Chapter 08 – Receivables
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Page 81
Current assets:
Cash
$ 56,000
Accounts receivable
$325,000
Allowance for doubtful accounts
(25,000)
300,000
Inventory
45,000
Supplies
4,000
Interest receivable
3,000
Other current assets
10,000
Total current assets
$418,000
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–07 – LO: 08–07
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.12 – Receivables Reporting
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
189. On the basis of the following data related to assets due within one year for Webb Co., prepare a partial balance sheet
in good form at December 31. Show total current assets.
Cash
Notes receivable
Accounts receivable
Allowance for doubtful accounts
Interest receivable
ANSWER:
Webb Co.
Balance Sheet
December 31
Assets
Current assets:
Cash
$ 96,000
Notes receivable
50,000
Accounts receivable
$275,000
Allowance for doubtful accounts
(40,000)
235,000
Interest receivable
1,000
Total current assets
$382,000
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–07 – LO: 08–07
Chapter 08 – Receivables
Copyright Cengage Learning. Powered by Cognero.
Page 83
For the year ended 12/31/Year 1, sales
1,050,000
For the year ended 12/31/Year 2, sales
1,200,000
ANSWER:
(a)
$1,200,000 ÷ [($100,000 + $70,000) ÷ 2] = 14.12
(b)
[($70,000 + $100,000) ÷ 2] ÷ ($1,200,000 ÷ 365 days) = 25.85 days
(c)
This situation is worse than the industry average.
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–08 – LO: 08–08
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
192. For the fiscal years 1 and 2, Grange Co. reported the following:
Year Ended December 31,
Year 1
Year 2
Sales
$44,123,486
$34,124,961
Accounts receivable
749,321
719,365
(a) Compute the accounts receivable turnover for Year 2. Round to two decimals.
(b) Compute the number of days’ sales in receivables at the end of Year 2. Round to two decimals.
ANSWER:
(a)
Accounts receivable turnover = Net sales/Average accounts receivable
Accounts receivable turnover = $34,124,961/[($749,321 + $719,365)/2]
Accounts receivable turnover = 46.47
(b)
Number of days’ sales in receivables = Avg. accounts receivable/Avg.
daily sales
Number of days’ sales in receivables = [($749,321 + $719,365)/2]/
($34,124,961/365 days)
Number of days’ sales in receivables = 7.85
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–08 – LO: 08–08
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
193. Financial statement data for the years ended December 31 for Parker Corporation are as follows:
Current Year Prior Year
Chapter 08 – Receivables
FNMN.WAJO.19.08–08 – LO: 08–08
Sales $2,595,600 $2,409,500
Accounts receivable:
Beginning of the year $390,000 $400,000
End of the year 434,000 390,000
(a) Determine the accounts receivable turnover for each year. Round to one decimal place.
(b) Determine the number of days’ sales in receivables for each year. Round to whole days.
(c) Does the change in accounts receivable turnover and number of days’ sales in receivables from
the first year to the second year indicate a favorable or unfavorable trend?
ANSWER:
(a) Accounts receivable turnover:
Current Year Prior Year
Average accounts receivable:
($390,000 + $434,000)/2 $412,000
($400,000 + $390,000)/2 $395,000
Accounts Receivable Turnover:
$2,595,600/$412,000 6.3
$2,409,500/$395,000 6.1
(b) Number of days’ sales in receivables:
Current Year Prior Year
Average daily sales:
($2,595,600/365 days) $7,111
($2,409,500/365 days) $6,601
Number of days’ sales in receivables:
($412,000/$7,111) 58 days
($395,000/$6,601) 60 days
(c) The increase in the accounts receivable turnover from 6.1 to 6.3 times and the
decrease in number of days’ sales in receivables from 60 days to 58 days indicates a
favorable trend in the efficiency of collection of accounts receivable.
POINTS:
1
DIFFICULTY:
Moderate
Chapter 08 – Receivables
ANSWER:
Journal
Date
Description
Post Ref.
Debit
Credit
Jun. 16
Bad Debt Expense
6,300
Accounts Receivable—CorpCo
6,300
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–03 – LO: 08–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
195. Theta Company determines that a $6,300 account receivable from CorpCo is uncollectible and writes off the account
using the direct write-off method on June 16. On August 21, CorpCo pays the $6,300 to Theta Company.
Journalize the entry for the reinstatement of the account receivable and receipt of cash on August 21. You may omit
posting references.
Journal
Date
Description
Post Ref.
Debit
Credit
ANSWER:
Journal
Date
Description
Post Ref.
Debit
Credit
Aug. 21
Accounts Receivable—CorpCo
6,300
Bad Debt Expense
6,300
21
Cash
6,300
Accounts Receivable—CorpCo
6,300
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–03 – LO: 08–03