chap 8.docx - Short Exercises S8-1 The companys credit...

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Short Exercises S8-1 The company’s credit department should not take customer payments or have any other cash- handling responsibilities. For example, if a credit department employee also handles cash, the company would have no separation of duties. The employee could pocket money received from a customer. He or she could then label the customer’s account as uncollectible, and the company would stop billing that customer. The employee may be able to cover his or her theft.
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S8-2 Requirement 1 Date Accounts and Explanation Debit Credit Jan. 28 Cash 20,384 Credit Card Expense ($20,800 × 0.02) 416 Sales Revenue 20,800 Recorded credit card sales, net of fee. Requirement 2 Date Accounts and Explanation Debit Credit Jan. 28 Cash 20,800 Sales Revenue ($10,800 + $10,000) 20,800 Recorded credit card sales. S8-3 Requirement 1 Date Accounts and Explanation Debit Credit Feb. 29 Bad Debts Expense 1,050 Accounts Receivable 1,050 Wrote off uncollectible accounts. Requirement 2 Accounts Receivable Jan 31 Bal 18,000 23,000 collected revenue 21,000 1,050 wrote off Bal 14,950
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S8-4 Date Accounts and Explanation Debit Credit 2016 Jun. 19 Bad Debts Expense 700 Accounts Receivable—Brown 700 Wrote off receivable. Dec. 31 Accounts Receivable—Brown 700 Bad Debts Expense 700 Reinstated previously written off account. 31 Cash 700 Accounts Receivable—Brown 700 Collected cash on account. S8-5 Requirement 1 Date Accounts and Explanation Debit Credit 2016 a. Accounts Receivable 265,800 Sales Revenue 265,800 b. Cash 220,000 Accounts Receivable 220,000 c. Allowance for Bad Debts 6,100 Accounts Receivable 6,100 d. Bad Debts Expense 5,000 Allowance for Bad Debts 5,000
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S8-5, cont. Requirement 2 Requirement 3 TURNING LEAVES FURNITURE RESTORATION Balance Sheet−Partial December 31, 2016 Assets Current Assets: Accounts Receivable $ 50,500 Less: Allowance for Bad Debts (900) $ 49,600 S8-6 Requirement 1 Date Accounts and Explanation Debit Credit 2016 Dec. 31 Bad Debts Expense ($314,000 × 4%) 12,560 Allowance for Bad Debts 12,560 Recorded bad debts expense for the period. Accounts Receivable 12/31/15, Bal 10,800 220,000 collected revenue 265,800 6,100 wrote off 12/31/16, Bal 50,500 Allowance for Bad Debts 2,000 12/31/15, Bal wrote off 6,100 5,000 expense 900 12/31/16, Bal Bad Debts Expense expense 5,000 Bal 5,000
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S8-6, cont. Requirement 2 SIGNATURE LAMP COMPANY Balance Sheet−Partial December 31, 2016 Assets Current Assets: Accounts Receivable $ 45,000 Less: Allowance for Bad Debts (12,560) $ 32,440 S8-7 Requirement 1 Date Accounts and Explanation Debit Credit 2016 Dec. 31 Bad Debts Expense 3,704 Allowance for Bad Debts 3,704 ($150,100 × 4% = $6,004; $6,004 – $2,300 = $3,704) Requirement 2 Date Accounts and Explanation Debit Credit 2016 Dec. 31 Bad Debts Expense 7,904 Allowance for Bad Debts 7,904 ($150,100 × 4% = $6,004; $6,004 + $1,900 = $7,904) Accounts Receivable 12/31/15, Bal 25,000 326,000 collected revenue 457,000 5,900 wrote off 12/31/16, Bal 150,100
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S8-8 Requirement 1 Age of Accounts Receivable 0 – 60 Days Over 60 Days Total Receivables Accounts Receivable $73,000 $5,000 $78,000 Percent uncollectible × 2% × 24% Estimated total uncollectible $1,460 $1,200 $2,660 (Target Balance) Date Accounts and Explanation Debit Credit 2016 Dec. 31 Bad Debts Expense 1,600 Allowance for Bad Debts 1,600 ($2,660 – $1,060 = $1,600) Requirement 2 S8-9 Principal Interest Rate Interest Period Interest Revenue Earned Note 1 $ 30,000 × 0.04 × 3/12 = $ 300 Note 2 8,000 × 0.05 × 180/360 = 200 Note 3 28,000 × 0.12 × 90/360 = 840 Note 4
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