Case Cash and Receivables free essay sample

Instructions 1. Prepare the journal entries required to establish the petty cash fund. 2. Prepare in general journal form the entry to replenish the fund. 3. On December 31, the office manager gives instructions to increase the petty cash fund by $100. Make the appropriate journal entry. 2. Bank Reconciliation (25 min. ) Reebles Food Store developed the following information in recording its bank statement for the month of March. Balance per books March 31 $ 2,905 Balance per bank statement March 31 $10,900 ————————————————————————————————————— (1) Checks written in March but still outstanding $7,000. (2) Checks written in February but still outstanding $2,800. (3) Deposits of March 30 and 31 not yet recorded by bank $5,200. (4) NSF check of customer returned by bank $1,200. (5) Check No. 210 for $594 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as payment on account for $549. (6) Bank service charge for March was $50. (7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable subsidiary ledger for $824 when Check No. We will write a custom essay sample on Case Cash and Receivables or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 318 was correctly prepared for $284. The check cleared the bank in March. (8) The bank collected a note receivable for the company for $4,000 plus $150 interest revenue. Instructions (a) Prepare a bank reconciliation for Reebles Food Store at March 31. (b) Prepare any adjusting entries necessary as a result of the bank reconciliation. 3. Sales Gross and Net ( 10 Min) On January 4, Mary company sold to Andry Company merchandise at a sales price of $ 6,000 with terms of 2/10, n/30, f. o. b shipping point. An invoice totaling $45 was received by Andry on January 10 from John Transport Service for the freight cost. On January 12, the company received a check for the balance due from Andry Company. (A) Prepare journal entries on the Mary Company Books to record all the events noted above under: (1) Sales and receivables are entered at gross selling price (2) Sales and receivables are entered at net of cash discounts (B) Prepare journal entry under the â€Å"net of cash discounts† basis, assuming that Andry Company did not remit payment until February 2. 4. Bad Debt Reporting ( 25 Min) From inceptions of operations to December 31, 2013, Tisdale Corporation provided for uncollectible accounts receivable under the allowance method : provisions were made monthly 6% of credit sales, bad debts written off were charged to allowance account, recoveries of bad debt previously written off were credited to allowance account. The balance in the Allowance for Doubtful Accounts was $100,000 at January 2013. During 2013, credit sales totaled $10,000,000, bad debts of $150,000 were written off, and recoveries of accounts previously written off amounted to $ 40,000. Tisdale installed a computer system in November 2013 and prepared an aging of accounts receivable for the first time as of December 31, 2013 as follows. Classification by month of sale Balance in each category Estimated % Uncollectible November-December 2013 $ 1,050,000 5% July-October 2013 $ 860,000 18% January-June 2013 $ 570,000 35% Prior to 1/1/2013 $ 230,000 80% Based on the review of collectability of the account balances in the â€Å"prior to 1/1/2013† aging category, additional receivables totaling $80,000 were written off as of December 31, 2013. Effective with the year ended December 31, 2013, Tisdale adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. Instructions (A) Prepare a schedule analyzing the changes in the Allowance for Doubtful Accounts for the year ended December 31, 2013. (B) Prepare the journal entry for the year-ended adjustment to the Allowance for Doubtful Accounts balance as of December 31, 2013 5. Notes Receivable ( 20 Min) Presented below is information from Supply Co. Jan 1 Sold goods to Tyler. Inc by accepting $ 25. 000, 1 year 6% note. The effective interest rate is 6% Jan 10 Sold goods to Grayson Co. by accepting 2 year $30. 000, zero interest bearing notes. The market interest rate is 10 %. Jan 15 Supply Co make loan to Tech Auto. Inc by accepting $ 50. 000, 3 year 10% note. The effective interest rate is 12% Jan 20 Sold Machine having fair value $ 900. 000 in exchange for 4 year zero interest bearing promissory note in the face amount $1. 416. 163. The land is carried on Rentoul’s book at cost of $ 590. 000 Instructions: Prepare the journal entries for the initial transaction and recognition of the interest for first year ! 6. Transfer Receivable ( 15 min) Below is independence situation. a) Anderson Co. factored $ 200. 000 of account receivable with Finman Factors Inc, without guarantee basis. Commercial assesses a fnance charge of 5 % and retains an amount equal to 4 % of account receivable. b) Adidas Co. factored $ 300. 000 of account receivable with Finman Factors Inc, with full guarantee for credit losses. Commercial assesses a fnance charge of 5 % and retains an amount equal to 4 % of account receivable. c) On November 1, 2013 Braxton Inc. assigns $ 2. 000. 000 of its account receivable to Wilton National Bank as collateral for a $ 1. 750. 000 note. The bank assesses a finance charge of 2 % of the receivables assigned and interest on the note of 10 %. Instructions Prepare the journal for the above situation for both company. Answers: TISDALE CORPORATION Analysis of Changes in the Allowance for Doubtful Accounts For the Year Ended December 31, 2013 Balance at January 1, 2013 $100,000 Provision for doubtful accounts ($ 10,000,000 X 6%) 600,000 Recovery of bad debts written off previously 40,000 Deduct write-offs for 2013 ($150,000 + $80,000) 230,000 Balance at December 31, 2013 before change in accounting estimate.. 510,000 Increase due to change in accounting estimate during 2013 (? 526,800 – ? 510,000).. 16,800 Balance at December 31, 2013 adjusted (Schedule 1) $526,800 Schedule 1 Computation of Allowance for Doubtful Accounts at December 31, 2010 Aging Category Balance %Uncollectible Doubtful Accounts Nov-Dec 2013 $ 1,050,000 5% $ 52,500 July-Oct 2013 $ 860,000 18% $ 154,800 Jan-Jun 2013 $ 570,000 35% $ 199,500 Prior to 1/1/2013 $ 150,000* 80% $ 120,000 $ 526,800 Sales Gross Net (A) (1) Jan 4Acc. Receivable$ 6,000 Sales$ 6,000 Jan 12Cash$ 5,880 Sales Discount$ 120 Acc. Receivable$ 6,000 (2) Jan 4Acc. Receivable$ 5,880 Sales$ 5,880 Jan 12Cash$ 5,880 Acc. Receivable $ 5,880 (B) Feb 2 Cash$ 6,000 Acc. Receivable $ 5,880 Sales Discount Forfeited$ 120 Notes Receivable Jan 1 Notes Receivables 25000 Sales25000 Jan 10 Notes Receivables39860 Sales39860 PV Principal = 50000 x PVF, 1, 12% = 50000 x 0,79719 Jan 15 Note Receivable47598 Cash47598 PV Principal = 50. 000 x 0,71178 = 35. 589 PV Interest = 5. 000 x 2,40183 = 12. 009 PV note` = 47. 598 Jan 20 Notes Receivable900. 000 Machine590. 000 Gain on sale of machine310. 000 Interest Tyler Inc. Cash1500 Interest revenue1500 Grayson Inc Notes Receivable4783,2 Interest revenue4783,2 Suppy Co. Cash5000 Notes Receivable711,76 Interest revenue5. 711,76 Rentol Notes Receivable108. 000