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Intermediate Accounting, 16e Chapter 7 Homework Cash and Receivables ACTG 381

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Brief Exercise 7-5
Nash, Inc. had net sales in 2017 of $1,506,300. At December 31, 2017, before adjusting entries,
the balances in selected accounts were Accounts Receivable $311,100 debit, and Allowance for
Doubtful Accounts $2,490 credit. If Nash estimates that 8% of its receivables will prove to be
uncollectible.
Prepare the December 31, 2017, journal entry to record bad debt expense. (If no entry is
required, select "No Entry" for the account titles and enter 0 for the amounts. Credit
account titles are automatically indented when the amount is entered. Do not indent
manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2017
Sheffield, Inc. had net sales in 2017 of $1,429,400. At December 31, 2017, before adjusting
entries, the balances in selected accounts were Accounts Receivable $237,400 debit, and
Allowance for Doubtful Accounts $1,859 debit. Assume that 10% of accounts receivable will
prove to be uncollectible. Prepare the entry to record bad debt expense. (If no entry is
required, select "No Entry" for the account titles and enter 0 for the amounts. Credit
account titles are automatically indented when the amount is entered. Do not indent
manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2017
Sheffield, Inc. had net sales in 2017 of $1,429,400. At December 31, 2017, before adjusting
entries, the balances in selected accounts were Accounts Receivable $237,400 debit, and
Allowance for Doubtful Accounts $4,270 credit. Assume Sheffield prepares an aging schedule that
estimates total uncollectible accounts at $24,600. Prepare the entry to record bad debt
expense. (If no entry is required, select "No Entry" for the account titles and enter 0 for
the amounts. Credit account titles are automatically indented when the amount is
entered. Do not indent manually.)
Date
Dec. 31, 2017
Account Titles and Explanation
Debit
Credit
Exercise 7-7
Skysong Company reports the following financial information before adjustments.
Dr.
Accounts Receivable
Cr.
$134,200
Allowance for Doubtful Accounts
$2,550
Sales Revenue (all on credit)
817,200
Sales Returns and Allowances
51,990
Prepare the journal entry to record bad debt expense assuming Skysong Company estimates bad
debts at (a) 5% of accounts receivable and (b) 5% of accounts receivable but Allowance for
Doubtful Accounts had a $1,350 debit balance. (If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts. Credit account titles are automatically
indented when the amount is entered. Do not indent manually.)
No. Account Titles and Explanation
Debit
Credit
(a)
(b)
Exercise 7-8
At the end of 2017, Novak Company has accounts receivable of $880,700 and an allowance for
doubtful accounts of $44,200. On January 16, 2018, Novak Company determined that its
receivable from Ramirez Company of $6,690 will not be collected, and management authorized
its write-off.
Prepare the journal entry for Novak Company to write off the Ramirez receivable. (If no entry
is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit
account titles are automatically indented when the amount is entered. Do not indent
manually.)
Date
Account Titles and Explanation
Jan. 16, 2018
Your answer is correct.
Debit
Credit
What is the net realizable value of Novak Company’s accounts receivable before the write-off of
the Ramirez receivable?
Net realizable value
$
Your answer is correct.
What is the net realizable value of Novak Company’s accounts receivable after the write-off of the
Ramirez receivable?
Net realizable value
$
Problem 7-6
The balance sheet of Pina Company at December 31, 2016, includes the following.
Notes receivable
$44,400
Accounts receivable
188,800
Less: Allowance for doubtful accounts
23,800
$209,400
Transactions in 2017 include the following.
1.
Accounts receivable of $149,500 were collected including accounts of $64,100 on which 4%
sales discounts were allowed.
2.
$5,590 was received in payment of an account which was written off the books as worthless
in 2016.
3.
Customer accounts of $24,000 were written off during the year.
4.
At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $27,600.
This estimate is based on an analysis of aged accounts receivable.
Prepare all journal entries necessary to reflect the transactions above. (If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts. Credit account
titles are automatically indented when the amount is entered. Do not indent manually.)
No. Account Titles and Explanation
1.
Debit
Credit
2.
(To reinstate the accounts receivable)
(To record the collection on account)
3.
4.
(23,800 + 5590 – 24,000 = 5,390 Balance in Allowance for DA. 27,600 – 5,390 = 22,210)
Multiple Choice Question 97
Sunland Company has outstanding accounts receivable totaling $1.25 million as of December 31
and sales on credit during the year of $6.28 million. There is also a debit balance of $5800 in the
allowance for doubtful accounts. If the company estimates that 2% of its accounts receivable will
be uncollectible, what will be the balance in the allowance for doubtful accounts after the yearend adjustment to record bad debt expense?
$19200.
$30800.
$25000.
$24884.
Multiple Choice Question 107
Concord Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $30500.
During 2017, it wrote off $22500 of accounts and collected $5890 on accounts previously written
off. The balance in Accounts Receivable was $640000 at 1/1 and $740000 at 12/31. At 12/31/17,
Smithson estimates that 6% of accounts receivable will prove to be uncollectible. What is Bad
Debt Expense for 2017?
$36400.
$37000.
$13900.
$30510.
740,000 * 6% = 44,400 Est. Uncollectible.
AFDA BB 30,500 - 22500 Debit + 5,890 Credit = 13,890.
44,400 – 13,890 = 30,510
Multiple Choice Question 142
Coronado Industries prepared an aging of its accounts receivable at December 31, 2017 and
determined that the net realizable value of the receivables was $904500. Additional information
is available as follows:
Allowance for uncollectible accounts at 1/1/17—credit balance
Accounts written off as uncollectible during 2017
Accounts receivable at 12/31/17
Uncollectible accounts recovered during 2017
$100000
68000
981000
15600
For the year ended December 31, 2017, Coronado's bad debt expense would be
$76500.
$47600.
$28900.
$68000.
AFDA 100,000 – 68,000 + 15,600 = 47,600 12/31/17 Balance in AFDA.
End of year Allowance FDA: 981,000 – 904,500 = 76,500
Bad Debt Exp.: 76,500 – 47,600 = 28,900
Brief Exercise 7-10
Riverbed Incorporated factored $163,900 of accounts receivable with Marin Factors Inc. on a
without-recourse basis. Marin assesses a 2% finance charge of the amount of accounts receivable
and retains an amount equal to 6% of accounts receivable for possible adjustments.
Prepare the journal entry for Riverbed Incorporated and Marin Factors to record the factoring of
the accounts receivable to Marin. (If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts. Credit account titles are automatically indented
when the amount is entered. Do not indent manually.)
No. Account Titles and Explanation
Debit
Credit
Riverbed
1.
Marin
2.
Brief Exercise 7-9
On October 1, 2017, Oriole, Inc. assigns $1,298,500 of its accounts receivable to Waterway
National Bank as collateral for a $723,800 note. The bank assesses a finance charge of 4% of the
receivables assigned and interest on the note of 10%.
Prepare the October 1 journal entries for both Oriole and Waterway. (If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts. Credit account
titles are automatically indented when the amount is entered. Do not indent manually.)
Date Account Titles and Explanation
Oriole, Inc.
Oct. 1
Waterway National Bank
Oct. 1
Debit
Credit
Brief Exercise 7-11
Sheridan Incorporated factored $158,900 of accounts receivable with Engram Factors Inc. on a with
recourse basis. Engram assesses a 3% finance charge of the amount of accounts receivable and
retains an amount equal to 5% of accounts receivable for possible adjustments.
Prepare the journal entry for Sheridan to record the sale, assuming that the recourse liability has a
fair value of $7,760. (If no entry is required, select "No Entry" for the account titles and enter
0 for the amounts. Credit account titles are automatically indented when the amount is
entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Exercise 7-17
Buffalo Inc. factors receivables with a carrying amount of $245,600 to Joffrey Company for
$179,200 on a with recourse basis.
The recourse provision has a fair value of $1,550. This transaction should be recorded as a sale.
Prepare the appropriate journal entry to record this transaction on the books of Buffalo Inc. (If
no entry is required, select "No Entry" for the account titles and enter 0 for the
amounts. Credit account titles are automatically indented when the amount is entered.
Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Exercise 7-18
Marigold Corporation factors $251,100 of accounts receivable with Kathleen Battle Financing, Inc.
on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables
records are transferred to Kathleen Battle Financing on August 15, 2017. Kathleen Battle
Financing assesses a finance charge of 2% of the amount of accounts receivable and also
reserves an amount equal to 4% of accounts receivable to cover probable adjustments.
(b) Assume that the conditions are met for the transfer of receivables with recourse to be
accounted for as a sale. Prepare the journal entry on August 15, 2017, for Marigold to record the
sale of receivables, assuming the recourse liability has a fair value of $4,750. (If no entry is
required, select "No Entry" for the account titles and enter 0 for the amounts. Credit
account titles are automatically indented when the amount is entered. Do not indent
manually.)
Date
Account Titles and Explanation
Debit
Credit
Aug. 15, 2017
Brief Exercise 156
Hunt Incorporated sold $100,000 of accounts receivable to Gannon Factors Inc. on a with
recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and
retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the
journal entries for Hunt Incorporated and Gannon Factors to record the sale of the accounts
receivable to Gannon assuming that the recourse liability has a fair value of $9,000. (Credit
account titles are automatically indented when the amount is entered. Do not indent
manually.)
Account Titles and Explanation
Hunt Incorporated
Gannon Factors
Debit
Credit
Multiple Choice Question 115
Vaughn Manufacturing sold $119000 of goods and accepted the customer's $119000 11%, 1-year
note receivable in exchange. Assuming 10% approximates the market rate of return, what would
be the debit in this journal entry to record the sale?
Debit Notes Receivable for $105910.
Debit Accounts Receivable for $119000.
No journal entry until cash is collected.
Debit Notes Receivable for $119000.
Pre-Lecture Question 06
Correct! Zero-interest-bearing notes (or non-interest-bearing) include interest as part of their
face amount.
Non-interest-bearing notes include interest as part of their face amount.
True
False
Exercise 7-14
On December 31, 2015, Metlock Co. performed environmental consulting services for Hayduke
Co. Hayduke was short of cash, and Metlock Co. agreed to accept a $309,400 zero-interestbearing note due December 31, 2017, as payment in full. Hayduke is somewhat of a credit risk
and typically borrows funds at a rate of 11%. Metlock is much more creditworthy and has
various lines of credit at 7%.
Prepare the journal entry to record the transaction of December 31, 2015, for the Metlock
Co. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and
final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry"
for the account titles and enter 0 for the amounts. Credit account titles are
automatically indented when the amount is entered. Do not indent manually.)
Date
Dec. 31, 2015
Account Titles and Explanation
Debit
Credit
Assuming Metlock Co.’s fiscal year-end is December 31, prepare the journal entry for December
31, 2016. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts. Credit account
titles are automatically indented when the amount is entered. Do not indent
manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2016
Assuming Metlock Co.’s fiscal year-end is December 31, prepare the journal entry for December
31, 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for
the amounts. Credit account titles are automatically indented when the amount is
entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2017
(To record interest revenue)
(To record collection of note)
Practice Exercise 7-4
On December 31, 2017, Cullumber Co. sold equipment to Marin, Inc. Cullumber Co. agreed to
accept a $660,000 zero-interest-bearing note due December 31, 2019, as payment in full.
Marin, Inc. incorporated in 2017 and had very little credit history at the time of the transaction
with Cullumber. Therefore, at that time, Marin typically borrowed funds at a rate of 9%.
Cullumber has a long and positive credit history. Therefore, Cullumber has various lines of credit
at 4%.
Prepare the journal entry to record the transaction of December 31, 2017, for Cullumber
Co. (Credit account titles are automatically indented when the amount is entered. Do
not indent manually. If no entry is required, select "No Entry" for the account titles
and enter 0 for the amounts. Round present value factor calculations to 5 decimal
places, e.g. 1.25124.)
Account Titles and Explanation
Debit
Credit
Assuming Cullumber Co.’s fiscal year-end is December 31, prepare the journal entry for
December 31, 2018. (Credit account titles are automatically indented when the amount
is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Assuming Cullumber Co.’s fiscal-year end is December 31, prepare the journal entries for
December 31, 2019. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Brief Exercise 7-8
John Acrobats lent $15,432 to Donaldson, Inc., accepting Donaldson’s 2-year, $18,000, zerointerest-bearing note. The implied interest rate is 8%.
Prepare John’s journal entries for the initial transaction, recognition of interest each year, and the
collection of $18,000 at maturity. (Round answers to 0 decimal places, e.g. 5,275. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts.
Credit account titles are automatically indented when the amount is entered. Do not
indent manually.)
No. Account Titles and Explanation
Debit
Credit
1.
(To record the initial transations)
2.
(To record the recognition of interest in year one)
3.
(To recognize the interest in year 2)
4.
(To record the collection of the note)
Multiple Choice Question 147
On January 1, 2017, Crane Company exchanged equipment for an $800000 zero-interest-bearing
note due on January 1, 2020. The prevailing rate of interest for a note of this type at January 1,
2017 was 9%. The present value of $1 at 9% for three periods is 0.77. What amount of interest
revenue should be included in Crane's 2018 income statement?
$72000
$0
$55440
$60430
$800000 × 0.77 = $616000 present value
$616000 × 0.09 = $55440 (2017 interest)
($616000 + $55440) × 0.09 = $60430 (2018 interest).
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