CACA$002$: Introduction to Accounting IB

Question KWWP$7-2$

Presented below are a series of unrelated situations.

HB Traders' unadjusted trial balance on $31$ December $2023$ included the following

accounts.

HB Traders estimates its credit loss expense $1\mathrm{.}5\%$ of net sales.

Required: Determine its credit loss expense for $2023.$

II$.$ An analysis and ageing of Stuart Baxi's $($SB$)$ Accounts receivable on $31$ December

$2023$ disclosed the following.

REQUIRED: What is the net realisable value of SB$\text{'}$s receivables on $31$ December

$2023$

III. At the end of its first year of operations, $31$ December $2023,$ Forbidden Traders

reported the following information.

Required: What should be the balance in accounts receivable at $31$ December $2023,$

before subtracting the allowance for credit losses?

IV$.$ The following accounts were taken from Bullock Enterprises' trial balance at $31$

December $2023.$

Debit Credit

Required: If Allowance for estimated credit losses is set at $3\%$ of accounts receivable,

determine the credit loss expense to be reported for $2023.$

V$.$ Shoreline Co$.$ provides for credit losses based on $3\%$ of credit sales. The following

data are available for $2023$

CACA$002$: Introduction to Accounting IB

$\begin{array}{cc}\text{C}\text{u}\text{s}\text{t}\text{o}\text{m}\text{e}\text{r}\text{a}\text{c}\text{c}\text{o}\text{u}\text{n}\text{t}\text{s}\text{w}\text{r}\text{i}\text{t}\text{t}\text{e}\text{n}\text{o}\text{f}\text{f}as\text{u}\text{n}\text{c}\text{o}\text{l}\text{l}\text{e}\text{c}\text{t}\text{i}\text{b}\text{l}\text{e}\text{d}\text{u}\text{r}\text{i}\text{n}\text{g}2023& 30000\end{array}$

Overall instructions

Answer the questions relating to each of the five independent situations as requested.

Question WE$6-8$

Bukavu Camera Shop uses the COMWIL basis for its inventory valuation. The

following data are available at $31$ May

REQUIRED:

a$)$ Determine the amount of the ending inventory by applying the COMWIL Value

and explain the accounting principle violated if the owner of Bukavu Camera

Shop doesn't use your inventory value.

b$)$ You are the Chief Accountant of Toys$\_$R$\_$Us Traders. Kathy Moiben, the

business owner, recently mentioned to you that she found an error in the $2022$

financial statements, which she belleves has corrected itself. In discussions

with the Purchasing Unit, she determined that the $2022$ ending inventory was

overstated by R$1$ million. Kathy says that the $2023$ ending inventory is correct.

Thus, she assumes that the $2023$ profit for the period is correct. Kathy says,

"What happened has happened$-$there's no point in worrying about it anymore."

You conclude that Kathy is incorrect. REQUIRED: Write a brief, "tactful"

memorandum to Kathy, clarifying the situation about inventory errors.