extra practice for chapter 9

extra practice for chapter 9 - 1 Question I: Accounts...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1
Background image of page 1

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

View Full DocumentRight Arrow Icon
Question I: Accounts Receivable and Notes Receivable (35 points) The following information applies to questions 1 and 2 ( 5 points) : Levitt Company sold supplies of $46,000 to Arthur Inc. on April 12, 2007 with credit terms 1/15, n/60. Levitt Company uses the net method of accounting for cash discounts. 1. What journal entry would Levitt Company make on April 12, 2007? Accounts receivable 45,540 Sales revenue 45,540 2. What journal entry would Levitt Company make on June 10, 2007, assuming the customer made the correct payment on that date? Cash 46,000 Accounts receivable 45,540 Sales Discount not taken (Interest revenue) 460 3. (6 points) At the beginning of 2004, Donaldson Co. had balances of $80,000 in accounts receivable and $12,000 in the allowance for uncollectible accounts. During 2004, Donaldson Co. has credit sales of $400,000, collections on accounts receivable of $360,000, and writeoffs of uncollectible accounts receivable of $20,000. The company uses the balance sheet method for the provision of bad debts and past experience indicates that 4% of the ending balance of accounts receivable will ultimately be uncollectible. What is the amount of bad debt expense for the year 2004? AR: 80,000 + 400,000 (1 pt) – 360,000 (1 pt) – 20,000 (1 pt) = 100,000 X 4% (1 pt) = 4000 Allowance before provision: 12,000 – 20,000 (1 pt) = 8000 DR balance, so aje is 12,000 (1 pt) $12,000 2
Background image of page 2
Question I (continued) 4. (9 points) On December 31, 2007, Pink, Inc. finished consultation services and accepted in exchange a promissory note with a face value of $200,000, a due date of December 31, 2010, and a stated rate of 3%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 6%. (a) Prepare the journal entry made by Pink, Inc. on 12/31/07 to record this transaction. NR ( 1/2 pt.) 200,000 ( 1/2 pt.) Discount ( 1/2 pt.) 16,042 ( 1/2 pt.) Sales ( 1/2 pt.) 183,958 ( 1/2 pt.) PV factor Face 200,00 0 0.8396 167,92 0 Cash payments 6,00 0 2.673 16,03 8 183,95 8 (b) Prepare relevant journal entry by Pink, Inc. to record interest for the year ended 12/31/08. Discount ( 1/2 pt.) 5,037 ( 1/2 pt.) Cash ( 1/2 pt.) 6,000 ( 1/2 pt.) Interest Rev ( 1/2 pt.) 11,037 ( 1/2 pt.) Cash Effective Interest Int Rev Carrying Date ( 3% ) (6% ) Disc. Amort. Amt NR 12/31/2007 183,95 8 12/31/2008 6,00 0 11,03 7 5,0 37 188,99 5 12/31/2009 6,00 0 11,34 0 5,3 40 194,33 5 12/31/2010 6,00 0 11,66 5 5,6 65 200,00 0 18,00 0 34,04 2 16,04 2 3
Background image of page 3

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

View Full DocumentRight Arrow Icon
(c) Prepare the relevant journal entries by Pink, Inc. for the note in 2010 (assume that the note was repaid on 12/31/10). Discount
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/30/2011 for the course ACC 101 taught by Professor B during the Spring '09 term at CUNY Baruch.

Page1 / 16

extra practice for chapter 9 - 1 Question I: Accounts...

This preview shows document pages 1 - 5. Sign up to view the full document.

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