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Assume that Nuance in number 1 above used the percentage of receivables method to estimate uncollectible accounts instead of the percentage of sales method. Nuance assumes that 5 percent of accounts receivable will never be collected.
1.
Prepare the entry to record Nuance’s bad debt expense for the year.
2.
Show how the net accounts receivable balance would be reported on the balance sheet.
3.
Why are companies allowed to choose between methods of estimating bad debts instead of being required to use one method?
Nuance Company had net credit sales for the year of $500,000. Nuance estimates that 2 percent of its net credit sales will never be collected.
1.
Prepare the entry to record Nuance’s bad debt expense for the year.
2.
Nuance had accounts receivable of $100,000 at the end of the year. Show how the net accounts receivable balance would be reported on the balance sheet. Assume that the allowance for doubtful accounts had a beginning balance of zero.
3.
Why is A/R shown at net rather than just showing the full amount?
12. Kevin decides to expand outside the college. On the first day of the month, KKCDK pays $20 in advance for advertising in the local paper. The advertisements will run during February and March.
13. The student groups paid for the 100 CDs not paid for in January.
14. KKCDK paid off its remaining accounts payable, salaries payable, taxes payable and interest payable.
15. KKCDK purchases 450 CDs for $135 on account.
16. KKCDK sells 500 CDs during the month for $0.80 each. KKCDK receives cash for 450 of them and is owed for the other 50.
17. KKCDK completes and delivers the advanced order of 50 CDs described in number 8 above.
18. KKCDK incurs $80 in tax expense. The taxes will be paid in March.
Required:
G. Prepare journal entries for the above events if needed.
H. Post the journal entries to the T-accounts.
I. Prepare an unadjusted trial balance for KKCDK for February.
J. Prepare adjusting entries for the following and post them to your T-accounts.
1. Kevin deposits $500 of his own money into the company’s checking account.
2. Kevin signs a note payable in the amount of $1,000 from Bank. The note is due in one year.
3. KKCDK (Kevin’s Kool CD Kopies) purchases a CD duplicator , which can copy seven CDs at one time. The cost is $1,300 and he pays cash.
4. KKCDK purchases 500 blank CDs for $150 on account.
5. KKCDK pays $20 cash for flyers to advertise.
6. KKCDK quickly catches on with the student groups on campus. KKCDK sells 400 CDs to various groups for $0.80 per CD. KKCDK receives cash payment for 300 of the CDs and the student groups owe for the other 100 CDs.
7. KKCDK pays $100 on its accounts payable.
8. KKCDK receives $40 in advance to copy 50 CDs for a student group. He will not begin work on the project until Feb
9. KKCDK incurs $40 in tax expense. The taxes will be paid in Feb
A. Prepare journal entries for the above events if needed.
B. prepare T-accounts.
C. Prepare an unadjusted trial balance for KKCDK for January
Jan Haley owns and operates Haley’s Dry Cleaners. The following occurred during December:
a. On December 1, Haley prepaid rent on her store for December and January with $2,000 cash.
b. On December 1, Haley purchased insurance with cash in the amount of $2,400 that will last six months.
c. Haley paid $900 of her accounts payable balance.
d. Haley paid off all of her salaries payable balance.
e. Haley purchased supplies on account in the amount of $2,400.
f. Haley paid a salary to her assistant of $1,000 in cash for work done in the first two weeks of December.
g. Haley dry-cleaned clothes for customers on account in the amount of $8,000.
h. Haley collected $6,300 of her accounts receivable balance.
i. Haley paid tax of $750 in cash.
Required:
A. Prepare the journal entry for each transaction.
B. Prepare all necessary T-accounts.
a. W works signs a note at the bank and is given $10,000 cash.
b. Leon deposits $2,000 of his own money into Webworks’s checking account.
c. W works purchases a new computer and additional equipment for $3,000.
d. W works purchases supplies worth $200 on account that should last W works two months.
e. W works hires Nancy Po to assist with admin tasks. She will charge $100 per Web site for her assistance.
f. W works begins working on his first two Web sites, one for Juan Sanchez, a friend of his dad’s and the other for Pauline Smith, a local businesswoman.
g. W works completes the site for Mr. Sanchez and sends him a bill for $600.
h. W works completes the site for Ms. Smith and sends her a bill for $450.
i. W works collects $600 in cash from Mr. Sanchez.
j. W works pays Nancy $100 for her work on Mr. Sanchez’s Web site.
k. W works receives $500 in advance to work on a Web site t. Work on the site will not begin until July.
l. W works pays taxes of $200 in cash.
A. Prepare journal entries
Determine if the following adjusting entries are
◦
accrued expense (AE)
◦
prepaid expense (PE)
◦
accrued revenue (AR)
◦
unearned revenue (UR)
1.
_____ Atlas Magazine was previously prepaid $400,000 by subscribers and has delivered half of the magazines ordered.
2.
_____ Hornsby Company agreed to provide 1,000 units of its product to Michaels Inc. and has substantially completed the agreement.
3.
_____ Nancy and Sons owes its employees $30,000 for work done over the past two weeks.
4.
_____ Replay Inc. advertised on TV 44 during the month of April, but has not yet made an entry to record the event.
5.
_____ Centurion Company paid Reliable Insurance Company $54,000 for insurance for twelve months, six of which have passed.
6.
_____ Reliable Insurance Company received a payment of $54,000 for insurance for twelve months from Centurion Company and six months have passed.
Determine if the following transactions for Marlin Corporation require an adjustment or not. If an adjusting entry is required, give the correct entry.
1.
At the beginning of the month, Marlin agreed to perform services for the next three months for Catsui Corporation for $30,000 per month. Catsui paid Marlin $90,000 in advance. One month has now passed.
2.
Marlin pays its employees every two weeks. At the end of the month, Marlin owes its employees $480,000, but will not pay them until the following week.
3.
Marlin paid $300,000 for rent at the beginning of the month by debiting prepaid rent and crediting cash. The $300,000 covered six months of occupancy, but only one month has passed.
4.
At the beginning of the month, Marlin agreed to perform services for Ryland Company for
127 Financial Accounting
$16,000 per month for the next six months. Ryland has not yet paid any cash to Marlin and the work is not substantially complete.
Maria Sanchez, an accountant by trade, moonlights as a personal trainer. Maria is curious about her cash inflows and outflows from her personal work for the month of February. Using the following information, prepare a statement of cash flows for Maria.
Cash for Supplies Inventory
$500
Cash for Advertising
$400
Cash Paid for Equipment
$900
Cash Received from Bank Loan
$1,000
Cash Paid for Insurance
$700
Cash Received from Customers
$2,200
Cash Paid for Taxes
$400
Cash Balance, 2/1
$500
Ramond Company has hired you to prepare financial statements for the year ending 12/31. On your first day of work, your assistant comes to you with several items that could be classified as expenses or could be classified as assets. Based on your knowledge of accounting so far, determine whether the following items should be recorded as an expense or an asset.
1.
On 12/31, Ramond paid $14,000 to rent office space for the next twelve months.
2.
On 10/1, Ramond paid $40,000 for insurance that covered the company’s property for the last quarter of the year.
3.
On 6/1, Ramond purchased $27,000 in supplies, all of which were used by 12/31.
4.
On 12/31, Ramond purchased $5,000 worth of supplies for the coming month.
