimated useful life of 100,000 hours and no residual value. The company uses the units-of-production method of depreciation for the equipment.

• A patent at a cost of $330,000 with an estimated useful life of 15 years. The company uses the straight-line method of amortization for intangible assets with no residual value.

1. Prepare a partial depreciation schedule for 2014, 2015, and 2016 for the following assets (round your answers to the nearest dollar):

a. Office equipment.

b. Factory equipment. The company used the equipment for 8,000 hours in 2014, 9,200 hours in 2015, and 8,900 hours in 2016.

2. On January 1, 2017, Matson altered its corporate strategy dramatically. The company sold the factory equipment for $700,000 in cash. Record the entry related to the sale of the factory equipment.

3. On January 1, 2017, when the company changed its corporate strategy, its patent had estimated future cash flows of $210,000 and a fair value of $190,000. What would the company report on the income statement (account and amount) regarding the patent on January 2, 2017? Explain your answer.

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DR PEPPER SNAPPLE GROUP, INC. Consolidated Balance Sheets (partial) (in millions) December 31, 2011 December 31, 2010 Assets Current assets: Cash and cash equivalents Accounts receivable (net of allowances of $3 and $5, respectively) $701 $315 585 536 Consolidated Statements of Income (partial) For the Year Ended December 31 (in millions) 2011 2010 2009 Net sales $5,903 $5,636 $5,531 Net income $ 606 $ 528 $ 555