Fundamentals of Financial Accounting, 5/e 8– 41
© 2016 by McGraw– Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWER TO COMPREHENSIVE PROBLEM
C8–1
Req. 1
Customer
Total
Balance
June
(one
month)
May
(two
months)
April
(three
months)
Greater than
three
months)
Anjuli Stores
$2,000
$2,000
Bravis Pharmaco
3,000
$3,000
Tony’s Pharmacy
1,500
$1,500
Walgreens
0
TOTAL
$6,500
$ 0
$2,000
$1,500
$3,000
Req. 2
Total
2 months
3 months
Accounts Receivable
$ 6,500
$ 2,000
$ 1,500
Estimated Uncollectible (%)
x 5 %
x 20 %
Estimated Uncollectible ($)
$ 1,600
$ 100
$ 300
Req. 3 OKAY OPTICAL, INC.
Partial Balance Sheet
At June 30
Accounts Receivable $6,500*
Allowance for Doubtful Accounts (1,600)
Accounts Receivable, Net of Allowance 4,900
OKAY OPTICAL, INC.
Partial Income Statement
For the Six Months Ended June 30
Sales Revenue……………….………….. $33,000 ($20,000 + $3,000 + $8,000 + $2,000)
Cost of Goods Sold………………………. 19,000 ($12,000 + $1,400 + $4,400 + $1,200)
Gross Profit……………….………………. 14,000
Bad Debt Expense……………………… 1,600
Income from Operations………………… 12,400
* Alternatively, Okay Optical could report its balance sheet information as follows:
Accounts Receivable, Net of Allowance of $1,600……………………..$4,900*
C8–1 (continued)
Req. 4
OOI did not accurately estimate the precise amounts that would be collected from each
customer, yet the total estimate was accurate. That is, OOI underestimated the amount
C8–2
Req. 1
2015
Allowance for Doubtful Accounts
=
$5,000
=
5%
Gross Receivables
$100,000
2014
Allowance for Doubtful Accounts
=
$6,000
=
10%
Gross Receivables
$60,000
2013
Allowance for Doubtful Accounts
=
$4,000
=
10%
Gross Receivables
$40,000
EB’s Allowance for Doubtful Accounts represented 10% of gross receivables in 2013
and 2014, but is only 5% of Gross Receivables in 2015.
Req. 2
2015
Bad Debt Expense
=
$5,900
=
1.0%
Net Sales Revenue
$590,000
2014
Bad Debt Expense
=
$8,100
=
1.5%
Net Sales Revenue
$540,000
C8–2 (continued)
Req. 2 (continued)
2013
Bad Debt Expense
=
$7,350
=
1.5%
Net Sales Revenue
$490,000
EB’s Bad Debt Expense was 1.5% of net sales revenue in 2013 and 2014, but is only
$590,000
$540,000
C8–3
Req. 1
1. 1/01
Note Receivable
1,500
Accounts Receivable
1,500
2. 1/02
Insurance Expense
500
Cash
500
3. 1/05
Inventory
9,000
Accounts Payable
9,000
4. 1/05
Inventory
300
Cash
300
5. 1/06
Unearned Revenue
4,350
Sales Revenue ($145 x 30 units)
4,350
Cost of Goods Sold
2,400
Inventory
2,400
($2,800/35 units = $80 per unit x 30 units delivered = $2,400)
6. 1/07
Accounts Payable
9,000
Cash ($9,000 x 98%)
8,820
Inventory ($9,000 x 2%)
180
7. 1/10
Accounts Receivable
5,800
Sales Revenue ($145 x 40 units)
5,800
Cost of Goods Sold
2,528
Inventory
2,528
{($80 x 5 units) + [($9,000+$300-$180)/150 units x 35 units] = $2,570}
8. 1/14
Cash ($5,800 x 98%)
5,684
Sales Discounts ($5,800 x 2%)
116
Accounts Receivable
5,800
9. 1/16
Salaries and Wages Expense
2,200
Cash
2,200
10. 1/18
Allowance for Doubtful Accounts
1,000
Accounts Receivable
1,000
11. 1/19
Accounts Payable
1,300
Rent Expense
1,300
Cash
2,600
C8–3 (continued)
Req. 1 (continued)
12. 1/26
Accounts Receivable
400
Allowance for Doubtful Accounts
400
Cash
400
Accounts Receivable
400
13. 1/27
Utilities Expense
400
Supplies (–A)
400
14. 1/28
Accounts Receivable
9,425
Sales Revenue ($145 x 65 units)
9,425
Cost of Goods Sold
3,952
Inventory
3,952
{[($9,000+$300-$180)/150 units x 65 units] = $3,952}
15. 1/30
Sales Returns and Allowances
2,175
Accounts Receivable ($145 x 15 units)
2,175
Inventory
912
Cost of Goods Sold ($3,952/65 units x 15 units)
912
16. 1/31
Salaries and Wages Expense
2,200
Salaries and Wages Payable
2,200
17. 1/31
Bad Debt Expense
852
Allowance for Doubtful Accounts
852
[($9,650-$1,500+/-$5,800-$1,000+/-$400+$9,425-$2,175) x 0.08
= $1,152 desired – ($900-$1,000+$400) unadjusted = $852]
18. 1/31
Interest Expense
125
Interest Payable
125
($15,000 x 0.10 x 1/12 = $150)
19. 1/31
Interest Receivable
15
Interest Revenue
15
($1,500 x 0.12 x 1/12 = $15)
C8–3 (continued)
Req. 2
Beg. 18,620
Beg. 9,650
900 Beg.
Beg. 0
8. 5,684
12. 400
500 2.
300 3.
8,820 6.
2,200 9.
2,600 11.
7. 5,800
12. 400
14. 9,425
1,500 1.
5,800 8.
1,000 10.
400 12.
2,175 15.
10. 1,000
400 12.
852 17.
1. 1,500
Bal. 10,284
Bal. 14,400
1,152 Bal.
Bal. 1,500
Inventory (A)
Interest Receivable (A)
Unearned Revenue (L)
Beg. 2,800
3. 9,000
3. 300
2,400 5.
180 6.
Beg. 0
19. 15
4,350 Beg.
2,528 7.
5. 4,350
15. 912
3,952 14.
Bal. 3,952
Bal. 15
0 Bal.
Accounts Payable (L)
Note Payable (L)
Salaries and Wages
Payable (L)
Interest Payable (L)
1,300 Beg.
15,000 Beg.
0 Beg.
0 Beg.
6. 9,000
11. 1,300
9,000 4.
400 13.
2,200 16.
125 18.
400 Bal.
2,200 Bal.
125 Bal.
Common Stock (SE)
Retained
Earnings (SE)
Sales Revenue (R)
Cost of Goods Sold (E)
5,000 Beg.
4,520 Beg.
0 Beg.
Beg. 0
4,350 5.
5. 2,400
Interest Revenue (R)
5,800 7.
7. 2,528
0 Beg.
15 19.
9,425 14.
14. 3,952
15 Bal.
19,575 Bal.
Bal. 7,968
Sales Discounts (xR)
Sales Returns/Allow (xR)
Bad Debt Expense (E)
Utilities Expense (E)
Beg. 0
8. 116
Beg. 0
15. 2,175
Beg. 0
17. 852
Beg. 0
13. 400
Bal. 116
Bal. 2,175
Bal. 852
Bal. 400
Interest Expense (E)
Insurance Expense (E)
Rent Expense (E)
Salaries and Wages
Expense (E)
Beg. 0
18. 125
Beg. 0
2. 500
Beg. 0
11. 1,300
Beg. 0
9. 2,200
16. 2,200
Bal. 125
Bal. 500
Bal. 1,300
Bal. 4,400
C8–3 (continued)
Req. 2 (continued)
ONE TRICK PONY
Adjusted Trial Balance
January 31
Account Titles
Debit
Credit
Cash
$ 10,284
Accounts Receivable
14,400
Allowance for Doubtful Accounts
$ 1,152
Inventory
3,952
Note Receivable
1,500
Interest Receivable
15
Unearned Revenue
0
Accounts Payable
400
Salaries and Wages Payable
2,200
Interest Payable
125
Note Payable
15,000
Common Stock
5,000
Retained Earnings
4,520
Sales Revenue
19,575
Sales Returns and Allowances
2,175
Sales Discounts
116
Cost of Goods Sold
7,968
Salaries and Wages Expense
4,400
Rent Expense
1,300
Bad Debt Expense
852
Insurance Expense
500
Utilities Expense
400
Interest Expense
125
Interest Revenue
15
Totals
$ 47,987
$ 47,987
C8–3 (continued)
Req. 3
ONE TRICK PONY
Income Statement
For the Month Ended January 31
Sales Revenue ……………………………………………………….. $19,575
C8–3 (continued)
Req. 3 (continued)
ONE TRICK PONY
Balance Sheet
At December 31
Assets
Current Assets:
Cash
Accounts Receivable
Allowance for Doubtful Accounts
Inventory
Note Receivable
Interest Receivable
Total Assets
Liabilities and Stockholders’ Equity
Liabilities
Current Liabilities:
Accounts Payable
Salaries and Wages Payable
Interest Payable
Total Current Liabilities
Note Payable
Total Liabilities
Stockholders’ Equity
Common Stock
$ 10,284
14,400
(1,152)
3,952
1,500
15
$ 28,999
$ 400
2,200
125
2,725
15,000
17,725
5,000