ACCT+2101+Quiz+3+V2+SOLUTION

ACCT+2101+Quiz+3+V2+SOLUTION - ACCT 2101 Quiz #3 —...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Background image of page 9
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ACCT 2101 Quiz #3 — Version 2 Solution Spring Semester, 2009 Case! PM» Section Name Kent M WM. 5 mag/4,. 6. (please print clearly Pledge: On my honor, I have neither given nor received any unauthorized help on this quiz. (signed) Instructions: 1. You may not ask questions during the quiz. However, all notes you write to the instructor will be read and considered during the grading process. 2. This quiz is comprised of numerous SHORT problems and questions. Please use your time wisely. Remember: Perfect answers are not required to get most of the points. Only the approved calculators may be used during the quiz. You must write legibly or your answers will not be graded. PLEASE SHOW YOUR WORK TO RECEIVE ANY PARTIAL CREDITEI Do NOT pull this quiz apart under any circumstances. Make sure you have 8 numbered pages including the cover sheet. Good luck! .U‘F‘P’ 90>]? Point Allocation: Problem 1: 2.0 Problem 2: 1.5 Problem 3: 2.0 Problem 4: 2.0 Problem 5: 1.5 Problem 6: fl TOTAL POINTS = Q points ..... .. ow” Vargibm QM N aim glam / } ACCTZIOI éuiz 3-2 Mg“; 1 0f9 x... ........... W PROBLEM 1. The Smith Company had the following information: 1. On May 31, Smith showed a balance in its Cash account of $3,891. On June 2, Smith received its bank statement for the month ended May 31, which showed an ending balance of $5,252. 2. A comparison on the company’s records with the bank statement showed that the $552 receipts of May 31 were included in Cash but not included as a deposit on the bank statement. This deposit was in the bank’s night deposit chute on May 31. 3. A comparison of checks issued with checks that had cleared the bank showed three checks outstanding: No. 9544 $322 No. 9545 368 No. 9546 223 4. Included with the bank statement was a credit memo for $1,325 (principal of $1,300 plus interest of $25) for collection of a note owed to Smith by Shipley Company. 5. Included with the bank statement was a $302 debit memo for an NSF check from the Johnson Company as payment on their account. 6. Charges made to Smith’s account include $23 for bank service charges. REQUIRED: (a) Prepare a bank reconciliation as of May 31. Be sure to label every item. Use the next page for your solution to this part. (b) Prepare an adjusting entry to bring the Cash account to its proper balance. Use the bottom of this page for you solution to this part. b) Journal Entry: (may be one combined entry) Cash 1,325 Notes Receivable 1,300 Interest Revenue 25 To record collection of note plus interest. \ g Accounts Receivable 302 Cash 302 To reinstate account as a result of N SP Check. Bank Service Expense 23 Cash 23 To recognize bank service charges. w... ACCT 2101 Quiz 3—2 2 of9 PROBLEM I SOLUTION HERE. (a) Bank Reconciliation as of May 31: BANK SIDE: Balance per bank statement Add: Deposits in Transit Deduct: Outstanding Checks Adjusted Cash Balance BOOK SIDE: Balance per books Add: Note collected Deduct: Debit memo for NSF check Bank service charge Adjusted Cash Balance ACCT 2101 Quiz 3-2 $5,252 + 552 I \O 1...; (,0 $3,891 + 1,325 — 302 ~ 23 §4g891 a... 3 of9 PROBLEM 2. Required: Fill in the blanks with the missing information for the Turner Company. The company uses a calendar year—end. Answer Gross sales $ 316,000 Sales discounts 10,000 Sales returns and allowances 30,000 Net sales 276,000 Merchandise inventory, January 1 24,000 Purchases 187,000 Purchase discounts 13,000 Purchase returns and allowances 18,000 Net purchases 156,000 Transportation—in 10,000 Net cost of purchases 166,000 Cost of goods available for sale 190,000 Merchandise inventory, December 31 31,000 Cost of goods sold 159,000 Gross margin 117,000 CW 3 ELLIQ/l/x all Maude r” {\IC} Pas?" “Hal (Am ‘3 a: {up ACCTZIOI Quiz 3-2 40f9 PROBLEM 3. The accounts of Stackhouse Company as of December 31, 2008, show: Accounts Receivable $ 490,000 Allowance for Uncollectible Accts 3,950 (CR) Sales 1,920,000 Sales Returns & Allowances 152,000 REQUIRED: 1. Prepare the journal entries necessary to adjust for bad debts on December 31, 2008, under each of the following assumptions: (a) Uncollectible accounts are estimated at 2% of net sales. (b) Uncollectible accounts are estimated at 5% of accounts receivable. 2. On March 1, 2009, Stackhouse wrote off the $800 account of one of their customers, Fuller Company. Record the necessary journal entry. 3. On May 15, 2009, Stackhouse receive a check in the amount of $300 from the Fuller Company in settlement of their account. The check cleared our bank account. Record the necessary journal entries. ACCTZIOI Quiz 3-2 50f9 PROBLEM 3 SOLUTION. 1. (a) (b) 3. (a) (b) Bad Debts Expense Allowance for Uncollectible Accounts [(1,920,000 ~ 152,000) * 2% = 35,360] Bad Debts Expense Allowance for Uncollectible Accounts [(490,000 * 5%) — 3,950 = 20,550] Allowance for Uncollectible Accounts Accounts Receivable — Fuller Company To record write—o]? of bad debt. Accounts Receivable — Fuller Company Allowance for Uncollectible Accounts To record partial recovery of bad debt. Cash Accounts Receivable —~ Fuller Company To record collection of account. ACCTZIOI Quiz 3—2 35,360 20,550 800 300 300 35,360 20,550 800 300 300 6 0f9 PROBLEM 4. Crawford Company gave a $400,000, 95-day, 15% note to Dunston Company in settlement of their Account Receivable owed to Dunston. Record the journal entries for both parties for: (1) The issuance of the note. (2) The maturity date assuming payment is made. DUNSTON COMPANY (LENDER): (1) Notes Receivable — Crawford Company 400,000 ( 3 Accounts Receivable —~ Crawford Company 400,000 5 ' To record settlement of account receivable with note. (2) Cash 415,616 8 Notes Receivable — Crawford Company 400,000 fl Interest Revenue 15,616 [Interest Revenue: 400,000 * 15% * 95/365 = $15,616] ‘ To record collection of note receivable at maturity. CRAWFORD COMPANY (BORROWER): (1) Accounts Payable — Dunston Company 400,000 . 35 Notes Payable — Dunston Company 400,000 To record settlement of account payable with note. (2) Notes Payable — Dunston Company 400,000 Interest Expense 15,616 ' Cash 415,616 /) [Interest Expense: 400,000 * 15% * 95/365 = $15,616] To record payment of note payable at maturity. ACCT210] Quiz 3—2 70f9 PROBLEM 5. The following information is available from the annual reports of the Green and Blue Companies. Green Blue Sales $256,000 $325,000 Beginning receivables, net 27,000 55,500 Ending receivables, net 38,500 63,400 Required: (a) Based on the preceding information, compute the following for each company: 1. Accounts receivable turnover 2. Days to collect accounts receivable (b) What conclusion concerning the management of accounts receivable can be drawn from your computations? (a) (1) Accounts receivable turnover: Green: $256,000 / [($27,000+$38,500) / 2] = $256,000/ $32,750 = 7.82 times g ‘5 Blue: $325,000/ [($55,500+$63,400) /2] = $325,000/$59,450 = 5.46 times i ‘3 (2) Days outstanding: H Green: 365 days / 7.82 times 2 46.7 days ‘fi Blue: 365 days/5.46 times = 66.8 days if 6’3? '3’? (b) Possible conclusions: (1) It appears that Blue has a slower turnover of accounts * - receivable than Green which can be very costly. (2) Green seems to be managing 3 their accounts receivable much better than Blue. Améji’himfi PQ&%OV(%EE§” 3-23,,” Pilgrim Cg”) marvel at be mdeeagyi“&bia. ACCT 2101 Quiz 3-2 8 of9 PROBLEM 6. ANSWER ALL QUESTIONS IN COMPLETE SENTENCES. (a) (b) i 3 W ((1) PM? Q (‘5 €49»th ACCT2101 Quiz 3~2 Define the term merchandise in transit. If the shipping terms are “FOB shipping,” which company (buyer or seller) should include the inventory in their physical count? Merchandise in transit is merchandise in the hands of the transit company at the date of a physical inventory. (That is, the inventory is between the seller and buyer at the date that the inventory is counted.) FOB shipping means that the transfer of title occurs when the goods are shipped by the seller. Therefore, merchandise in transit would belong to the buyer and should be included in the buyer’s physical count. Identify one advantage and one disadvantage of the FIFO inventory costing method. Possible advantages include: 0 Easy to apply. 0 Less ability to manipulate income. - Assumed cost flow often matches normal physical flow. 0 Balance sheet amount for inventory will be close to market value. Possible disadvantages include: 0 Recognition of "paper" profits since inventory will have to be replaced at higher prices. 0 Heavier tax burden in periods of inflation. Identify two ways that companies can return excess cash to their shareholders. Two ways that companies can return excess cash to their shareholders are (1) the payment of cash dividends and (2) the repurchase of stock from, the shareholders. i» r . t . 3 Identify tymvp ways that companies can use their receivables to obtain financing. Possible ways to use receivables to obtain financing include: 0 Convert regular receivables to credit card sales. 0 Sell credit card sales to financial institution each day (example: Lowe’s). - Discounts notes receivable (sell at a discount). 0 Factor accounts receivable (sell to financial institutions at a substantial discount). 0 Assign notes receivable (pledging notes receivable as collateral). 90f9 ...
View Full Document

This note was uploaded on 02/08/2011 for the course ACCT 2101 taught by Professor Turner during the Spring '08 term at Georgia Institute of Technology.

Page1 / 9

ACCT+2101+Quiz+3+V2+SOLUTION - ACCT 2101 Quiz #3 —...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online