Receivables
Gross
Current
Turnover Net Retained Working
Transaction Profit Ratio Rate Income Earnings Capital
a. U NE U NE NE NE
Ex. 7.12
Ex. 7.13 a.
The amount of unrealized holding gain included in the securities’ current market
value will appear as an element of stockholders’ equity. The securities also will
appear in the balance sheet at current market value, with their cost disclosed as
supplemental information.
a.
2015
Aug. 1 1.
2016
Jan. 31 4.
Accounts Receivable (Dusty Roads) …………………………
Notes Receivable ……………………………………………
Interest Revenue ……………………………………………
Interest Receivable …………………………………………
To record collection of six-month note plus interest from
Dusty Roads. Total interest amounts to $1,620 ($36,000 ×
9% × ½), of which $270 was earned in 2016.
Notes Receivable ……………………………………………
Interest Receivable …………………………………………
Interest Revenue ……………………………………………
Cash ……………………………………………………………
Accepted a six-month, 9% note receivable in settlement of
an account receivable on August 1, 2015.
Accounts Receivable (Dusty Roads) ………………………
36,000
Ex. 7.14
Notes Receivable ………………………………………………
36,000
Interest Receivable ……………………………………………
Interest Revenue ……………………………………………
Ex. 7.15 a.
b.
Financial assets = $3.889 billion
The company does not report any investments in marketable securities. If Home
Depot had such investments, unrealized gains and losses would be included in a
separate stockholders’ equity account.
25 Minutes, Medium
a.
114,828$ 16
b.
c.
The amount of cash that should be included in the balance sheet at July 31 is the adjusted
balance of $129,714.
checks outstanding which have been deducted in the company’s records but which have not
yet cleared the bank, and (2) the bank periodically makes collections and deposits them into
the com
p
an
y
’s account.
char
g
es and the customer’s check char
g
ed back as
office e
q
ui
p
ment.
NSF.
from Rene Manes
,
and correct recorded cost of
To ad
j
ust accountin
g
records for bank service
To record collection b
y
bank of note receivable
General Journal
SOLUTIONS TO PROBLEMS SET A
PROBLEM 7.1
A
BANNER, INC.
July 31
Bank Reconciliation
BANNER, INC.
Balance per bank statement, July 31
45 Minutes, Strong
$
400
$
524 176
$
$
$
$
$
$
$
$
$
PROBLEM 7.2
A
OSAGE FARM SUPPL
Y
November 30
BANK RECONCILIATION
OSAGE FARM SUPPL
Y
Less: Outstandin
g
checks:
no. 8231
c.
Problem 7.2A
OSAGE FARM SUPPLY (concluded)
Two weaknesses in internal control are apparent. First, the bank account should be
15 Minutes, Medium
a.
Percentage Estimated
Considered Uncollectible
Amount Uncollectible Accounts
250,000$ 1% 2,500$
a. Not yet due
PROBLEM 7.3
A
Accounts Receivable by Age Group
PUTNAM & PUTNAM
30 Minutes Medium
Dec 31 160,000
Allowance for Doubtful Accounts 160,000
80,000$
(
165,000
)
(
160,000$
b.
As Wilcox Mills sells on 30-day terms, it should turn over its receivables about 12 times each
year. Thus, the year-end receivables should equal only about 1/12 of a year’s credit sales, and
the balance in the allowance should provide for about 1/12 of the accounts written off during
the year.
Less: Write-offs during 2015
Desired balance (credit)
*The first three entries summarize entries occurring at various dates throughout 2015.
A case can probably be made that the allowance is unreasonably low. The amount of the
allowance at the end of 2014 was $80,000, but $165,000 were written off during the following
year which may imply that the allowance should have been higher. A counter argument,
which may justify the $80,000 balance, is that the allowance at the end of a year is not
necessarily intended to provide for all accounts that will be written off during the coming
year. Rather, it represents only the portion of the receivables existing at year-end estimated
to be uncollectible.
Required adjustment ($70,000 + $90,000)
PROBLEM 7.4
A
a.
General Journal
WILCOX MILLS
2015
Balance at Dec. 31, 201
4
Entry summarizing the reinstatement of accounts
Uncollectible Accounts Expense
To adjust allowance for doubtful accounts to
proving to be collectible.
$90,000 credit balance:
40 Minutes, Strong
a. Marketable securities
(
cost, $360,000
)
364,000$
(
no chan
g
e since Dec. 31, 2014
)
4,000$
Current
d. Cost Market Value
market value, $42
)
160,000$ 168,000$
market value, $37
)
80,000 74,000
e. 2,000
Marketable Securities 2,000
(
cost, $240,000
)
242,000$
Unrealized holdin
g
g
ain on investments 2,000$
Sold 1,000 shares of Limited Brands, Inc. at a price
PROBLEM 7.5
A
CHARTER HOLDING CO.
Stockholders’ equity:
Current assets:
To reduce unadjusted balance in Marketable
($244,000 – $242,000).
Securities account to current market value
Unrealized Holding Gain on Investments
Gap, Inc. (2,000 shares; cost, $40 per share; market
Limited Brands, Inc. (4,000 shares; cost $40 per
above cost.
Unrealized Holding Gain on Investments
g
(