Intermediate accounting | Accounting homework help

Question 1

Sandhill Enterprises owns the following assets at December 31, 2017.

Cash in bank—savings account

 

71,700

 

Checking account balance

 

27,000

Cash on hand

 

8,400

 

Postdated checks

 

900

Cash refund due from IRS

 

38,800

 

Certificates of deposit (180-day)

 

94,380


What amount should be reported as cash?

Cash to be reported

 

$

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Question 2

Blue Family Importers sold goods to Tung Decorators for $45,000 on November 1, 2017, accepting Tung’s $45,000, 6-month, 5% note.

Prepare Blue’s November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and interest. (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. Record journal entries in the order presented in the problem.)

Question 3

Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $3,345 per month, has just purchased a new Acura. You decide to test the accuracy of the accounts receivable balance of $182,860 as shown in the ledger.

The following information is available for your first year in business.

(1)

 

Collections from customers

 

$441,540

(2)

 

Merchandise purchased

 

713,600

(3)

 

Ending merchandise inventory

 

200,700

(4)

 

Goods are marked to sell at 40% above cost

   


Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account.

The ending balance of accounts receivable from customers

 

$

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Apparent shortage

 

$

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Question 4

The trial balance before adjustment of Whispering Inc. shows the following balances.

   

Dr.

 

Cr.

Accounts Receivable

 

$96,700

   

Allowance for Doubtful Accounts

 

3,050

   

Sales Revenue (all on credit)

     

$723,000

Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 5% of gross accounts receivable and (b) 6% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,654 credit 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.)

Question 5

Sandhill, Inc. decided to establish a petty cash fund to help ensure internal control over its small cash expenditures. The following information is available for the month of April.

1. On April 1, it established a petty cash fund in the amount of $265.
2. A summary of the petty cash expenditures made by the petty cash custodian as of April 10 is as follows.

Delivery charges paid on merchandise purchased

 

$76

Supplies purchased and used

 

41

Postage expense

 

49

I.O.U. from employees

 

33

Miscellaneous expense

 

52


The petty cash fund was replenished on April 10. The balance in the fund was $12.

3. The petty cash fund balance was increased by $116 to $381 on April 20.

Prepare the journal entries to record transactions related to petty cash for the month of April. (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.)

Question 6

Kimmel Company uses the net method of accounting for sales discounts. Kimmel also offers trade discounts to various groups of buyers.

On August 1, 2017, Kimmel sold some accounts receivable on a without recourse basis. Kimmel incurred a finance charge.

Kimmel also has some notes receivable bearing an appropriate rate of interest. The principal and total interest are due at maturity. The notes were received on October 1, 2017, and mature on September 30, 2019. Kimmel’s operating cycle is less than one year.

Using the net method, how should Kimmel account for the sales discounts at the date of sale? What is the rationale for the amount recorded as sales under the net method?Using the net method, what is the effect on Kimmel’s sales revenues and net income when customers do not take the sales discounts?What is the effect of trade discounts on sales revenues and accounts receivable? Why?

How should Kimmel account for the accounts receivable factored on August 1, 2017? Why?

How should Kimmel account for the note receivable and the related interest on December 31, 2017? Why?

Question 8

From inception of operations to December 31, 2017, Buffalo Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Buffalo’s usual credit terms are net 30 days.

The balance in Allowance for Doubtful Accounts was $147,300 at January 1, 2017. During 2017, credit sales totaled $9,061,900, the provision for doubtful accounts was determined to be $181,238, $90,619 of bad debts were written off, and recoveries of accounts previously written off amounted to $16,980. Buffalo installed a computer system in November 2017, and an aging of accounts receivable was prepared for the first time as of December 31, 2017. A summary of the aging is as follows.

Classification by
Month of Sale

 

Balance in
Each Category

 

Estimated %
Uncollectible

November–December 2017

 

$1,265,100

   

2%

July–October

 

677,000

   

10%

January–June

 

421,600

   

24%

Prior to 1/1/17

 

157,300

   

74%

   

$2,521,000

     


Based on the review of collectibility of the account balances in the “prior to 1/1/17” aging category, additional receivables totaling $61,300 were written off as of December 31, 2017. The 74% uncollectible estimate applies to the remaining $96,000 in the category. Effective with the year ended December 31, 2017, Buffalo adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2017. Show supporting computations in good form. (Hint: In computing the 12/31/17 allowance, subtract the $61,300 write-off.)

BUFFALO CORPORATION
Analysis of Changes in the
Allowance for Doubtful Accounts
For the Year Ended December 31, 2017

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