Block Foods, a retail grocery store, has agreed to purchase all of its merchandise from Square Wholesalers. In return. Block receives a special discount on purchases. Over recent months, Square noticed that purchases by Block had been falling off. At first, Square simply thought that business might be down for Block and was hopeful that their purchases would pick up. When business with Block did not return to a normal level, Square requested financial statements from Block. Squares records indicate that Block purchased $300,000 worth of merchandise during 20-1, the most recent year.
Selected information taken from Block's financial statements is as follows:
REQUIRED
Compute net purchases made by Block during 20-1. Does it appear that Block violated the agreement?
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Chapter 14 Solutions
College Accounting, Chapters 1-27
- Your client, Daves Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. During 2019, the CFO decided that keeping track of inventory using a combination of QuickBooks and spreadsheets was not an efficient way to manage the stores inventories. So Daves purchased an inventory management system for 9,000 that allowed the entity to keep track of inventory, as well as automate ordering and purchasing, without replacing QuickBooks for its accounting function. The CFO would like to know whether the cost of the inventory management program can be expensed in the year of purchase. Write a letter to the CFO, Cassandra Martin, that addresses the tax treatment of purchased software. Cassandras mailing address is 867 Broadway, New York, NY 10003.arrow_forwardTri-State Bank and Trust is considering giving Concord Company a loan. Before doing so, management decides that further discussions with Concord’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $345,000. Discussions with the accountant reveal the following. 1. Concord shipped goods costing $32,000 to Lilja Company, FOB shipping point, on December 28. The goods are not expected to arrive at Lilja until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Concord FOB destination on December 27 and were still in transit at year-end. 3. Concord received goods costing $23,000 on January 2. The goods were shipped FOB shipping point on December 26 by Brent Co. The goods were not included in the physical count. 4. Concord shipped goods costing $34,000 to…arrow_forwardUmatilla Bank and Trust is considering giving Sarasota Corp. a loan. Before doing so, it decides that further discussions with Sarasota’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $284,470. Discussions with the accountant reveal the following. 1. Sarasota shipped goods costing $50,150 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $88,600 that were shipped to Sarasota FOB destination on December 27 and were still in transit at year-end. 3. Sarasota received goods costing $24,100 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 4. Sarasota shipped goods costing $49,800 to Ehler of…arrow_forward
- Tri-State Bank and Trust is considering giving Cheyenne Corp. a loan. Before doing so, management decides that further discussions with Cheyenne’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $303,500. Discussions with the accountant reveal the following. 1. Cheyenne shipped goods costing $32,400 to Sorci Company, FOB shipping point, on December 28. The goods are not expected to arrive at Sorci until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $91,000 that were shipped to Cheyenne FOB destination on December 27 and were still in transit at year-end. 3. Cheyenne received goods costing $29,800 on January 2. The goods were shipped FOB shipping point on December 26 by Solita Co. The goods were not included in the physical count. 4. Cheyenne shipped goods costing $44,000…arrow_forwardUmatilla Bank and Trust is considering giving Pohl Company a loan. Before doingso, it decides that further discussions with Pohl’s accountant may be desirable. One areaof particular concern is the Inventory account, which has a year-end balance of $275,000.Discussions with the accountant reveal the following. 1. Pohl sold goods costing $55,000 to Hemlock Company FOB shipping point onDecember 28. The goods are not expected to reach Hemlock until January 12. Thegoods were not included in the physical inventory because they were not in thewarehouse. 2. The physical count of the inventory did not include goods costing $95,000 that wereshipped to Pohl FOB destination on December 27 and were still in transit at year-end. 3. Pohl received goods costing $25,000 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physicalcount. 4. Pohl sold goods costing $51,000 to Ehler of Canada FOB destination on December 30.The goods were…arrow_forwardOn July 29, 20Y1, Ever Green Company, a garden retailer, purchased $12,000 of seed, terms 2/10, n/30, from Fleck Seed Co. Even though the discount period had expired, Mary Jasper subtracted the discount of $240 when she processed the documents for payment on August 13, 20Y1. Is Mary committing an illegal act? Is Mary behaving in a professional manner? Mary Jasper is not behaving in a Give reasons for your answers. What choices does Fleck Seed Co. have when it processes the receipt of $11,760 for payment of the invoice?arrow_forward
- Guthrie Company receives orders from customers and records revenue at that time, even though it has not yet delivered products or services to the customers. what accounting assumption violate and how it should be done? Because of inflation, Cross Company adjusts its financial statements each year to show the current purchasing power for all items.what accounting assumption violate and how it should be done? David Thomas combines his personal transactions and business transactions when he prepares his company’s financial statements so that he can tell how well he is doing on an “overall” basis.what accounting assumption violate and how it should be done? At the end of each year, Vann Company reports its economic resources on a liquidation basis even though it is likely to operate in the future. what accounting assumption violate and how it should be done?arrow_forwardUmatilla Bank and Trust is considering giving Novak Corp. a loan. Before doing so, it decides that further discussions with Novak’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $261,940. Discussions with the accountant reveal the following. 1. Novak shipped goods costing $55,800 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $97,720 that were shipped to Novak FOB destination on December 27 and were still in transit at year-end. 3. Novak received goods costing $25,980 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 4. Novak shipped goods costing $54,080 to Ehler of Canada FOB…arrow_forwardSweet Shop Co. is a chain of candy stores that has been in operation for the past ten years. Preparejournal entries for the following events, which occurred at the end of the most recent year. If theevent is not a transaction, write “no transaction.”a. Ordered and received $12,000 worth of cotton candy machines from Candy Makers Inc.,which Sweet Shop Co. will pay for in 45 days.b. Sent a check for $6,000 to Candy Makers Inc. for the cotton candy machines from (a).c. Received $400 from customers who bought candy on account in previous months.d. To help raise funds for store upgrades estimated to cost $20,000, Sweet Shop Co. issued 1,000common shares for $15 each to existing stockholders.e. Sweet Shop Co. bought ice cream trucks for $60,000 total, paying $10,000 cash and signing along-term note for $50,000.arrow_forward
- Umatilla Bank and Trust is considering giving Sheffield Corp. a loan. Before doing so, it decides that further discussions with Sheffield’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $273,850. Discussions with the accountant reveal the following. 1. Sheffield shipped goods costing $53,860 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $88,840 that were shipped to Sheffield FOB destination on December 27 and were still in transit at year-end. 3. Sheffield received goods costing $26,690 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 4. Sheffield shipped goods costing $52,540 to…arrow_forwardYou are a financial adviser with a client in the wholesale produce business that just completed its first year of operations. Due to weather conditions, the cost of acquiring produce to resell has escalated during the latter part of this period. Your client, Javonte Gish, mentions that because her business sells perishable goods, she has striven to maintain a FIFO flow of goods. Although sales are good, the increasing cost of inventory has put the business in a tight cash position. Gish has expressed concern regarding the ability of the business to meet income tax obligations. Required Prepare a memorandum that identifies, explains, and justifies the inventory method you recommend that Ms. Gish adopt.arrow_forwardFirst Bank is considering giving Sunland Company a loan. First, however, it decides that it would be a good idea to have further discussions with Sunland’s accountant. One area of particular concern is the inventory account, which has a December 31 balance of $278,000. Discussions with the accountant reveal the following: 1. The physical count of the inventory did not include goods that cost $95,000 that were shipped to Sunland, FOB shipping point, on December 27 and were still in transit at year end. 2. Sunland sold goods that cost $34,000 to Blossom, FOB destination, on December 28. The goods are not expected to arrive at their destination in India until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 3. On December 31, Bridgeport had $32,000 of goods held on consignment for Sunland. The goods were not included in Sunland’s ending inventory balance. 4. Sunland received goods that cost $28,000 on January 2.…arrow_forward
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