B_Series_SolutionsChap8

# B_Series_SolutionsChap8 - SOLUTIONS TO EXERCISES SERIES B...

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SOLUTIONS TO EXERCISES - SERIES B - CHAPTER 8 EXERCISE 8-1B a. and c. Hughes Dry Cleaning T-Accounts Assets = Liabilities + Stockholders’ Equity Cash Retained Earnings 2003  2003 2. 8,000 cl 100  cl 10,000 Bal. 8,000  Bal. 9,900 2004 3. 10,000 Service Revenue Bal. 18,000  2003 cl 10,000   1. 10,000 Accounts Receivable  Bal. -0- 2003  2004 1. 10,000   2. 8,000  2. 12,000 Bal. 2,000  Bal. 12,000 2004 2. 12,000   1. 80 Bad Debts Expense   3. 10,000 2003 Bal. 3,920 3. 100  cl 100 Bal. -0- Allow. For Doubt. Accts. 2004  2003 4. 120   3. 100 1 Bal. 120  Bal. 100  2004 8 - 61

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1. 80   4. 120 2  Bal. 140 1 \$10,000 x 1% = \$100 2 \$12,000 x 1% = \$120 Year 2004 closing entries are not shown.  They are not needed to answer the  questions 8 - 62
EXERCISE 8-1B (cont.) b. (1)Net Income for 2003: \$9,900 (\$10,000  -  \$100) c.  Net Cash Flow from Operating Activities: \$8,000 d. Balance of Accounts Receivable, 12/31/2003: \$2,000 e.  Net Realizable Value of Accounts Receivable, 12/31/2003:\$1,900  (\$2,000  -  \$100) c.  (1)Net Income for 2004: \$11,880 (\$12,000  -  \$120) d.  Net Cash Flow from Operating Activities: \$10,000 e.  Balance of Accounts Receivable, 12/31/2004: \$3,920 f.  Net Realizable Value of Accounts Receivable, 12/31/2004: \$3,780 (\$3,920  -  \$140) 8 - 63

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EXERCISE 8-2B Event Assets = Liab. + Stk. Equity Rev. Exp. = Net Inc. Cash Flow Ret. Earn. 1. + NA + + NA + NA 2. +/ - NA NA NA NA NA +   OA 3. - NA - NA + - NA 4. +/ - NA NA NA NA NA NA
EXERCISE 8-3B a.  Analyze the Accounts Receivable account: Accounts Receivable Beginning Balance \$ 1,500 Plus: Revenue on Account  7,000 Less: Write-off (80) Less: Ending Balance (2,000) Collections of Accounts Rec. \$ 6,420 b.  Analyze the Allowance for Doubtful Accounts account: Allowance for Doubtful Accounts Beginning Balance \$150 Less: Write-off (80) Less: Ending Balance (175) Bad Debts Expense \$105 Note to Instructor:  This information can also be shown in T-Account  format.

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EXERCISE 8-4B Selected T-Accounts: Cash Allowance for Doubt Acct. Sales Revenue 2008 12/31/07 2008 2b. 900 Bal. 3,000 3. 200,000 4. 190,000 2008 1. 3,500 2a. 900 Accounts Receivable 5. 4,000 Bad Debts Expense 12/31/07 Bal. 4,400 2008 Bal. 80,000 5. 4,000 2008 2a.  900 1. 3,500 3. 200,000 2b. 900 4. 190,000 Bal. 86,500 2008 transactions: 1. Bad accounts written off: \$3,500 2a. Reinstated previously written-off accounts: 900 2b. Collected reinstated accounts: 900 3. Sales on account: 200,000 4.  Collections of accounts receivable: 190,000 5.  Bad Debts Expense (200,000 x 2%): 4,000 a. (1) Allowance for Doubtful Accounts, 12/31/08: \$  4,400 (2) Accounts Receivable, 12/31/08: 86,500 (3) Net Realizable Value (\$86,500 – \$4,400): 82,100
b. Bad Debts Expense 2008 (\$200,000 x 2%): \$4,000 c. The recovery of the previously written off accounts will not affect  the income statement.  The transaction is an asset exchange  transaction.  The income statement is only affected when bad  debts expense is recognized.

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EXERCISE 8-5B Accounts Receivable Allowance for Doubt. Accts.  Sales 300,000 Coll. 260,000 Chg. Off 250 Est.
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