principle ch 8 ed.23 oxley internal control, and cash)

8/2/2019 Principle Ch 8 Ed.23 Oxley Internal Control, And Cash)

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EX 8-3

Hermans Auto Supply distributes new and used automobile parts to local dealers throughout

the Midwest. Hermans credit terms are n/30. As of the end of business on July 31, the following

accounts receivable were past due:

Account Due Date Amount

Bear Creek Body Shop June 8 $3,000

First Auto July 3 2,500

Kaiser Repair March 20 500

Masters Auto Repair May 15 1,000

Richter Auto June18 750

Sabols April 12 1,800

Uptown Auto May 8 500

Westside Repair & Tow May 31 1,100

Determine the Number of days each accounts is past due.

EX 8-5

Intimacy Mattress Company has a past history of uncollectible accounts, as shown below.

Estimate the allowance for doubtful accounts, based on the aging of receivables schedule you

schedule in Exercise 8-4.

Age Class Percentage Uncollectible

Not past due 1 %

1-30 days past due 4



Over 90 days past due 40

EX 8-7

Kubota Co. is a wholesaler of office supplies. An aging of the companys accounts receivable on

December 31, 2006, and a historical analysis of the percentage of uncollectible accounts in each

age category are as follows:


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Age Interval Balance Percent Uncollectible

Not past due $450,000 2 %

1-30 days past due 110,000 4

31-60 days past due 51,000 6

61-90 days past due 12,500 20

91-180 days past due 7,500 60

Over 180 days past due 5,500 80

$ 700.000

Estimate what the proper balance of the allowance for doubtful accounts should be as of

December 31, 2006.

EX 8-9

At the end of the current year, the accounts receivable account has a debit balance of $840,000

and net sales for the year total $7,150,000. Determine the amount of the adjusting entry to

provide for doubtful account under each of the following assumptions:

a. The allowance account before adjustment has a credit balance of $1,780. Uncollectibleaccounts expense is estimated at of 1% of net sales.

b. The allowance account before adjustment has a credit balance of $2,750. An aging of theaccounts in the costumer ledger indicates estimated doubtful accounts of $16,350.

c. The allowance account before adjustment has a debit balance of $3,050. Uncollectibleaccounts expense is estimated at of 1% of net sales.

d. The allowance account before adjustment has a debit balance of $3,050. An aging of theaccounts in the costumers ledger indicates estimated doubtful account of $38,400.

EX 8-10

Anchor.com, a computer consulting firm, has decided to write off the $7,130 balance of an

account owed by a costumer. Journalize the entry to record the write-off, (a) assuming that the

allowance method is used, and (b) assuming that the direct write-off method is used.

EX 8-12

Journalize the following transactions in the accounts of Graybeal Co., a hospital supply company

that uses the direct write-off method of accounting for uncollectible receivables:

July. 6. Sold merchandise on account to Dr. Jerry Jagers, $18,500. The cost of the

merchandise sold was $11,100.

Sept. 12. Received $9,000 from Dr. Jerry Jagers. and wrote off the remainder owed on the

sale of July 6 as uncollectible.


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Dec. 20. Reinstated the account of Dr. Jerry Jagers that had been written off on

September 12 and received $9,500 cash in full payment.

EX 8-13

During its first year of operations, OHara Automotive Supply Co. had net sales of $4,050,000,

wrote off $112,350 of accounts as uncollectible using the direct write-off method, and reported

net income of $212,800. If the allowance method of accounting for uncollectible had been used,

2% of net sales would have been estimated as uncollectible. Determine what the net income

would have been if the allowance method had been used.

EX 8-14

Using the data in Exercise 8-13, assume that the during second year of operations OHara

Automotive Supply Co. had net sales of $4,800,000, wrote off $114,800 of accounts as

uncollectible using the direct write-off method, and reported net income of $262,300.

a. Determine what net income would have been in the second year if the allowance method(using 2% of net sales) had been used in both the first and second years.

b. Determine what the balance of the allowance for doubtful accounts would have been at theend of the second year if the allowance method had been used in both the first and second

years.

EX 8-15

Determine the due date and the amount of interest due at maturity on the following notes:

Date of Note Face Amount Term of Note Interest Rate

a. June 2 $8,000 90 days 6%

b. August 30 18,000 120 days 8

c. October 1 12,500 60 days 12

d. March 6 10,000 60 days 9

e. May 20 6,000 60 days 10


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EX 8-16

Magpie Interior Decorators issued a 120-day, 6% note for $24,000, dated April 10, to Peels

Furniture Company on account.

a. Determine the due date of the note.b. Determine the maturity value of the note.c. Journalize the entries to record the following: (1) receipt of the note by the payee, and (2)

receipt of payment of the note at maturity.

EX 8-18

The following selected transactions were completed by Cassidy Co., a supplier of elastic bands

for clothing:

2005

Dec. 13. Received from Visage Co., on account, a $25,000, 120-day, 6% note dated

December 13.

31. Recorded an adjusting entry for accrued interest on the note of December 13.

31. Closed the interest revenue account. The only entry in this account originated

from the December 31 adjustment.

2006

Apr. 12. Received payment of note and interest from Visage Co.

Journalize the transactions.

EX 8-19

Journalize the following transactions of Prairie Theater Productions:

July 8. Received a $30,000, 90-day, 8% note dated July 8 from Pennington Company on

account.

Oct. 6. The note is dishonored by Pennington Company.

Nov. 5. Received the amount due on the dishonored note plus interest for 30 days at

10% on the total amount charged to Pennington Company on October 6.

EX 8-20

Journalize the following transactions in the accounts of Blue Sky Co., which operates a riverboat

casino:

Mar. 1. Received a $15,000, 60-day, 5% note dated March 1 from Absaroka Co. on

account.


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18. Received a $12,000, 90-day, 9% note dated March 18 from Sturgis Co. on

account

Apr. 30. The note dated March 1 from Absaroka Co. is dishonored, and the costumers

account is charged for the note, including interest.

June 16. The note dated March 18 from Sturgis Co. is dishonored, and the costumers

account is charged for the note, including interest.

July 11. Cash is received for the amount due on the dishonored note dated March 1 plus

interest for 72 days at 8% on the total amount debited to Absaroka Co. on

April 30.

Oct. 12. Wrote off against the allowance account the amount charged to Sturgis Co. on

June 16 for the dishonored note dated March 18.

PR 8-1A

The following transactions, adjusting entries, and closing entries were completed by Elko

Contractors Co. during the year ended December 31, 2006:

Mar. 15. Received 60% of the $18,500 balance owed by Bimba Co., a bankrupt business,

and wrote off the remainder as uncollectible.

Apr. 16. Reinstated the account of Ian Tom Miner, which had been written off in the

preceding year as uncollectible. Journalized the receipt of $5,782 cash in full

payment of Miners account.

July 20. Wrote off the $5,500 balance owed by Martz Co., which has no assets.

Oct. 31. Reinstated the account of Two Bit Saloon Co., which had been written off in the

preceding year as uncollectible. Journalized the receipt of $6,100 cash in full

payment of the account.

Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Asche Co.,

$950; Dorsch Co., $4,600; Krebs Distributors, $2,500; J. J. Levi, $1,200.

31. Based on an analysis of the $535,750 of accounts receivable, it was estimated that

$13,700 will be uncollectible. Journalized the adjusting entry.

31. Journalized the entry to close the appropriate account to Income Summary.

Instructions

1. Post the January 1 credit balance of $12,050 to Allowance for Doubtful Accounts.2. Journalize the transactions and the adjusting and closing entries. Post each entry that

affects the following T accounts and determine the new balances:

115 Allowance for Doubtful Accounts

313 Income Summary

718 Uncollectible Accounts Expense

3. Determine the expected net realizable value of the account receivable as of December 31.


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PR 8-4A

Matrix Co. wholesales bathroom fixtures. During the current fiscal year, Matrix Co. received the

following notes:

Date Face Amount Term Interest Rate

1. March 7 $24,000 60 days 6%

2. June 18 16,800 30 days 9

3. Aug. 30 10,200 120 days 6

4. Oct. 31 27,000 60 days 9

5. Nov. 19 12,000 60 days 6

6. Dec. 23 16,000 30 days 9

Instructions

1. Determine for each note (a) that due date and (b) the amount of interest due at maturity,identifying each note by number.

2. Journalize the entry to record the dishonor of Note (3) on its due date.3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on

December 31.

4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) inJanuary.

PR 8-5A

The following data relate to notes receivable and interest for Clyde Park Optic Co., a cable

manufacturer and supplier. (All notes are dated as of the day are received.)June 4. Received a $18,800, 9%, 60-day note on account.

July 15. Received a $27,000, 10%, 120-day note on account.

Aug 3. Received a $19,082 on note of June 4.

Sept. 1. Received a $24,000, 9%, 60-day note on account.

Oct. 31. Received a $24,360, on note of September 1.

Nov. 5. Received $9,600, 7%, 30-day note on account.

12. Received $27,900 on note of July 15.

30. Received a $15,000, 10%, 30-day note on account.

Dec. 5. Received $9,656 on note of November 5.

30. Received $15,125 on note of November 30.

Instructions

Journalize the entries to record the transactions.


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PR 8-6A

The following were selected from among the transactions completed by Rimrock Co. during the

current year. Rimrock Co. sells and installs home and business security system.

Jan. 10. Loaned $12,000 cash to Brenda Norby, receiving a 90-day, 8% note.

Feb. 4. Sold merchandise on account to Emerson and Son., $24,000. The cost of themerchandise sold was $14,400.

12. Sold merchandise on account to Gwyn Co., $25,000. The cost of merchandise

sold was $15,000.

Mar. 6. Accepted a 60-day, 6% note for $24,000 from Emerson and Son on account.

14. Accepted a 60-day, 12% note for $25,000 from Gwyn Co. on account.

Apr. 10. Received the interest due from Brenda Norby and a new 90-day, 9% note as a

renewal of the loan of January 10. (Record both the debit and the credit to the

notes receivable account).

May 5. Received from Emerson and Son the amount due on the note of March 6.

13. Gwyn Co. dishonored its note dated March 14.June 12. Received from Gwyn Co. the amount owed on the dishonored note, plus

interest for 30 days at 12% computed on the maturity value of the note.

July 9. Received from Brenda Norby the amount due on her note of April 10.

Aug. 24. Sold merchandise on account to Haggerty Co., for $10,200. The cost of

merchandise sold was $6,000.

Sept. 3. Received from Haggerty Co. the amount due on the invoice of August 24, less

1% discount.

Instructions

Journalize the transactions. Round to the nearest dollar.

principle ch 8 ed.23 oxley internal control, and cash)

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