107) A portion of the income statement for Oscar Company is shown below. Provide the missing
account titles and amounts.
A.
________
Sales returns and allowances
B.
C.
________
$348,000
D.
________
________
Gross profit
$90,000
108) A portion of the income statement for Lone Star Company is shown below. Provide the
missing account titles and amounts.
A.
________
$380,000
Sales discounts
20,000
Net sales
B.
________
Cost of sales
$100,000
C.
________
D.
________
109) Indicate whether each of the accounts listed below normally will have a debit balance or a
credit balance. Record your answer to the left of each account by entering either Dr or Cr.
____ 1.
Allowance for doubtful accounts
____ 2.
Bad debt expense
____ 3.
Sales returns and allowances
____ 4.
Credit card discounts
____ 5.
Sales discounts
____ 6.
Notes receivable
____ 7.
Sales revenue
____ 8.
Nontrade receivables
110) Hickory Corporation recorded sales revenue during the year of $350,000 of which $100,000
was on credit. The company has experienced an average bad debt loss rate of 2% of credit sales.
Prepare the adjusting journal entry at the end of the year to record bad debt expense.
111) Prior to the year-end adjustment to record bad debt expense for 2019 the general ledger of
Stickler Company included the following accounts and balances:
Allowance for Doubtful
Accounts
$1,000
Bad Debt Expense
0
Accounts Receivable
200,000
Cash collections on accounts receivable during 2019 amounted to $450,000. Sales revenue
during 2019 amounted to $800,000, of which 75% was on credit, and it was estimated that 2% of
these credit sales made in 2019 would ultimately become uncollectible.
A. Calculate the bad debt expense for 2019.
B. Determine the adjusted 2019 year-end balance of the allowance for doubtful accounts.
C. Determine the net realizable value of accounts receivable for the December 31, 2019 balance
sheet.
112) On December 31, 2019, Colonial Corporation had the following account balances related to
credit sales and receivables prior to recording adjusting entries:
Accounts receivable
$25,000
Allowance for doubtful
accounts
200
Sales revenue (all credit
sales)
400,000
Required:
Prepare the necessary year-end adjusting entry related to uncollectible accounts for each of the
following independent assumptions:
A. An aging of accounts receivable is completed. It is estimated that $2,150 of the receivables
outstanding at year-end will be uncollectible.
B. Assume the same information presented in part A above except that, prior to adjustment, the
allowance for doubtful accounts had a debit balance of $200 rather than a credit balance of $200.
C. It is estimated that a provision for bad debts is required for 1% of credit sales for the year.
Bad debt expense
1,950
1,950
($2,150 — $200)
Bad debt expense
2,350
2,350
($2,150 + $200)
Bad debt expense
4,000
4,000
(1% × $400,000)
113) On January 1, American Company’s allowance for doubtful accounts had a credit balance of
$3,000. The balance in the Accounts Receivable account on that date was $75,000. On January 2,
prior to any credit sales, a $500 account from National Company was deemed to be uncollectible
and written off.
A. Compute the net realizable value of American’s receivables on January 1.
B. Prepare the journal entry American would record on January 2 related to the write-off of
National’s account.
C. Compute the net realizable value of American’s receivables on January 2, immediately
following the write-off of National’s account.
114) Cyclone Inc. reported the following figures from its financial statements for the years 2018
through 2020:
2020
2018
Net revenues
$717,422
$591,786
Gross profit
560,421
498,605
Net income (net loss)
(92,788)
47,811
Cash flow from
operations
106,850
204,496
Accounts receivable
68,648
56,454
Describe how the change in accounts receivable will affect the calculation of cash flow from
operating activities for 2020 and 2019.
115) Cyclone Inc. reported the following figures from its financial statements for the years 2018
through 2020:
2020
2019
2018
Net credit sales
$717,422
$1,110,178
$591,786
Gross profit
560,421
960,434
498,605
Net income (net loss)
(92,788)
70,776
47,811
Cash flow from
operating activities
106,850
509,707
204,496
Accounts receivable
68,648
90,562
56,454
A. Calculate the accounts receivable turnover for 2020 and 2019.
B. Calculate the average collection period for 2020 and 2019.
69
116) Matrix Corp. reported the following figures from its financial statements for the years 2018
through 2020.
2020
2019
2018
Net credit sales
$812,720
$1,264,380
$573,255
Accounts
receivable
68,648
90,562
56,454
A. Calculate for 2020:
1. Accounts receivable turnover
2. Average collection period
B. Calculate for 2019:
1. Accounts receivable turnover
2. Average collection period
C. Interpret the receivables turnover and the average collection period, in general. Comment on
the change in the ratio results from 2019 to 2020. Then discuss how the trend in sales from 2018
to 2019 and 2020 may have affected the change in the ratios from 2019 to 2020.
117) A recent annual report for Kirova Company contained the following data:
(in millions)
2019
2018
Accounts receivable
$2,026
$1,866
Less: Allowance for doubtful
accounts
50
52
Net accounts receivable
1,976
1,814
Net sales (all are on credit)
18,158
A. Calculate the accounts receivable turnover ratio.
B. Calculate the average days sales in receivables for 2019 (rounded to the nearest day).
C. Explain the meaning of each number.
118) During 2019, Charles Inc. recorded credit sales of $2,000,000. Based on prior experience, it
estimates a 1 percent bad debt loss rate on credit sales. At the beginning of the year, the balance
in net accounts receivable was $150,000. At the end of the year, but before the bad debt expense
adjustment was recorded and before any bad debts had been written off, the balance in net
accounts receivable was $125,000.
A. Assume that on December 31, 2019, the appropriate bad debt expense adjustment was
recorded for the year 2019 and accounts receivable totaling $16,000 was written off for the year.
What was the accounts receivables turnover ratio for the year?
B. Assume that on December 31, 2019, the appropriate bad debt expense adjustment was
recorded for the year 2019 and accounts receivable totaling $12,000 was written off for the year.
What was the accounts receivables turnover ratio for the year?
C. Explain why the answers to parts A and B differ or do not differ.
119) Select the appropriate answer choice A through G (listed below) to correspond with the
following numbered items on a bank reconciliation. There may be more than one letter selection
for the numbered item.
1.
Balance per bank statement, June 30
$XXX
Plus
(1)
_____
Minus
(2)
_____
Correct cash balance, June 30
$XXX
2.
Balance per company books, June 30
$XXX
Plus
(3)
_____
Minus
(4)
_____
Correct cash balance, June 30
$XXX
Items:
A. Checks written during June that had not cleared the bank by June 30.
B. Bank service charges for June, which were not known until the June 30th bank statement
arrived.
C. Deposit made on June 30 that did not reach the bank until July 1.
D. Upon reviewing the company’s cash receipts book after June 30, it was discovered the
accounting clerk had neglected to post one receipt to the cash account.
E. The bank statement reported a “NSF check” during June.
F. The bank incorrectly deducted the check of another company to the bank account during June.
G. The company was paid interest on its account by the bank.
120) Why is the reconciliation of a company’s cash account to the bank statement so important
for effective internal control for cash?
121) Illinois Company prepared the following bank reconciliation at May 31:
Balance per bank
$1,250
Balance per books
$1,365
Additions:
Additions:
Deposits in transit
240
Interest Received from bank
100
Check incorrectly
charged to our bank balance
75
Deductions:
Deductions:
Outstanding checks
(235)
NSF check (Nelson)
(100)
Bank service charges
(35)
Correct cash balance
$1,330
Correct cash balance
$1,330
Required:
Prepare the necessary journal entries for Illinois Company required by the May 31 bank
reconciliation.
1.
Cash
2.
Accounts receivable, Nelson
3.
Bank service charge expense
Accounts receivable, Nelson
Bank service charge expense