position has deteriorated causing the creditor to reevaluate the note. After careful consideration, the creditor believes that only 60 % of the principal($ 10,000) will be collected at the end of the term. The only interest expected to be received is 2 % of the original principal for one year, also to be collected at the end of the term. At the end of the current year, what amount of expense or loss is recognized by the creditor for this loan impairment? The present value of $ 1 two years hence at 6 % is. 89, and at 2 % is. 961. Question 12 Hutch, Inc. uses the conventional retail inventory method to account for inventory. The following information relates to 2004 operations: What amount should be reported as cost of sales for 2004? Question 13 Trans Co. uses a periodic inventory system. The following are inventory transactions for the month of January: Trans uses the average pricing method to determine the value of its inventory. What amount should Trans report as cost of goods sold on its income statement for the month of January? Question 14 At December 31, 2004, Kale Co. had the following balances in the accounts it maintains at First State Bank: Kale classifies investments with original maturities of three months or less as cash equivalents. In its December 31, 2004 balance sheet, what amount should Kale report as cash and cash equivalents? Question 15 Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a Question 16 A material overstatement in ending inventory was discovered after the year-end financial statements of a company were issued to the public. What effect did this error have on the year-end financial statements? Question 17