BUAD 121 Ch 10 Practice Questions Solutions

Transcription

1 BUAD 121 Ch 10 Practice Questions Solutions Exercise (15 minutes) Oct. 31 Notes Receivable Leann Grimes... Accounts Receivable Leann Grimes... 5, , To record 6-month, 8% note to replace past-due account. Dec. 31 Interest Receivable... Interest Revenue To record accrued interest; $5, /12 = $ Apr. 30 Cash... 5, Notes Receivable Leann Grimes... 5, Interest Revenue Interest Receivable To record collection of note and interest; $5, /12 = $ Fundamental Accounting Principles, Twelfth Canadian Edition

2 Problem 10-4A (30 minutes) Part A 1. a) Cash ,000 Accounts Receivable... 2,220,000 Sales... 2,960,000 To record sales; 25% x $2,960,000 total sales = cash sales of $740,000. Cost of Goods Sold... 1,804,000 Merchandise Inventory... 1,804,000 To record cost of sales. b) Sales Returns and Allowances ,000 Accounts Receivable... 57,000 Cash... 57,000 To record return of defective merchandise to be scrapped. c) Accounts Receivable... 24,000 Allowance For Doubtful Accounts... 24,000 To reverse write-off due to recovery. Cash... 24,000 Accounts Receivable... 24,000 To record recovery. d) Allowance For Doubtful Accounts... 39,000 Accounts Receivable... 39,000 To record write-off of uncollectible accounts. e) Cash... 1,880,000 Accounts Receivable... 1,880,000 To record collections from credit customers. Solutions Manual for Chapter

3 Problem 10-4A (continued) Part B 2. Dec. 31 Bad Debt Expense... 21,630 Allowance for Doubtful Accounts... 21,630 2,220,000 57,000 = 2,163,000 2,163,000 1% = 21, Current assets: Accounts receivable... $742,000 Less: Allowance for doubtful accounts... 23,310 $718,690 OR Current assets: Accounts receivable (net of $23,310 estimated uncollectible acounts)... $718,690 Calculation of balance in AFDA : AFDA 16,680 39,000 24,000 21,630 23, $21, Fundamental Accounting Principles, Twelfth Canadian Edition

4 Problem 10-4A (concluded) Part C 5. Dec. 31 Bad Debt Expense... Allowance for Doubtful Accounts... 20,580 20, ,000 3% = 22,260 1,680 = 20,580. Calculations: Dec. 31/10 Balance Dec. 31/11 Balance Accounts Receivable Allowance for Doubtful Accounts 498,000 16,680 Dec. 31/10 Balance a) 2,220,000 57,000 b) c) 24,000 24,000 c) 24,000 c) 742,000 39,000 d) d) 39,000 1,880,000 e) 1,680 3% $22,260 22,260 Required adjusted balance Unadjusted balance, Dec. 31/11 What adjustment is needed? 6. Current assets: Accounts receivable... $742,000 Less: Allowance for doubtful accounts... 22,260 $719,740 OR Current assets: Accounts receivable (net of $22,260 estimated uncollectible acounts)... $719, $20,580 Solutions Manual for Chapter

5 Problem 10-7A (25 minutes) Part 1 Jul. 31 Bad Debt Expense... Allowance For Doubtful Accounts... 8, ,675 To record estimated uncollectible accounts. Part 2 Aug. 31 Bad Debt Expense... Allowance For Doubtful Accounts... 5,625 5,625 To record estimated uncollectible accounts. Calculations: July write-offs Allowance for Doubtful Accounts 13,500 Balance, June 30 15,500 8,6751 Adjustment to estimate bad debts for July 6,675 Balance, July 31 1,950 Recovery of account previously written off 8,625 Unadjusted balance, August 31 5,625 2 What adjustment is necessary to get the desired balance 2? 14,250 Desired balance, August 31 based on aging analysis 1. (900,000 32,500) 1% = 8, ,250 8,625 = 5,625 is the required adjustment. 854 Fundamental Accounting Principles, Twelfth Canadian Edition

6 Problem 10-10A (30 minutes) a), b), c) Note Days of Accrued Interest at Dec. 31, 2011 Accrued Interest at Dec. 31, 2011 Date of Note Principal Interest Rate Term Maturity Date 1 Nov. 1/10 $ 240,000 7% 180 days Apr. 30/ Jan. 5/11 $ 100,000 8% 90 days Apr. 5/ Nov. 20/11 $ 90,000 10% 45 days Jan. 4/ days $ Dec. 10/11 $ 120,000 12% 30 days Jan. 9/ days $ Calculations as denoted by superscripts: 1. Days in November Minus date of note... 1 Days remaining in November Add days in December Add days in January Add days in February Add days in March Add days in April Period of note in days Days in January Minus date of note... 5 Days remaining in January Add days in February Add days in March Add days in April... 5 Period of note in days Days in November Minus date of note Days remaining in November Add days in December Add days in January... 4 Period of note in days Days in December Minus date of note Days remaining in December Add days in January... 9 Period of note in days $90,000 10% 41/365 = $ $120,000 12% 21/365 = $ d) Dec. 31/11 Interest Receivable Note Interest Revenue... To accrue interest on Note e) Jan. 4/12 Cash... 91, Interest Revenue... Interest Receivable Note Receivable Note 3... To record collection of Note 3 and interest; 90, ,000 x 10% x 45/365 = 1,109.59; 1, = Solutions Manual for Chapter