fin 1 valix chap 6

Problem 6-5

a. Accounts receivable 775,000

Notes receivable 100,000

Installments receivable 300,000

Advances to suppliers 150,000

Advances to subsidiary 400,000

Claim receivable 15,000

Subscriptions receivable 300,000

Accrued interest receivable 10,000

Customer's credit balances 30,000

Advances from customers 20,000

Receivables 2,000,000

b. Accounts receivable 775,000

Allowance for doubtful accounts (50,000)


Installments receivable 300,000

Advances to suppliers 150,000


Subscriptions receivable 300,000

Accrued interest receivable 10,000

Total trade and other receivables 1,600,000

c. The advances to subsidiary should be classified as noncurrent and

presented as long-term investment.

The customers' credit balances and advances from customers should

be classified as current liabilities and included as part of

"trade and other payables".

Problem 6-6

a. Accounts receivable - January 1 600,000

Charge sales 6,000,000

Total 6,600,000

Less: Collections from customers 5,300,000

Writeoff 35,000

Merchandise returns 40,000

Allowances to customers 25,000 5,400,000

Accounts receivable - December 31 1,200,000

b. Subscriptions receivable 150,000

Deposit on contract 120,000


Advances to employees 10,000

Advances to affiliates 100,000

Advances to supplier 50,000

Accounts receivable 490,000

c. Accounts receivable 1,200,000


Advances to employees 10,000

Advances to supplier 50,000

Total trade and other receivables 1,320,000

d. The subscriptions receivable should be deducted from subscribed share capital

The deposit on contract should be classified as noncurrent and presented non-current asset.

The advances to affiliates should be classified as noncurrent and presented as long-term investment.

The deposit on contract should be classified as noncurrent and presented non-current asset.

The advances to affiliates should be classified as noncurrent and presented as long-term investment.

Problem 6-7

Requirement 1

1. Accounts receivable 3,600,000

Sales 3,600,000

2. Notes receivable 400,000


3. Doubtful accounts 90,000

Allowance for doubtful accounts 90,000

4. Allowance for doubtful accounts 20,000


5. Sales return 15,000


6. Cash 2,450,000

Accounts receivable 2,450,000

7. Sales discount 45,000


8. Cash 150,000


Requirement 2


Requirement 3


Less: Allowance for doubtful accounts (70,000)

Net realizable value 600,000

Problem 6-8

FOB destination and freight collect FOB shipping point and freight collect

1. Accounts receivable 500,000 1. Accounts receivable

Freight out 10,000

Sales 500,000

Allowance for freight charge 10,000 2. Cash

Sales discount

2. Cash 475,000

Sales discount 15,000

Allowance for freight charge 10,000


FOB destination and freight prepaid FOB shipping point and freight prepaid

1. Accounts receivable 500,000 1. Accounts receivable

Freight out 10,000

Sales 500,000

Cash 10,000

2. Cash

2. Cash 485,000 Sales discount



FOB shipping point and freight collect


Sales 500,000

485,000



FOB shipping point and freight prepaid


Sales 500,000

Cash 10,000

495,000



Problem 6-9


Sales 4,000,000

2. Cash 1,470,000



3. Cash 1,000,000





Allowance for sales return 20,000

Problem 6-10

July 1 Accounts receivable 50,000 July 1 Accounts receivable

Sales 50,000 Sales

2 Accounts receivable 200,000 2 Accounts receivable

Sales 200,000 Sales

12 Cash 196,000 12 Cash

Sales discount 4,000 Accounts receivable


30 Cash 50,000 30 Cash

Accounts receivable 50,000 Accounts receivable

Sales discount forfeited

Net methodGross method


49,000


196,000

196,000


50,000


Sales discount forfeited 1,000

Net method

Problem 6-11

a. Credit sales (75% x 5M) 3,750,000

Doubtful accounts (2% x 3.75M) 75,000

Doubtful accounts expense 75,000


b. Doubtful accounts expense (1% x 5M) 50,000


c. Required allowance 80,000

Less: Credit balance of allowance (20,000)




d. Required allowance (10% x 500,000) 50,000

Less: Credit balance of allowance (20,000)




Problem 6-12

a. Required allowance (5% x 600,000) 30,000

Add: Debit balance in allowance account 10,000


Doubtful accounts 40,000


b. Required allowance 50,000

Add: Debit balance in allowance account 10,000




c. Doubtful accounts (2% x 1.9M) 38,000


Problem 6-13

a. Doubtful accounts (3% x 8M) 240,000


b. Doubtful accounts 170,000


Allowance - January 1 100,000

Doubtful accounts (squeeze) 170,000

Recovery 20,000

Total 290,000

Accounts written off (130,000)

Allowance - December 31 (8% x 2M) 160,000

c. Doubtful accounts 210,000


Allowance - January 1 100,000


Recovery 20,000

Total 330,000

Accounts written off (130,000)

Allowance - December 31 200,000

Problem 6-14

Requirement a


Sales 7,000,000

2. Cash 2,450,000


Accounts receivable (2.45M / 98%) 2,500,000

3. Cash 3,900,000




5. Accounts receivable 10,000


Cash 10,000




Requirement b



Rate = 40,000 /1M =4%

Allowance for doubtful accounts - December 31 (4% x 1.5M) 60,000

Less: Allowance before adjustment (20,000)


Requirement c

Accounts receivable - December 31 1,500,000

Allowance for doubtful accounts (60,000)

Net realizable value 1,440,000

Problem 6-15

Requirement a

1. Cash 800,000


Sales (800,000 / 10%) 8,000,000

2. Cash 684,000

Sales discount (5% x 720,000) 36,000

Accounts receivable (10% x 7.2M) 720,000

3. Cash 5,940,000


4. Sales discount 10,000

Allowance for sales discount 10,000







Cash 10,000




Required Allowance - December 31 (5% x 2.4M) 120,000



Rate = 100,000 /2M = 5%

Requirement b


Less: Allowance for doubtful accounts 120,000

Allowance for sales discount 10,000 (130,000)


Problem 6-16

Requirement a


Sales (3,070,000 - 470,000) 2,600,000

2. Cash (2,455,000 - 1,455,000) 1,000,000


3. Cash 1,455,000


Accounts receivable (1,455,000 / 97%) 1,500,000



5. Cash 470,000

Sales 470,000

6. Sales returns and allowances 55,000


7. Sales returns and allowances 10,000

Cash 10,000

8. Accounts receivable 5,000


Cash 5,000


9. Doubtful accounts expense 50,000


Credit Sales 2,600,000

Less: Sales discount 45,000

Sales returns and allowances 55,000 (100,000)

Net credit sales 2,500,000

Doubtful accounts (2.5M x 2%) 50,000

Requirement b



Net realizable value 565,000

Problem 6-17

A.

1. Accounts Receivable 7,935,000

Sales 7,935,000

2. Cash 4,410,000

Sales Discount 90,000

Accounts Receivable 4,500,000

3. Cash 2,475,000

Sales Discount 25,000

Accounts Receivable 2,500,000

4. Accounts Receivable 15,000

Allowance for Doubtful Accounts 15,000

Cash 15,000

Accounts Receivaable 15,000

5. Cash 900,000

Accounts Receivable 900,000

6. Allowance for Doubtful Accounts 55,000


7. Sales Return 30,000


B.

Accounts Rec. Jan 1 1,500,000

Sales 7,935,000

Recovery 15,000

Collections (8,000,000)

Sales discount (115,000)

Writeoff (55,000)

Sales return (30,000)

Accounts Rec. Dec 1 1,250,000

Rate: 60,000/1,500,000= 0.004

Allowance for Doubtful Accounts 50,000

1,250,000 x 0.004


Doubful accounts expense 30,000

C.

Accounts Rec. Dec. 31 1,250,000

Allowance for Doubful Accounts (50,000)

Net Realizable value 1,200,000

Problem 6-18

Amount Percent of Required

Uncollectible Allowance

1. Not yet due 1,700,000 - -

1 - 30 days past due 1,200,000 5% 60,000

31 - 60 days past due 100,000 25% 25,000

61 - 90 days past due 150,000 50% 75,000

Over 90 days past due 120,000 100% 120,000

3,270,000 280,000

2. Allowances - January 1 170,000

Receivables 30,000


Total 545,000

Less: writeoff (235,000 + 30,000) (265,000)

Required allowance - December 31 280,000




Problem 6-19

1. 1,000,000 1% = 10,000

400,000 5% = 20,000

300,000 10% = 30,000

200,000 25% = 50,000

60,000 100% = 60,000

1,960,000 170,000

2. Allowance - January 1 90,000

Recoveries 20,000

Doubtful accounts (unknown) 200,000

Total 310,000

Less: writeoff (100,000 + 40,000) 140,000

Allowance - December 31 170,000



Correct amount 200,000

Recorded (2% x 9M) 180,000

Understatement 20,000

4. Accounts receivable - December 31 1,960,000

Less: Allowance for doubtful accounts 170,000


Problem 6-20

2011 2012 2013 Total

1. Writeoff 26,000 29,000 30,000 85,000

Less: Recoveries (2,000) (3,000) (4,000) (9,000)

Net writeoff 24,000 26,000 26,000 76,000

Percentage to be used in computing the allowance = 76,000 / 3.8M = 2%

2. Credit sales for 2013 3,000,000

Multiply by bad debt percentage 2%

Provision for doubtful accounts 60,000

3. Accounts receivable - January 1, 2013 250,000

Add: Credit sales for 2013 3,000,000

Recoveries 5,000 3,005,000

Total 3,255,000

Less: Collections in 2013 2,615,000

Writeoff 40,000 2,655,000

Accounts receivable - December 31, 2013 600,000

4. Allowance for doubtful - Jan.1 20,000

Add: Doubtful accounts 2013 60,000

Recoveries 5,000 65,000

Total 85,000

Less: Writeoff (40,000)

Allowance for doubtful - Dec.31 45,000

Requirement 1 Requirement 4

Accounts Receivable-Dec 31, 2012 600,000 Required Allowance- Dec. 31 2013

Add: Sales for 2013 5,000,000 Add: Debit Balance before adjustments

Recovery of written off accounts 10,000 5,010,000 Total Increase in Allowance

Total 5,610,000

Less: Collections from Customers 4,360,000 Requirement 5

Accounts written off 50,000

Accounts settled by note 200,000 4,610,000 Doubtful Accounts

Accounts Receivable-Dec 31, 2013 1,000,000 Allowance for doubtful accounts

Requirement 2

Allowance for doubtful accounts-Dec 31,2012 30,000

Add: Recovery of written off accounts 10,000

Total 40,000

Less: Accounts written off 50,000

Allowance before adjustment- Dec. 31, 2013 (10,000)

Requirement 3

Required Allowance for doubtful accounts-Dec 31,2013

On Current Account 35,000

(700000 x 5%)

On Past Due Accounts 60,000

(300000 x 20%)

Total Required Allowance 95,000

Required Allowance- Dec. 31 2013 95,000

Add: Debit Balance before adjustments 10,000

Total Increase in Allowance 105,000

105,000


Problem 6-23

1. Allowance - January 1, 2013 500,000

Doubtful accounts recorded (2% x 20M) 400,000

Recovery 50,000

Total 950,000

Less: Writeoff (300,000 + 100,000) (400,000)

Allowance before adjustment 550,000

2. 5,000,000 x 5% 250,000

2,000,000 x 10% 200,000

1,000,000 x25% 250,000

500,000 -100,000 x 75% 300,000

Required allowance - December 31, 2013 1,000,000

3. Doubtful account 450,000


(1M - 550,000)

Problem 6-24

1. Allowance - 1/1/2013 (1% x 2.8M) 28,000

2. Allowance - 1/1/2013 28,000

Doubtful accounts recorded in 2013 (1% x 3M) 30,000

Recovery 7,000

Total 65,000

Writeoff (27,000)

Allowance before adjustment 38,000

3. 300,000 x 1% 3,000

80,000 x 5% 4,000

60,000 x 20% 12,000

25,000 x80% 20,000

Required allowance - 12/31/2013 39,000

4. Doubtful account 1,000


(39,000 - 38,000)

fin 1 valix chap 6

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