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.
Required:
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 2016 the general ledger of
Stickler Company included the following accounts and balances:
$1,000
credit
balance
0
200,000
Cash collections on accounts receivable during 2016 amounted to $450,000. Sales revenue
during 2016 amounted to $800,000, of which 75% was on credit, and it was estimated that 2%
of these credit sales made in 2016 would ultimately become uncollectible.
Required:
A. Calculate the bad debt expense for 2016.
B. Determine the adjusted 2016 year-end balance of the allowance for doubtful accounts.
C. Determine the net realizable value of accounts receivable for the December 31, 2016
balance sheet.
112.
On December 31, 2016, 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
credit
balance
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.
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.
Required:
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 2015
through 2017:
2017
2016
2015
Net revenues
$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
operations
106,850
509,707
204,496
Accounts receivable
68,648
90,561
56,454
Describe how the change in accounts receivable will affect the calculation of cash flow from
operating activities for 2017 and 2016.
115.
Cyclone Inc. reported the following figures from its financial statements for the years 2015
through 2017:
2017
2016
2015
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
Required:
A. Calculate the accounts receivable turnover for 2017 and 2016.
B. Calculate the average collection period for 2017 and 2016.
116.
Matrix Corp. reported the following figures from its financial statements for the years 2015
through 2017.
2017
2016
2015
Net credit sales
$812,720
$1,264,380
$573,255
Accounts receivable
68,648
90,562
56,454
Required:
A. Calculate for 2017:
1. Accounts receivable turnover
2. Average collection period
B. Calculate for 2016:
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 2016 to 2017. Then discuss how the trend in sales from
2015 to 2016 and 2017 may have affected the change in the ratios from 2016 to 2017.
117.
A recent annual report for Kirova Company contained the following data:
(in millions)
2016
2015
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
Required:
A. Calculate the accounts receivable turnover ratio.
B. Calculate the average days’ sales in receivables for 2016 (rounded to the nearest day).
C. Explain the meaning of each number.
118.
During 2016, 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, 2016, the appropriate bad debt expense adjustment was
recorded for the year 2016 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, 2016, the appropriate bad debt expense adjustment was
recorded for the year 2016 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.