1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, percentages in % cells,
On December 31, 2016, the credit balance in Allowance for Doubtful Accounts is $34,590. The amounts of gross receivables,
by age, on this date are as follows:
are between one and two months past due, the probability of collection is 65%, and if an account is over two months past
due, Rough Stuff estimates only a 25% chance of collecting the receivable.
3. The completed exercise/problem may be printed or e-mailed per direction from your instructor.
P7-2A
Aging Schedule:
Estimated Estimated
1. Prepare a schedule to estimate the amount of uncollectible accounts at December 31, 2016.
2. Rough Stuff knows that $40,000 of the $45,000 amount that is more than two months overdue is due from one
customer that is in severe financial trouble. It is rumored that the customer will be filing for bankruptcy in the
near future. As controller for Rough Stuff, how would you handle this situation?
Rough Stuff is a distributor of large rocks. It sells on credit to commercial landscaping companies and extends terms that
require customers to pay in 60 days. For accounts that are not overdue, Rough Stuff has found that there is a 90%
probability of collection. For accounts up to one month past due, the likelihood of collection decreases to 75%. If accounts
3. Show how accounts receivable would be presented on the December 31, 2016, balance sheet.
Partial Balance Sheet at December 31, 2016:
age on this date are as follows:
two months past due, the probability of collection is 60%, and if an account is over two months past due, Sparkle Jewels
estimates only a 40% chance of collecting the receivable.
On December 31, 2016, the credit balance in Allowance for Doubtful Accounts is $12,300. The amounts of gross receivables by
1. Prepare a schedule to estimate the amount of uncollectible accounts at December 31, 2016.
Sparkle Jewels distributes fine stones. It sells on credit to retail jewelry stores and extends terms that require the stores
to pay in 60 days. For accounts that are not overdue, Sparkle has found that there is a 95% probability of collection.
For accounts up to one month past due, the likelihood of collection decreases to 80%. If accounts are between one and
2. On the basis of the schedule in part (1), prepare the journal entry on December 31, 2016, to estimate bad debts.
1. The following worksheet may be used to complete the exercise/problem.
3. The completed exercise/problem may be printed or e-mailed per direction from your instructor.
P7-5
July 1:
Oct. 23:
Nov. 21:
Dec. 28:
Dec. 31:
Received dividends of $1.50 per share on the Eagle Rock stock and $2.00 per share on the Montana stock.
Sold 400 shares of Eagle Rock common stock at $25 per share.
Received interest from the Gallatin bonds.
in 5½ years.
Purchased 600 shares of Eagle Rock common stock at $20 per share.
Purchased 200 shares of Montana preferred stock at $30 per share.
BALANCE SHEET
INCOME STATEMENT
Expenses
To record purchase of 6%, Gallatin bonds.
Assets = Liabilities + Stockholders’ Equity Revenues −= Net Income
Investment in
Cash (12,000)
Nov. 21 Investment in Montana Stock 6,000
Dec. 10 Cash 1,300
Expenses
BALANCE SHEET
INCOME STATEMENT
Cash 6,000
To record purchase of 200 shares of preferred stock at $30 per share.
Cash 1,300 1,300 Dividend 1,300
Expenses
BALANCE SHEET
INCOME STATEMENT
BALANCE SHEET
INCOME STATEMENT
Swartz Inc. enters into the following transactions during 2016:
Paid $10,000 to acquire on the open market $10,000 face value of Gallatin bonds. The bonds have a stated
annual interest rate of 6% with interest paid semiannually on June 30 and December 31. The bonds mature
Income 1,300
Dec. 28 Cash 10,000
Investment in Eagle Rock Stock 8,000
Dec. 31 Cash 300
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, and
dollars or numbers in the $ cells.
St. Charles Antique Market uses the indirect method to prepare its statement of cash flows. It does not have any other
current assets or current liabilities and did not enter into any investing or financing activities during 2016.
P7-7A
St. Charles Antique Market was able to generate a significant amount of cash from operations even though the company
incurred an accrual-basis net loss during 2016 of $6,000. Most importantly, the amount of accounts receivable decreased by
$47,000 during the year from $126,000 to $79,000; collections of accounts receivable generated cash for the company.
This cash flow was partially offset by a $7,800 increase in notes receivable during the year, from $104,800 to $112,600.
January XX, 2017
Cash Flows
You recently questioned the increase in the company’s cash balance in light of this year’s net loss. My thoughts and a
copy of the company’s 2016 statement of cash flows follow.
TO:
FROM:
Owner of St. Charles Antique Market
Student’s name
2. Draft a brief memo to the owner to explain why cash increased during such an unprofitable year.
1. Prepare St. Charles Antique Market’s 2016 statement of cash flows.
ST. CHARLES ANTIQUE MARKET
STATEMENT OF CASH FLOWS
St. Charles Antique Market reported a net loss of $6,000 for the year ended December 31, 2016. The following items were
included on St. Charles Antique Market’s balance sheets at December 31, 2016 and 2015: