Home Work #7

Home Work #7Home Work #7

Dr. Yan XiongDr. Yan Xiong

The Central Copy Center (CCC) ending cash balance for October The Central Copy Center (CCC) ending cash balance for October was $9,110.45. The owner deposited $773.14 on October 31 that was $9,110.45. The owner deposited $773.14 on October 31 that did not appear on the bank statement. The bank collected a note did not appear on the bank statement. The bank collected a note of $500 for CCC and charged $25 for the service. The ending of $500 for CCC and charged $25 for the service. The ending balance on the bank statement for October was $9,022.39. After balance on the bank statement for October was $9,022.39. After comparing the company’s records with the bank statement, comparing the company’s records with the bank statement, checks totaling $503.65 were found to be outstanding. Besides checks totaling $503.65 were found to be outstanding. Besides the collection fee, there was $30 in other service charges. Also, the collection fee, there was $30 in other service charges. Also, the statement showed that CCC earned $180 in interest revenue the statement showed that CCC earned $180 in interest revenue on the account and that checks amounting to $380.57 turned to on the account and that checks amounting to $380.57 turned to be NSF. Finally, a bank error was discovered: check number 4320 be NSF. Finally, a bank error was discovered: check number 4320 for $318.04 was paid to one of the CCC vendors. The bank for $318.04 was paid to one of the CCC vendors. The bank incorrectly deducted $381.04 from the CCC account referencing incorrectly deducted $381.04 from the CCC account referencing check number 4320.check number 4320.

The Central Copy Center (CCC) ending cash balance for October The Central Copy Center (CCC) ending cash balance for October was $9,110.45. The owner deposited $773.14 on October 31 that was $9,110.45. The owner deposited $773.14 on October 31 that did not appear on the bank statement. The bank collected a note did not appear on the bank statement. The bank collected a note of $500 for CCC and charged $25 for the service. The ending of $500 for CCC and charged $25 for the service. The ending balance on the bank statement for October was $9,022.39. After balance on the bank statement for October was $9,022.39. After comparing the company’s records with the bank statement, comparing the company’s records with the bank statement, checks totaling $503.65 were found to be outstanding. Besides checks totaling $503.65 were found to be outstanding. Besides the collection fee, there was $30 in other service charges. Also, the collection fee, there was $30 in other service charges. Also, the statement showed that CCC earned $180 in interest revenue the statement showed that CCC earned $180 in interest revenue on the account and that checks amounting to $380.57 turned to on the account and that checks amounting to $380.57 turned to be NSF. Finally, a bank error was discovered: check number 4320 be NSF. Finally, a bank error was discovered: check number 4320 for $318.04 was paid to one of the CCC vendors. The bank for $318.04 was paid to one of the CCC vendors. The bank incorrectly deducted $381.04 from the CCC account referencing incorrectly deducted $381.04 from the CCC account referencing check number 4320.check number 4320.

P7-2A

Information about credit sales and collection for June Information about credit sales and collection for June Company for the fiscal year ending June 30 follows:Company for the fiscal year ending June 30 follows:a. June had credit sales of $560,000 during the year.a. June had credit sales of $560,000 during the year.B. June began the year with accounts receivable of $23,500 B. June began the year with accounts receivable of $23,500 and an allowance for uncollectible accounts of $(800). During and an allowance for uncollectible accounts of $(800). During the year the company collected $555,000 cash for payments of the year the company collected $555,000 cash for payments of accounts receivable. The company also wrote off the balances accounts receivable. The company also wrote off the balances of two bankrupt customers, totaling $750.of two bankrupt customers, totaling $750.c. June uses the accounts receivable balance to estimate c. June uses the accounts receivable balance to estimate uncollectible accounts.uncollectible accounts.D. June decides that 4% of accounts receivable will be D. June decides that 4% of accounts receivable will be uncollectible.uncollectible.Required: Calculate the bad debt expense and the net realized Required: Calculate the bad debt expense and the net realized value of accounts receivable for June company for the year value of accounts receivable for June company for the year ended June 30, 2002.ended June 30, 2002.

P7-3B

P company purchased a new printing press in 2004. The P company purchased a new printing press in 2004. The invoice price was $158,500, but the manufacturer of invoice price was $158,500, but the manufacturer of the press gave P company a 3% discount for paying the press gave P company a 3% discount for paying cash for the machine on delivery. Delivery costs cash for the machine on delivery. Delivery costs amounted to $2,500, and P company paid $900 for a amounted to $2,500, and P company paid $900 for a special insurance policy to cover the press while in special insurance policy to cover the press while in transit. Installation cost $2800; and P company spent transit. Installation cost $2800; and P company spent $5,00 training the employees to use the new press. $5,00 training the employees to use the new press. Additionally, P company hired a new supervisor at an Additionally, P company hired a new supervisor at an annual salary of $75,000 to be responsible for keeping annual salary of $75,000 to be responsible for keeping the press online during business hours.the press online during business hours.

What amount should be capitalized for this new asset?What amount should be capitalized for this new asset?

P5-1A

a.

Accounts receivable, 07/01/01 $ 23,500

+ Credit sales 560,000

– Write offs –750

– Cash collections –555,000


Allowance, beg. bal. $ 800

– Write offs –750

Allowance, before expense $ 50

Allowance, after expense –1,110 ($27,750 4%)

Bad debt expense (changes in allowance)

$ 1,060

Balance sheet:

Accounts receivable $ 27,750

Less: Allowance for uncollectible accounts

1,110

Net realizable value of accounts receivable

$ 26,640

G Mart has provided the following information about the company’s G Mart has provided the following information about the company’s sales and accounts receivables for the fiscal year ending sales and accounts receivables for the fiscal year ending December 31, 2003.December 31, 2003.

A/R at 12/31/2002 $42,500A/R at 12/31/2002 $42,500Allowance at 12/31/2002 (after adjustment) $1275Allowance at 12/31/2002 (after adjustment) $1275Credit sales for the year ended 12/31/2003 $135,750Credit sales for the year ended 12/31/2003 $135,750Cash collections on A/R during 2003 $142,600Cash collections on A/R during 2003 $142,600Specific accounts written off during 2003 1,050Specific accounts written off during 2003 1,050Required:Required:a. Suppose G Mart used A/R method in year 2002. Can you tell if G a. Suppose G Mart used A/R method in year 2002. Can you tell if G

has over or under estimated the uncollectible accounts in year has over or under estimated the uncollectible accounts in year 2002.2002.

b. If G Mart used sales method, can you tell what percentage of the b. If G Mart used sales method, can you tell what percentage of the sale the company used?sale the company used?

P7-4B

c. Use A/R method. Assume 3% of A/R is estimated to be c. Use A/R method. Assume 3% of A/R is estimated to be uncollectible, computer(1) the uncollectible account uncollectible, computer(1) the uncollectible account expense at 12/31/2003 and (2) Net realized value of A/R expense at 12/31/2003 and (2) Net realized value of A/R at 12/31/2003.at 12/31/2003.

d. d. Using sales method and assume 1% of sales is Using sales method and assume 1% of sales is estimated to be uncollectible, computer(1) the estimated to be uncollectible, computer(1) the uncollectible account expense at 12/31/2003 and (2) uncollectible account expense at 12/31/2003 and (2) Net realized value of A/R at 12/31/2003.Net realized value of A/R at 12/31/2003.

3. Accounts receivable, 12/31/02 $ 42,500


– Write offs –1,050



Allowance for uncollectible accounts, 12/31/02

$ 1,275


Allowance, before expense $ 225

– Allowance, after expense –1,038

Bad debt expense (changes in allowance)

$ 813

On balance sheet:

Accounts receivable $ 34,600

Less: Allowance for uncollectible accounts

1,038

Net realizable value of accounts receivable

$ 33,562






Allowance, 12/31/02 $ 1,275.00

– Write offs –1,050.00

Allowance, before expense $ 225.00

+ Bad debt adjustment 1,357.50

Allowance, 12/31/03 $(1,582.50

Balance sheet:

Accounts receivable $34,600.00

Less: Allowance 1,582.50

Net realizable value $33,017.50

P7-7AP7-7A Holly Hoops sold $5,000 of hoops during month July. Holly Hoops sold $5,000 of hoops during month July.

Each is guaranteed for 12 months. Any defective hoop Each is guaranteed for 12 months. Any defective hoop will be repaired or replaced free of charge during the will be repaired or replaced free of charge during the period.period.

Holly estimated that it will cost $250 to honor Holly estimated that it will cost $250 to honor warranties related to July sales.warranties related to July sales.

During August, Holly spent $250 to honor warranties During August, Holly spent $250 to honor warranties related to July sales.related to July sales.

The company did not sell any hoops in August.The company did not sell any hoops in August.Required: What is the warranty expense for July.Required: What is the warranty expense for July.b. What is the warranty liability for July?b. What is the warranty liability for July?c. What is the warranty expense for August?c. What is the warranty expense for August?d. What effect did recording warranty expense have on d. What effect did recording warranty expense have on

owner’s equity?owner’s equity?f. What effect did spending $250 have on owner’s equity?f. What effect did spending $250 have on owner’s equity?

Home Work #7

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