Cash_Receivables_Practice_Problem_1_with_Solution

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ACCT 301 Cash & Receivables Practice Problem #1 with Solution Question 1 On December 1, 2004, Craun, Inc. loaned $273,000 cash to another company and received a non- interest bearing note with a face value of $300,000 due on August 1, 2005. A. Record the transaction on December 1, 2004. B. Record any necessary adjusting entry on December 31, 2004. C. Record the collection on August 1, 2005 and any other necessary journal entries. Question 2 Craun, Inc. has the following information for 2004: Accounts Receivable, 1/1 04 $ 5,760,000 Allowance for Uncollectibles, 1/1/04 $ 171,000 Credit Sales Revenue, 2004 $24,000,000 Collections, 2004 $22,000,000 Write-offs of Accounts Receivable, 2004 $ 700,000 A. Assume that Uncollectible Accounts (Bad Debt) Expense is estimated at 3.3% of credit sales. 1. Record Uncollectible Accounts Expense for 2004. 2. What should be the balance in the Allowance for Uncollectibles on the 12/31/04 balance sheet? B. Assume that uncollectible accounts are estimated to be 3.6% of ending accounts receivable.
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Unformatted text preview: 1. Record Uncollectible Accounts Expense for 2004. 2. What should be the balance in the Allowance for Uncollectibles on the 12/31/04 balance sheet? Q1.A Notes Receivable $300,000 Discount on Notes Receivable $ 27,000 Cash $273,000 Q1.B Discount on Notes Receivable $3,375 = $27,000 * 1/8 Interest Revenue $3,375 Q1.C Discount on Note Receivable $23,625 = $27,000 * 7/8 Interest Revenue $23,625 Cash $300,000 Notes Receivable $300,000 Q2A.1. Uncollectible Accounts Expense $792,000 = $2,400,000 * 3.3% Q3.A.2 Allowance for Uncollectibles Allowance for Uncollectibles $792,000 | $171,000 $700,000 | $792,000 Q2.B.1 Uncollectible Accounts Expense $783,160 | $263,000 Allowance for Uncollectibles $783,160 Accounts Receivable Allowance for Uncollecibles $ 5,760,000 | $ 700,000 | $171,000 $24,000,000 | $22,000,000 $700,000 | $ 783,160 $ 7,060,000 | $ 254,160 = $7,060,000 * 3.6% = Q3.B.2...
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