20 Minutes, Medium
a.
Dec 31 50
750
Office Su
pp
lies 468
Cash 332
b.
PROBLEM 7.7
A
General Journal
SKI FACTOR
Y
Bank Reconciliation
an error in the recordin
g
of office su
pp
lies.
Bank Service Char
g
es
Accounts Receivable
To record bank service char
g
es, to reclassif
y
NSF
check as an account receivable, and to correct
Marketable Securities
40 Minutes, Strong
General
Bank
Ledger
Statement
Balance
Balance
a.
96,990
$
100,560
$
24,600
(31,700)
(200)
(3,600)
270
93,460
$
93,460
$
200
3,600
270
3,530
b.
75,000
$
3,000
78,000
$
93,460
c.
500
500
171,460
$
PROBLEM 7.8A
Deposits in Transit
HENDRY CORPORATION
Preadjustment balance, 12/31/15
Outstanding Checks
The necessary journal entry to update the
Error correction (check #244)
Adjusted cash balance, 12/31/15
Accounts Receivable (Kent Company)
Bank service charge
NSF check returned (Kent Company)
Bank Service Charge
general ledger is as follows:
d.
2,150,000
$
(140,000)
(21,213,600)
20,000,000
3,600
800,000
$
40,000
$
(140,000)
400,000
300,000
500,000
$
e.
171,460
$
86,000
100,000
500
500,000
857,960
$
December 31, 2015
at December 31, 2015
Net realizable value of accounts receivable
Collections on account during 2015
(resulting from NSF check)
January 1, 2015
Allowance for doubtful accounts balance
Accounts receivable balance December 31, 2015
Credit sales made during 2015
Reinstating Kent Company’s account
PROBLEM 7.8A
Accounts receivable written off during 2015
HENDRY CORPORATION
Accounts receivable balance January 1, 2015
(continued)
Cash and cash equivalents (see b. above)
Marketable securities (at FMV, not cost)
Notes Receivable (from Moran Industries)
Interest receivable (see c. above)
f.
December 31, 2015
January 1, 2015
800,000
$
2,150,000
$
300,000
40,000
500,000
$
2,110,000
$
1,305,000
$
20,000,000
15.33
times
23.81
days
than the industry standard.
If the industry average is 45 days, Hendry Corporation’s turnover is better
Net realizable value
(sales ÷ average accounts receivable)
Accounts receivable turnover
PROBLEM 7.8A
Allowance for doubtful accounts (see part d.)
HENDRY CORPORATION
Accounts receivable (see part d.)
(concluded))
25 Minutes, Medium
a.
Balance per bank statement, November 30
4,710
$
3,850
8,560
$
115
$
170
530
815
7,745
$
6,750
$
4,000
10,750
$
15
$
2,900
90
3,005
7,745
$
Nov.
30
4,000
Notes Receivable
4,000
30
90
15
2,900
Cash
3,005
c.
no. 814
Deduct: Outstanding checks
Check recording error (no. 810)
NSF check
SOLUTIONS TO PROBLEMS SET B
PROBLEM 7.1B
DODGE, INC.
Add: Deposit in transit
b.
no. 816
no. 830
Adjusted cash balance
Deduct:
Balance per accounting records, November 30
Service charge
Add: Note receivable collected by bank
To record collection by bank of note receivable
Adjusted cash balance (as above)
charges, customer’s check charged back as
Cash
from Wright Sisters.
The amount of cash that should be included in the balance sheet at November 30 is the
Bank Service Charges
To adjust accounting records for bank service
Computer Equipment
Accounts Receivable
NSF, and correct the recorded cost of equipment.
45 Minutes, Strong
a. Corrected bank reconciliation for April:
Balance per bank statement, April 30
14,300
$
5,000
19,300
$
500
$
440
330
1,300
2,570
16,730
$
20,325
$
6,200
26,525
$
125
$
50
175
26,350
$
9,620
16,730
$
2,120
$
6,200
1,300
adjusted balance per the bank statement:
Overstating the deposit in transit
Improperly adding the amount of the note collected
by the bank to the bank balance
Omitting check no. 859 from the outstanding checks
Less: Indicated cash shortage ($26,350 – $16,730)
Bank service charges
Less: NSF check returned
recognition of cash shortage
Adjusted cash balance per accounting records (as above)
Errors leading to a $9,620 overstatement of the
b. Crook attempted to conceal the shortage by making
the following intentional errors in his reconciliation:
Less: Outstanding checks:
Add: Deposit in transit
Add: Note receivable collected by bank
no. 842
Subtotal
Subtotal
Adjusted cash balance per bank statement
no. 836
Balance per accounting records, April 30
no. 855
no. 859
Total outstanding checks
Adjusted cash balance per accounting records prior to
PROBLEM 7.2B
JASON CHAIN SAWS, INC.
c.
PROBLEM 7.2B
JASON CHAIN SAWS, INC. (concluded)
Two weaknesses in internal control are apparent. First, the bank account should be
reconciled by someone with no other responsibilities for cash transactions, not by the
15 Minutes, Medium
a.
Percentage
Estimated
Considered
Uncollectible
Amount
Uncollectible
Accounts
500,000$ 1% 5,000$
60,000 50% 30,000
750,000$ 49,300$
b.
Dec
31
44,600
44,600
49,300
$
4,700
44,600
$
c.
Jan
18
1,600
1,600
d. Such a policy would compensate the company for having to wait extended periods of time to
collect its cash. It also provides the company with additional “leverage” in a court of law,
should it decide to press charges against customers with delinquent accounts.
Required allowance balance:
Uncollectible Accounts Expense
required total of $49,300 computed as follows:
Allowance for Doubtful Accounts
Present credit balance
Accounts Receivable (May Flowers)
receivable from May Flowers.
To write-off as uncollectible the account
Required adjustment ($49,300 – $4,700)
To increase the valuation account to the estimated
Allowance for Doubtful Accounts
General Ledger
e. Over 90 days past due
Totals
PROBLEM 7.3B
Accounts Receivable by Age Group
STARLIGHT
a. Not yet due
Education.
30 Minutes Medium
Var.* 230,000
Accounts Receivable 230,000
Var.* 18,000
80,000$
(
230,000
)
18,000
(
132,000
)
$ 150,000
282,000$
b.
Accounts Receivable
Balance at Dec. 31, 201
4
PROBLEM 7.4B
a.
General Journal
REDSTONE MILL
throughout the year.
Allowance for Doubtful Accounts
Entry summarizing the write-off of receivables
2015
The $80,000 allowance for doubtful accounts established at the end of 2014 appears to be
inadequate in view of the fact that $212,000 of accounts receivable were written off during
accounts at year-end need only be large enough to provide for 1/12 of the accounts expected
to be written off in the upcoming year.
Less: Write-offs during 2015
Desired balance (credit)
*The first three entries summarize entries occurring at various dates throughout 2015.
Required adjustment ($132,000 + $150,000)
Add: Accounts reinstated
Unadjusted balance (debit balance)
40 Minutes, Strong
a. Marketable securities
(
cost
,
$75
,
000
)
90
,
000$
Unrealized holdin
g
g
ain on investments 15
,
000$
b.
A
p
ril 6 5
,
480
Marketable Securities 3
,
000
Gain on Sale of Investments 2
,
480
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
g
g
,
Sold 100 shares of Lamb Com
p
uter at a
p
rice above
Current assets:
PROBLEM 7.5B
WESTPORT MANUFACTURING CO.
Stockholders’ e
q
uit
y
:
above cost.
Cash
Education.
,
g.
2,540
$
2,480
$
5,020
(2,540)
$
PROBLEM 7.5B
WESTPORT MANUFACTURING CO. (concluded)
Nonoperating items:
Loss on sale of investments
Computation:
Less: Realized losses