(continued) P 5-56A
Req. 3
First Data Communications
Comparative Balance Sheets (Partial)
December 31, 2017 and December 31, 2016
2017
2016
Accounts receivable…………………………..…..
$231,000
$215,000
(20-25 min.) P 5-57A
Req. 1
$ 32,000
17,000
$42,000
(26,500)
15,500
$137,500
$106,000
Req. 2
As reported
Corrected
Current
=
$191,000
=
1.80
$137,500
=
1.30
ratio
$106,000
$106,000
Quick
(continued) P 5-57A
Req. 3
Net income, as reported ……………………………..
$94,000
Less: Unrealized loss on trading
investments
($26,000 − $17,000) ………………………………..
(9,000)
Less: Correction for conversion to the
Correct uncollectible-account expense,
per aging method ………………………………
Net income, as corrected …………………………..
(20-30 min.) P 5-58A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Oct.
31
Note Receivable — BiLo’s Foods …………….
36,000
Sales Revenue…………………………………….
36,000
Interest Revenue …………………………………
270
2017
Jan.
31
Cash ………………………………………………………
36,405
Note Receivable — BiLo’s Foods ………..
36,000
Interest Receivable ……………………………..
270
Interest Revenue ($36,000 × .045 × 1/12) ….
135
Dutton Market …………………………………..
19
Cash ………………………………………………………
Financing Expense …………………………………
Note Receivable — Dutton Market ……….
Nov.
11
Note Receivable — Sauble Co. …………………
15,600
Cash …………………………………………………..
15,600
Dec.
31
Interest Receivable …………………………………
(continued) P 5-58A
Req. 2
December 31,
BALANCE SHEET
2017
2016
Current assets:
Note receivable ……………………………………
Interest receivable ……………………………….
(15-25 min.) P 5-59A
Req. 1
Dollar amounts in millions
2017
2016
a. Current
=
Total current assets
=
$885
= 1.58
$860
= 1.39
ratio
Total current liabilities
$560
$620
ratio
$70+$130+$270
$80+$165+$260
=
0.84
= 0.81
c. One
day’s
sales
=
Net sales
=
$7,665
= $21.00
$5,110
= $14.00
365
365
365
($270+$260)/2
Accounts
receivable
turnover
=
Net credit sales
=
$7,665
$5,110
Average net accounts
receivable
($270 + $260) / 2
($260 + $230) / 2
=
28.92 times
= 20.86 times
(continued) P 5-59A
Req. 2
The current ratio improved from 1.39 to 1.58. The quick (acid-test) ratio
increased slightly from 0.81 to 0.84. Days’ sales in receivables
decreased from 18 days to 13 days.
Req. 3
Kenmore Pools can improve cash flows from receivables by either
(20-30 min.) P 5-60B
Reqs. 1 and 2
Cash
Investment in Trading Securities
11,700*
7,800
_____
*1,300 × $9 = $11,700
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Nov.
17
Investment in Trading Securities …………….
11,700
Cash (1,300 × $9) ………………………………
11,700
Purchased investment.
Dec.
19
Cash (1,300 × $0.48) ……………………………….
Dividend Revenue …………………………….
Received cash dividend.
31
Unrealized Loss on Trading Securities ……
Investment in Trading Securities
Adjusted investment to market value.
(continued) P 5-60B
Req. 3
BALANCE SHEET
Current assets:
Investment in trading securities (1,300 × $6)…….. $ 7,800
Req. 5
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2017
Jan.
11
Cash …………………………………………………..
10,400
Gain on Sale of Trading Securities …..
2,600
Investment in Trading Securities ……..
7,800
Sold investment at a gain.
(continued) P 5-60B
Req. 6
3.
BALANCE SHEET
Dec. 31
Current assets:
2017
2016
Investment in AFSS ………………………………….
$13,000
$7,800
Income)
4.
INCOME STATEMENT
(10-15 min.) P 5-61B
Req. 1
MEMORANDUM
DATE: _________________
TO: Company Employees
FROM: Jeannette Carson, President
RE: Procedures to ensure that all cash receipts are deposited in
the bank and that each day’s total cash receipts are posted to
accounts receivable.
1. Someone other than the accountant opens the mail. This person
separates customer checks from the accompanying remittance slips.
4. A third person, such as the manager or the president, compares the
amount of the bank deposit to the total of the customer credits posted
by the accountant. This gives some assurance that the day’s cash
(15-20 min.) P 5-62B
(All amounts in millions)
Reqs. 1 and 3
Accounts Receivable
Allowance for Uncollectible Acct
3,500
28,395
240
4,300
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
a.
Cash ($32,600 × .06) ……………………………….
1,956
Accounts Receivable …………………………..
30,644
Service Revenue ……………………………….
32,600
Cash …………………………………………………….
28,395
Accounts Receivable ………………………..
c.
Uncollectible-Account Expense ………………
Allowance for Uncollectible Accts
($30,644 × .04) …………………………………..
Allowance for Uncollectible Accts …………..
Accounts Receivable ………………………..
e.
Notes Receivable ………………………………..
Accounts Receivable ……………………..
Interest Receivable ……………………………..
Interest Revenue ($210 × .08 × 1/12) …..
Accounts Receivable ………………………….
Cash …………………………………………….
47
(continued) P 5-62B
Req. 4
These balances agree with the Henderson Shipping Corp. amounts.
Henderson Shipping expects to collect $4,120 ($4,300 − $180) from its
charge customers (plus the note receivable and interest).
Req. 5
INCOME STATEMENT
(25-35 min.) P 5-63B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Nov.
30
Allowance for Doubtful Accounts ……………….
1,700
Accounts Receivable — Blue Carpets ……
1,300
Accounts Receivable — Rare Antiques ….
400
Dec.
31
Doubtful-Account Expense ………………………..
6,644
Req. 2
Allowance for Doubtful Accounts
Nov. 30 Write-offs
1,700
Sept. 30 Balance
8,400
Dec. 31 Adjusting
Dec. 31 Balance
(continued) P 5-63B
Req. 3
Media Communications
Comparative Balance Sheets (Partial)
December 31, 2017 and December 31, 2016
2017
2016
Accounts receivable …………………………………
$230,000
$215,000
Accounts receivable, net …………………………..
$216,656
$210,800
(20-25 min.) P 5-64B
Req. 1
$33,000
16,000
$36,000
63,000
Req. 2
As reported
Corrected
Current
=
$194,000
=
1.96
$144,000
=
1.45
ratio
$99,000
$99,000
(continued) P 5-64B
Req. 3
Net income, as reported ……………………………..
$95,000
Less: Unrealized loss on trading securities
($22,000 − $16,000) ………………………………..
(6,000)
Less: Correction for conversion to the
Correct uncollectible-account expense,
per aging method ……………………………..
Net income, as corrected …………………………...
$75,500
(20-30 min.) P 5-65B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Oct.
31
Note Receivable — Dorsey Foods ……………….
38,000
Sales Revenue ………………………………………
38,000
Dec.
31
Interest Receivable ($38,000 × .0575 × 2/12) ….
364
Interest Revenue ……………………………………
364
2017
Jan.
31
Cash ………………………………………………………….
Note Receivable — Dorsey Foods …………..
38,000
Interest Receivable ………………………………..
Interest Revenue ($38,000 × .0575 × 1/12) ..
Feb.
18
Note Receivable — Barb’s Market ………………..
Accounts Receivable — Barb’s Market ……
7,600
19
Cash …………………………………………………………
Financing Expense ……………………………………..
200
Nov.
11
Note Receivable — Master Foods ………………..
Cash ……………………………………………………..
Dec.
31
Interest Receivable ……………………………………..