Chap007.xls
16
Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-01 SWATHMORE CLOTHING CORPORATION General Journal Account Debit Credit Requirement 1: Monthly bad debt expense accrual summary. Bad Debt Expense 78,600 Allowance for uncollectible accounts 78,600 «- Correct! To record year 2011 accounts receivable write-offs. Allowance for uncollectible accounts 68,000 Accounts receivable 68,000 «- Correct! Requirement 2: Account Debit Credit Bad debt expense 4,300 Allowance for uncollectible accounts 4,300 «- Correct! Summary Age Group Percent Estimated 0-60 days Amount Uncollectible Allowance 61-90 days $ 430,000 4% $ 17,200 91-120 days 98,000 15% 14,700 Over 120 days 60,000 25% 15,000 Totals 55,000 40% 22,000 $ 643,000 $ 68,900 Correct! Correct! Allowance for uncollectible accounts analysis: Beginning balance $ 54,000 Add: Monthly bad debt accruals 78,600 Deduct: Write-offs (68,000) Balance before adjustments 64,600 Required allowance 68,900 Required year-end increase in $ 4,300 allowance Correct! Requirement 3: Bad debt expense for 2011: Monthly accruals $ 78,600 Year-end adjustment 4,300 Total $ 82,900
Transcript of Chap007.xls
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-01
SWATHMORE CLOTHING CORPORATIONGeneral Journal
Account Debit CreditRequirement 1:Monthly bad debt expense accrual summary.Bad Debt Expense 78,600 Allowance for uncollectible accounts 78,600 «- Correct!
To record year 2011 accounts receivable write-offs.Allowance for uncollectible accounts 68,000 Accounts receivable 68,000 «- Correct!
Requirement 2:Account Debit CreditBad debt expense 4,300 Allowance for uncollectible accounts 4,300 «- Correct!
Summary
Age Group Percent Estimated0-60 days Amount Uncollectible Allowance
61-90 days $ 430,000 4% $ 17,200 91-120 days 98,000 15% 14,700
Over 120 days 60,000 25% 15,000 Totals 55,000 40% 22,000
$ 643,000 $ 68,900 Correct! Correct!
Allowance for uncollectible accounts analysis: Beginning balance $ 54,000 Add: Monthly bad debt accruals 78,600 Deduct: Write-offs (68,000) Balance before adjustments 64,600 Required allowance 68,900 Required year-end increase in $ 4,300 allowance Correct!
Requirement 3:Bad debt expense for 2011:
Monthly accruals $ 78,600 Year-end adjustment 4,300 Total $ 82,900
D11
Enter appropriate data in yellow cells. Your Debit entries will be verified.
C29
Enter appropriate data in yellow cells. Your entries for Totals will be verified.
D37
Enter appropriate data in yellow cells. Your entry for "Bad debt expense adjustment" will be verified.
Correct!
SWATHMORE CLOTHING CORPORATIONBalance Sheet
Current Assets:Accounts Receivable, net of allowance for uncollectible accounts $ 574,100
Correct!
Given Data P07-01:
SWATHMORE CLOTHING CORPORATION
Accounts Receivable, 12/31/10 $ 574,000 Allowance for uncollectibles, 12/31/10 54,000 Credit sales, year 2011 2,620,000 Collections, year 2011 (2,483,000)Write-offs, year 2011 (68,000)Ending A/R balance at 12/31/11 $ 643,000
A/R aging at 12/31/2009:
PercentageAge Group Amount Uncollectible0-60 days $ 430,000 4%
61-91 days $ 98,000 15%91-120 days $ 60,000 25%
Over 120 days $ 55,000 40% Total $ 643,000
Bad debt estimate (percentage of 3% credit sales)
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-04
RAINTREE COSMETIC COMPANYGeneral Journal
Account Debit CreditRequirement 1:To record accounts receivable written off during the year 2011:Allowance for uncollectible accounts 35,000 Accounts receivable 35,000 «- Correct!
To record collection of account receivable previously written off:Accounts receivable 3,000 Allowance for uncollectible accounts 3,000 «- Correct!
Cash 3,000 Accounts receivable 3,000 «- Correct!
Requirement 2(a):Account Debit CreditBad debt expense 52,500 Allowance for uncollectible accounts 52,500 «- Correct!
Requirement 2(b):Accounts receivable analysis: Beginning balance $ 462,000 Add: Credit sales 1,750,000 Less: Write-offs (35,000) Less: Cash collections (1,830,000) Ending balance $ 347,000
Required allowance for uncollectible $ 34,700 accounts Correct!
Allowance for uncollectible accounts analysis: Beginning balance $ 30,000 Add: Collection of receivable 3,000 previously written off Less: Write-offs (35,000) Balance before adjustments (2,000) Required allowance 34,700 Bad debt expense adjustment $ 36,700
Correct!
Account Debit CreditBad debt expense 36,700
D11
Enter appropriate data in yellow cells. Your Debit entries will be verified.
D30
Enter appropriate data in yellow cells. Your entries for "Required allowance for uncollectible accounts" and "Bad debt expense adjustment" will be verified.
D50
Enter appropriate data in yellow cells. Your Debit entries will be verified.
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-04
Allowance for uncollectible accounts 36,700 «- Correct!
Requirement 2(c):RAINTREE COSMETIC COMPANY
Required Allowance
% of Year-end Percent EstimatedAge Group Receivables Amount Uncollectible Allowance0-60 days 65% $ 225,550 4% $ 9,022
61-90 days 20% 69,400 15% 10,410 91-120 days 10% 34,700 25% 8,675
Over 120 days 5% 17,350 40% 6,940 Totals $ 347,000 $ 35,047
Correct! Correct!
Allowance for uncollectible accounts analysis: Beginning balance $ 30,000 Add: Collection of receivable 3,000 previously written off Less: Write-offs (35,000) Balance before adjustments (2,000) Required allowance 35,047 Bad debt expense adjustment $ 37,047
Correct!
Account Debit CreditBad debt expense 37,047 Allowance for uncollectible accounts 37,047 «- Correct!
Requirement 3:RAINTREE COSMETIC COMPANY
Net Amount of Accounts Receivable
Accounts Year-end NetReceivable Allowance Amount
(a) $ 347,000 $ 50,500 $ 296,500 «- Correct!
(b) $ 347,000 $ 34,700 $ 312,300 «- Correct!
(c) $ 347,000 $ 35,047 $ 311,953 «- Correct!
D60
Enter appropriate data in yellow cells. Your entries for Totals will be verified.
D68
Enter appropriate data in yellow cells. Your entry for "Bad debt expense adjustment" will be verified.
D78
Enter appropriate data in yellow cells. Your Debit entries will be verified.
C88
Enter appropriate data in yellow cells. Your entries for "Net Amount" will be verified.
Given Data P07-04:
RAINTREE COSMETIC COMPANY
Receivables, net of allowance $ 432,000 for uncollectible accounts, 12/31/10Allowance for uncollectibles, 12/31/10 30,000 Credit sales, year 2011 1,750,000 Cash collections, year 2011 1,830,000 A/R write-offs, year 2011 35,000 Cash collected in 2011 from prior year write off. 3,000
A/R aging at 12/31/2011% of Year-End
Receivables PercentAge Group in Group Uncollectible0-60 days 65% 4%
61-91 days 20% 15%91-120 days 10% 25%
Over 120 days 5% 40%
Bad debt estimate (percentage of 3% credit sales)Estimate of allowance for uncollectible 10% accounts
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-11
PROCEEDS RECEIVED
Note Face Date of Interest Date Discount ProceedsNote Value Note Rate Discounted Rate Received
1 $ 50,000 3/31/2011 8% 6/30/2011 10% $ 50,350 2 50,000 3/31/2011 8% 9/30/2011 10% 51,675 3 50,000 3/31/2011 8% 9/30/2011 12% 51,410 4 80,000 6/30/2011 6% 10/31/2011 10% 81,027 5 80,000 6/30/2011 6% 10/31/2011 12% 80,752 6 80,000 6/30/2011 6% 11/30/2011 10% 81,713
Note 1 $ 50,000 Face amount 3,000 Interest to maturity 53,000 Maturity value (2,650) Discount $ 50,350 Cash proceeds
Note 2 $ 50,000 Face amount 3,000 Interest to maturity 53,000 Maturity value (1,325) Discount $ 51,675 Cash proceeds
Note 3 $ 50,000 Face amount 3,000 Interest to maturity 53,000 Maturity value (1,590) Discount $ 51,410 Cash proceeds
Note 4 $ 80,000 Face amount 2,400 Interest to maturity 82,400 Maturity value (1,373) Discount $ 81,027 Cash proceeds
Note 5 $ 80,000 Face amount 2,400 Interest to maturity 82,400 Maturity value (1,648) Discount $ 80,752 Cash proceeds
Note 6 $ 80,000 Face amount 2,400 Interest to maturity 82,400 Maturity value (687) Discount $ 81,713 Cash proceeds
G9
Enter appropriate data in yellow cells. Your "Proceeds Received" entries will be verified. Calculations for each note are located below this table. NOTE: Amounts should be rounded to the nearest dollar.
PROCEEDS RECEIVED
«- Correct!
«- Correct!
«- Correct!
«- Correct!
«- Correct!
«- Correct!
Given P07-11:
PROCEEDS RECEIVED
Note Face Date of Interest Date DiscountNote Value Note Rate Discounted Rate
1 $ 50,000 3/31/2011 8% 6/30/2011 10%2 50,000 3/31/2011 8% 9/30/2011 10%3 50,000 3/31/2011 8% 9/30/2011 12%4 80,000 6/30/2011 6% 10/31/2011 10%5 80,000 6/30/2011 6% 10/31/2011 12%6 80,000 6/30/2011 6% 11/30/2011 10%
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-14
Requirement 1:EL GATO PAINTING COMPANY
Reconciliation
Step 1: Bank Balance to Corrected Balance
Balance per bank statement $ 3,851 Add: Deposits outstanding (1) 2,150 Deduct: Bank error - deposit incorrectly credited (1,300) to company account Outstanding checks (2) (831)Corrected cash balance $ 3,870 «- Correct!
Step 2: Book Balance to Corrected Balance
Balance per books $ 4,422 Deduct: Error in recording check #411. (90) Service charges (22) NSF checks (440)Corrected book balance $ 3,870 «- Correct!
(1) Receipts $ 42,650 Less: December receipts deposited: Bank deposits $ 43,000 Less: Deposit errors (1,300) Less: Prior months deposits outstanding (1,200) 40,500 Deposits outstanding, December 31 $ 2,150 «- Correct!
(2) December disbursements $ 41,853 Error in recording check #411. 90 Less: December checks cleared: Total checks cleared $ 41,918 Prior months checks: #363 $ 123 #380 56 #381 86 #382 340 605 (41,313) December checks outstanding $ 630 Add: check #365 201 Total checks outstanding, December 31 $ 831 «- Correct!
Requirement 2:
F11
Enter appropriate data in yellow cells. Your entry for "Corrected cash balance" will be verified. Calculations for "Deposits outstanding, Dec. 31" and "Total checks outstanding. Dec. 31" are located below Step 2, and will be verified.
F12
HINT: You must perform calculation (1) Receipts below in order to arrive at this number.
F16
HINT: You must perform calculation (2) below in order to arrive at this number.
To record credits to cash revealed by the bank reconciliationAdvertising expense 90 Miscellaneous expense (bank svc. charges) 22 Accounts receivable (NSF checks) 440 Cash 552 «- Correct!
D52
Enter appropriate data in yellow cells. Your Debit entries will be verified.
Given Data P07-14:
EL GATO PAINTING COMPANY
Balance per bank, November 30 $ 3,231 Add: Deposits outstanding 1,200 Less: Checks outstanding #363 $ 123 #365 201 #380 56 #381 86 #382 340 (806)Adjusted balance per bank, November 30 $ 3,625
General ledger account:Balance, December 1 $ 3,625 Receipts 42,650 Disbursements (41,853)Balance, December 31 $ 4,422
December bank statement: Balance, December 1 $ 3,231 Deposits 43,000 Checks processed (41,918) Service charges (22) NSF checks (440) Balance, December 31 $ 3,851
Additional information: Check #411: Correct amount $ 320 Amount recorded in books $ 230 Deposit not recorded in books $ 1,300
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-15
ROTHSCHILD CHAIR COMPANY, INC.General Journal
Account Debit CreditRequirement 1:Land 16 «- Correct!Loss on debt restructuring 6 «- Correct! Note receivable Correct!-» 20 Accrued interest receivable Correct!-» 2
D10
Enter appropriate data in yellow cells. Your entries will be verified. Enter amounts in millions.
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-15
Requirement 2:ROTHSCHILD CHAIR COMPANY, INC.
Analysis
Previous Value: Accrued 2010 interest $ 2,000,000 Principal 20,000,000 Carrying amount of the receivable $ 22,000,000
New Value: Interest $ 3,169,870 Principal 10,245,150 Present value of the receivable (13,415,020) Loss: $ 8,584,980
Correct!
Amortization Schedule
Cash Effective Increase inInterest Interest Balance Outstanding
(by agreement) 10% (Disc. Reduction) Balance 13,415,020
1,000,000 1,341,502 341,502 13,756,522 1,000,000 1,375,652 375,652 14,132,174 1,000,000 1,413,217 413,217 14,545,391 1,000,000 1,454,609 454,609 15,000,000
4,000,000 5,584,980 1,584,980 Correct!
Correct! Correct! Correct!
ROTHSCHILD CHAIR COMPANY, INC.General Journal
Account Debit CreditJanuary 1, 2011Loss on troubled debt restructuring 8,584,980 «- Correct! Accrued interest receivable 2,000,000 Note receivable 6,584,980 December 31, 2011Cash 1,000,000 Note receivable 341,502 Interest revenue 1,341,502 «- Correct!December 31, 2012Cash 1,000,000 Note receivable 375,652 Interest revenue 1,375,652 «- Correct!December 31, 2013Cash 1,000,000 Note receivable 413,217 Interest revenue 1,413,217 «- Correct!December 31, 2014Cash 1,000,000 Note receivable 454,609 Interest revenue 1,454,609 «- Correct!
Cash 15,000,000
D21
Enter appropriate data in yellow cells. Your answer for "Loss:" will be verified.
D37
Enter appropriate data in yellow cells. Use the entries for Effective Interest to complete the General Journal below.
B38
Round the effective interest entries to the nearest integer.
B41
This entry is rounded to amortize the note to $15,000,000.
D50
Enter appropriate data in yellow cells. Your entries will be verified.
E68
This entry is rounded to amortize the note to $15,000,000.
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-15
Note receivable 15,000,000 «- Correct!
Student Name: InstructorClass: McGraw-Hill/Irwin
Problem 07-15
Requirement 3:ROTHSCHILD CHAIR COMPANY, INC.
Analysis
Previous Value: Accrued interest $ 2,000,000 Principal 20,000,000 Carrying amount of the receivable $ 22,000,000
New Value: Interest (18,970,603) Loss: $ 3,029,397
Correct!
Amortization Schedule
Cash Effective Increase inInterest Interest Balance Outstanding
(by agreement) 10% (Discount Reduction) Balance 18,970,603
- 1,897,060 1,897,060 20,867,663 - 2,086,766 2,086,766 22,954,429 - 2,295,443 2,295,443 25,249,872 - 2,525,128 2,525,128 27,775,000
- 8,804,397 8,804,397 Correct!
Correct! Correct! Correct!
ROTHSCHILD CHAIR COMPANY, INC.General Journal
Account Debit CreditJanuary 1, 2011Loss on troubled debt restructuring 3,029,397 Accrued interest receivable 2,000,000 Note receivable 1,029,397 «- Correct!December 31, 2011Note receivable 1,897,060 Interest revenue 1,897,060 «- Correct!December 31, 2012Note receivable 2,086,766 Interest revenue 2,086,766 «- Correct!December 31, 2013Note receivable 2,295,443 Interest revenue 2,295,443 «- Correct!December 31, 2014Note receivable 2,525,128 Interest revenue 2,525,128 «- Correct!
Cash 27,775,000 Note receivable 27,775,000 «- Correct!
E79
Enter appropriate data in yellow cells. Your answer for "Loss:" will be verified.
D93
Enter appropriate data in yellow cells. Use the entries for Effective Interest to complete the General Journal below.
B94
Round the effective interest entries to the nearest integer.
B97
This entry is rounded to amortize the note to $27,775,000.
E120
This entry is rounded to amortize the note to $27,775,000.
Given Data P07-15:
ROTHSCHILD CHAIR COMPANY, INC.
Bank note $ 20,000,000 Bank note interest 10%Fair market value of land $ 16,000,000 Book value of land 13,000,000 Remaining 4 interest payments 1,000,000 Principal reduced to 15,000,000 Settlement of debt at maturity date 27,775,000
