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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

The following accounts were abstracted from Pika Co.'s unadjusted trial balance at December 31:

                                                                                                Debit                     Credit
Accounts receivable                                                       $2,000,000
Allowance for uncollectible accounts     16,000
Net credit sales                                                                                $6,000,000

Pika estimates that 3% of the gross accounts receivable will become uncollectible. After
adjustment at December 31, the allowance for uncollectible accounts should have a credit
balance of $60,000

2,000,000 x 0.03 = 60,000
   
Accounts receivable       $525,000
Allowance                          (45,000)
Cash realizable value      480,000

During 2007 sales on account were $145,000 and collections on account were $86,000. Also, during 2007 the company wrote off $8,000
in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $54,000.
The change in the cash realizable value from the balance at 12/31/06 to 12/31/07 was

a. $50,000 increase
b. $59,000 increase
c. $42,000 increase
d. $51,000 increase

525,000 + 145,000 - 86,000 - 8,000 - 54,000 = 522,000
522,000 - 480,000 = 42,000
   
Papa Bear Corporation's unadjusted trial balance includes the following balances (assume normal balances)

Accounts Receivable $1,119,000
Allowances for Doubtful Accounts $ 21,300

Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debts expense will the company record?

a. $67,140
b. $45,840
c. $44,562
d. $68,418
 
(1,119,000 x .06 = 67,140) (67140 - 21,300 = 45,840)
   
An analysis and aging of Hom Company's accounts receivable at December 31
disclosed the following:

Accounts receivable                                                                                        $850,000
Allowance for uncollectible accounts per books                  50,000
Amounts deemed uncollectible                                                 64,000

The net realizable value (NRV) of the accounts receivable at December 31 should be:
 
$786,000

850,000 - 64,000 = 786,000
   
The amount of uncollectible accounts at the end of the year is estimated to be $30,000, using the aging of accounts receivable method.
The balance in the Allowance of Doubtful Accounts account is an $10,000 credit before adjustment.
What is the adjusted balance of the Allowance for Doubtful Accounts at the end of the year?
 
30,000
   
The Perry Company reported Accounts Receivable, Net of $64,600 at the beginning of the year and $73,600 at the end of the year.
If the company's net sales revenue during the fourth year was $896,000, what are the days to collect during year?
(Round all calculations to 1 decimal place.)
 
28.1
   
Morrow Incorporated uses the percentage of credit sales method of estimating doubtful accounts.
The Allowance for Doubtful Accounts has an unadjusted credit balance of $5,700, and the company had $290,000
of net credit sales during the period. Morrow has experienced bad debt losses of 6% of credit sales in prior periods.
After making the adjusting entry for estimated bad debts, what is the ending balance in the Allowance for Doubtful Accounts account?
 
23,100
   
Hall Co.'s allowance for uncollectible accounts had a credit balance of $24,000 at December 31, Year 1. During Year 2, Hall wrote
off uncollectible accounts of $96,000. The aging of accounts receivable indicated that a $100,000 allowance for doubtful accounts
was required at December 31, Year 2. What amount of uncollectible accounts expense should Hall report for Year 2?

A. $100,000
B. $120,000
C. $96,000
D. $172,000
   
On January 1, Portillo, Incorporated lends a corporate customer $120,000 at 8% interest.
The amount of interest revenue that should be recorded for the quarter ending March 31 equals:
 
$2,400
 
March is the third month, so 12 / 3 = 4
120,000 x .08 = 9,600
9,600 / 4 = 2,400
   
Holder Co. has an 8% note receivable dated June 30, Year 1, in the original amount of $300,000.
Payments of $100,000 in principal plus accrued interest are due annually on July 1, Year 2, Year 3, and Year 4.
In its June 30, Year 3, balance sheet, what amount should
Holder report as a current asset for interest on the note receivable?
 
$16,000

200,000 x 0.08 = 16,000
   
Grandview Grinding, Incorporated had net accounts receivable of $65,700 at the beginning of the year and $73,500 at the end of the year.
If the company's net sales revenue during the year was $898,875, what is the receivables turnover ratio?
 
12.91
   
Jayne Corp. discounted its own $50,000, 1-year note at a bank, at a discount rate of 12%, when the prime rate was 10%.
In reporting the note on Jayne's balance sheet prior to the note's maturity, what rate should Jayne use for the accrual of interest?
(round to one decimal place)
 
13.6%

50,000 - (50,000 × .12) = 44,000 
50,000 - 44,000 = 6,000
6,000 / 44,000) = 0.13636…. (13.6%)
   
Henry Stores, Inc., had sales of $2,000,000 during December. Experience has shown that merchandise equaling 7% of sales will be
returned within 30 days and an additional 3% will be returned within 90 days. Returned merchandise is readily resalable.
In addition, merchandise equaling 15% of sales will be exchanged for merchandise of equal or greater
value. What amount should Henry report for net sales in its income statement for the month of December?
 
$1,800,000

A. Net sales equal gross sales minus net returns and allowances. No adjustments are made
for anticipated exchanges for merchandise of equal or greater value. Hence, net sales equal

2,000,000 - (2,000,000 × .10) = 1,800,000
   
Ayn, Inc., accepted from a customer an $80,000, 90-day, 12% interest-bearing note dated August 31. On September 30, Ayn discounted the
note at the Nadir State Bank at 15%. However, the proceeds were not received until October 1. In Ayn's September 30 balance sheet, the
amount receivable from the bank, based on a 360-day year, includes accrued
interest revenue of
 
$340
 
12 / 3 = 4
80,000 x .12 / 4 = 2,400
80,000 + 2,400 = 82,400
12 / 2 = 6
82,400 x .15 / 6 = 2,060
2,400 – 2,060 = 340
   
Kelton Incorporated reported net credit sales of $510,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $850.
The company has experienced bad debt losses of 1% of credit sales in prior periods. Using the percentage of credit sales method, what amount should the
company record as the estimated Bad Debt Expense?
 
5,100
   
William Co. determined that the net realizable value (NRV) of its accounts receivable at December 31, based on an aging of the receivables,
was $650,000. Additional information is as follows:

Allowance for uncollectible accounts -- 1/1                         $             60,000
Uncollectible accounts written off during the year--                        36,000
Uncollectible accounts recovered during the year--                         4,000
Accounts receivable at 12/31--                                                                  700,000

What is William's bad debt expense for the year?
 
$22,000

60,000 – 36,000 = 28,000
700,000 – 650,000 = 50,000
50,000 – 28,000 = 22,000

 
The following information pertains to Oro Corp.:

Credit sales for the year ended December 31                                                      450,000
Credit balance in allowance for uncollectible accounts at January 1         10,800
Bad debts written off during the year                                                                    18,000


According to past experience, 3% of Oro's credit sales have been uncollectible.
After provision is made for bad debt expense for the year ended December 31,
the allowance for uncollectible accounts balance would be:

A. $6,300
B. $13,500
C. $24,300
D. $31,500

.03 × 45,000 = 13,500
10,800 + 13,500 = 24,300
24,300 - 18,000 = 6,300
   
Grandview, Incorporated uses the allowance method. At December 31, 2021, the company's balance sheet reports Accounts Receivable,
Net in the amount of $24,000. On January 2, 2022, Grandview writes off a $2,900 customer account balance when it becomes clear that
the customer will never pay. What is the amount of Accounts Receivable, Net after the write-off?
 
24,000
 
Information is given.
   
Halen, Inc., received from a customer a 1-year, $500,000 note bearing annual interest of 8%. After holding the note for 4 months,
Halen discounted the note at Regional Bank at an effective interest rate of 10%. What amount of cash did Halen receive from the bank?
 
$504,000

500,000 + (500,000 × .08) = 540,000
540,000 × .10 × (8 / 12) = 36,000
540,000 - 36,000 = 504,000
   
On July 1, 2021, Empire Incorporated lends $18,000 to a customer and receives a 10% note due in two years.
Interest is due in full on July 1, 2023, the due date of the note.
What is the amount of Interest Revenue that will be reported on Empire's income statement for the year ended December 31, 2021?
 
900
   
The following information relates to Soward Co.'s accounts receivable for the year just ended:

Accounts receivable, 1/1--                                           $              1,300,000
Credit sales for the year--                                                             2,700,000
Sales returns for the year--                                                          75,000
Accounts written off during the year--                   40,000
Collections from customers during the year--     2,150,000
Estimated future sales returns at 12/31--                             50,000
Estimated uncollectible accounts at 12/31--        220,000

What amount should Soward report for gross accounts receivable, before allowances for sales returns and uncollectible accounts, at December 31?
 
$1,735,000

1,300,000 + 2,700,000 - 2,150,000 - 40,000 - 75,000 = 1,735,000

   
Wheeling Incorporated uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging
analysis equals $5,600. At the end of the year, the balance of Accounts Receivable is $106,000 and the unadjusted debit balance of the
Allowance for Doubtful Accounts is $620. Credit sales during the year totaled $162,000.
What is the estimated Bad Debt Expense for the current year?
 
6,220
 
   
A company lends its supplier $170,000 for 3 years at a 8% annual interest rate. Interest payments are to be made twice a year.
The entry to record the establishment of the loan includes a debit to:
 
Notes Receivable and a credit to Cash for $170,000.
   
Ward Co. estimates its uncollectible accounts expense to be 2% of credit sales. Ward's credit sales for year 1 were $1,000,000. During year 1,
Ward wrote off $18,000 of uncollectible accounts. Ward's allowance for uncollectible accounts had a $15,000 balance on January 1, year 1.
In its December 31, year 1 income statement, what amount should Ward report as uncollectible accounts expense?
 
$20,000

1,000,000 x .02 = 20,000
   
Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card. National Bank deducts a 3% service charge
for sales on its credit cards. Kenai electronically remits the credit card sales receipts to the credit card company and receives payment immediately.
The journal entry to record the collection from the credit card company would be:
 
Debit Cash of $618 and credit Accounts Receivable—National $618.
Debit Cash of $618; credit Credit Card Expense $18 and credit Sales $600.
Debit Accounts Receivable—National $582; debit Credit Card Expense $18 and credit Sales $600.
Debit Cash $582; debit Credit Card Expense $18 and credit Sales $600.
Debit Cash $582 and credit Sales $582.
   
Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000.
Food Supplier’s journal entry to record the collection on the maturity date is: (Use 360 days a year.)
 
Debit Cash $4,060; credit Notes Receivable $4,060
Debit Notes Receivable $4,000; credit Cash $4,000
Debit Cash $4,000; debit Interest Receivable $60; credit Sales $4,060
Debit Notes Receivable $4,060; credit Sales $4,060
Debit Cash $4,060; credit Interest Revenue $60; credit Notes Receivable $4,000
   
The following information pertains to Eire Co.'s accounts receivable at December 31,
Year 2:

0 – 60                                    $240,000                              1%
61 – 20                  180,000                                 2%
Over 120                              200,000                                 6%
$620,000
 
During Year 2, Eire wrote off $14,000 in receivables and recovered $8,000 that was written
off in prior years. Its December 31, Year 1, allowance for uncollectible accounts was
$44,000. Under the aging method, what amount of allowance for uncollectible accounts
should Eire report at December 31, Year 2?
 
$18,000

(240,000 x 0.01) + (180,000 x 0.02) + (200,000 x 0.06) = 18,000
   
Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card.
On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit?
 
Debit Cash $3,500; credit Sales $3,500
Debit Accounts Receivable $3,500; credit Sales $3,500
Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500
Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500
Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500
   
Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper’s entry to record the collection of the note and interest at maturity should be:
(Use 360 days a year.)
 
Debit Cash for $25,000; credit Notes Receivable $25,000.
Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000.
   
Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 10% promissory note for $7,800.
If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note?
(Use 360 days a year.)
 
Debit Accounts Receivable $7,930; debit Bad Debt Expense $130; credit Notes Receivable $8,060.
Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930.
Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800.
Debit Accounts Receivable—Valley Spa $7,800; credit Notes Receivable $7,800.
Debit Accounts Receivable—Valley Spa $7,930, credit Interest Revenue $130; credit Notes Receivable $7,800.
   
MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card.
Regional Bank deducts a 4% service charge for sales on its credit cards. MacKenzie electronically remits the credit
card sales receipts to the credit card company and receives payment immediately. The journal entry to record this sale transaction would be:
 
Debit Cash of $180 and credit Sales $180.
Debit Cash of $180 and credit Accounts Receivable—Regional $180.
Debit Accounts Receivable—Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
Debit Cash $172.80 and credit Sales $172.80.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2