takehomequiztwofall2009solution

takehomequiztwofall2009solution - Name Take Home Quiz Two...

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Name________________________ Take Home Quiz Two Fall 2009 PROBLEM 1 (1 point) The trial balance before adjustment of Feister Company reports the following balances: Dr. Cr. Accounts receivable $750,000 Allowance for doubtful accounts 10,500 Sales (all on credit) 775,000 Sales returns and allowances 55,000 Sales discounts 27,550 Part A (a) Assume that the allowance is to provide for doubtful accounts on the basis of 3.5% of gross accounts receivable. What is the journal entry for estimated bad debt? Bad Debt Exp. 15,750 Allowance for doubtful accounts 15,750 Ending Balance in Allowance for doubtful account = 750,000*3.5%=26,250 *Bad Debt Exp. = 26,250-10,500= 15,750 (b) Assume that the allowance is to provide for doubtful accounts on the basis of 5.5% of net sales. What is the journal entry for estimated bad debt? Bad Debt Exp. 38,085 Allowance for doubtful accounts 38,085 (775,000-55,000-27,550)*5.5%=$38,085 Part B (a) Giant received a 4-year, $250,000 4 percent interest-bearing note. The market rate of interest for a note of similar risk is 5 percent. How does Giant record the receipt of the note? Note Receivable 250,000 Discount on Note Receivable 8,865 Cash 241,135 (b) Prepare the amortization schedule using the effective interest method for the scheduled interest payments.
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Cash Received 5% Interest Revenue Amortized Discount Carrying Value Date of Issue 241,135 End of year 1 10,000 12,057 2,057 243,192 End of year 2 10,000 12,160 2,160 245,352 End of year 3 10,000 12,268 2,268 247,620 End of year 4 10,000 12,381 2,381 250,000 PROBLEM 2 (2 points): The comparative balance sheets for Isaac Corporation show the following information.
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