wilcox mills is a manufacturer that makes all sales on 30 day credit terms annual sa 1323170

Wilcox Mills is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $30 million. At the end of 2010, accounts receivable were presented in the com- pany’s balance sheet as follows:

 

                    

Accounts receivable from clients  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $3,100,000

Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               80,000

 

 

During 2011, $165,000 of specific accounts receivable were written off as uncollectible. Of these accounts written off, receivables totaling $15,000 were subsequently collected. At the end of 2011, an aging of accounts receivable indicated a need for a $90,000 allowance to cover possible failure to collect the accounts currently outstanding.

Wilcox Mills makes adjusting entries for uncollectible accounts only at year-end.

 

                    

 

                                                                                                                                                                                                                       

 

Instructions

a.       Prepare the following general journal entries:

1.       One entry to summarize all accounts written off against the Allowance for Doubtful Accounts during 2011.

2.       Entries to record the $15,000 in accounts receivable that were subsequently collected.

3.       The adjusting entry required at December 31, 2011, to increase the Allowance for Doubt- ful Accounts to $90,000.

b.       Notice that the Allowance for Doubtful Accounts was only $80,000 at the end of 2010, but uncollectible accounts during 2011 totaled $150,000 ($165,000 less the $15,000 reinstated). Do these relationships appear reasonable, or was the Allowance for Doubtful Accounts greatly

c.        understated at the end of 2010? Explain.

 

 

P

 

Cost

Current Market Value

Footlocker, Inc. (5,000 shares: cost,

$17 per share; market value, $20). . . . . . . . . . . . . . . .        $  85,000

 

$100,000

The Gap, Inc. (4,000 shares: cost, $17

per share; market value, $15) . . . . . . . . . . . . . . . . . . .            68,000

60,000

$153,000

$160,000

 

 

A

 

 

 

 

 

 

 

 

 

at december 31 2010 weston manufacturing co owned the following investments in capit 1323171

At December 31, 2010, Weston Manufacturing Co. owned the following investments in capital stock of publicly traded companies (classified as available-for-sale securities):

 

In 2011, Weston engaged in the following two transactions:

Apr. 10     Sold 1,000 shares of its investment in Footlocker, Inc., at a price of $21 per share, less a brokerage commission of $50.

Aug.  7        Sold 2,000 shares of its investment in The Gap, Inc., at a price of $14 per share, less a brokerage commission of $60.

At December 31, 2011, the market values of these stocks were: Footlocker, Inc., $18 per share; and The Gap, Inc., $16 per share.

 

Instructions

a.       Illustrate the presentation of marketable securities and the unrealized holding gain or loss in Weston’s balance sheet at December 31, 2010. Include a caption indicating the section of the balance sheet in which each of these accounts appears.

b.       Prepare journal entries to record the transactions on April 10 and August 7.

c.       Prior to making a fair value adjustment at the end of 2011, determine the unadjusted bal- ance in the Marketable Securities control account and the Unrealized Holding Gain (or Loss) on Investments account. (Assume that no unrealized gains or losses have been rec- ognized since last year.)

d.       Prepare a schedule showing the cost and the market values of securities owned at the end of 2011. (Use the same format as the schedule illustrated above.)

e.       Prepare the fair value adjusting entry required at December 31, 2011.

f.       Illustrate the presentation of the marketable securities and unrealized holding gain (or loss) in the balance sheet at December 31, 2011. (Follow the same format as in part a.)

g.       Illustrate the presentation of the net realized gains (or losses) in the 2011 income statement. Assume a multiple-step income statement and show the caption identifying the section in which this amount would appear.

h.       Explain how both the realized and unrealized gains and losses will affect the company’s 2011 income tax return.

 

 

                                                                                                                      

 

 

 

 

 

 

 

eastern supply sells a variety of merchandise to retail stores on account but it ins 1323172

Eastern Supply sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when due must replace their account receivable with an interest-bearing note. The company adjusts and closes its accounts at December 31. Among the transactions relating to notes receivable were the following:

Sept. 1               Received from a customer (Party Plus) a nine-month, 10 percent note for $75,000 in settlement of an account receivable due today.

June 1               Collected in full the nine-month, 10 percent note receivable from Party Plus, including interest.

 

Instructions

a.       Prepare journal entries (in general journal form) to record: (1) the receipt of the note on September 1; (2) the adjustment for interest on December 31; and (3) collection of principal and interest on June 1. (To better illustrate the allocation of interest revenue between account- ing periods, we will assume Eastern Supply makes adjusting entries only at year-end.)

b.       Assume that instead of paying the note on June 1, the customer (Party Plus) had defaulted. Give the journal entry by Eastern Supply to record the default. Assume that Party Plus has sufficient resources that the note eventually will be collected.

c.        Explain why the company insists that any customer who fails to pay an invoice when due must replace it with an interest-bearing note.

 

the scooter warehouse provided the following information at december 31 2011 general 1323173

The Scooter Warehouse provided the following information at December 31, 2011:

 

 

General ledger cash

balance, 12/31/11 . . . . . . . . . .

 

$17,566

Bank statement balance, 12/31/11. . . . . . . . . . . . . . . . .

 

$16,306

Bank service charge . . . . . . . . . .

(25)

Deposits in transit . . . . . . . . . . .

2,450

 

 

Bank Reconciliation

 

through

 

 

LO7

 

 

 

Returned customer checks                                      Outstanding checks . . . . . . . . . .       (1,356) marked NSF . . . . . . . . . . . . . .              (375)

Error in recording of office

 

supplies . . . . . . . . . . . . . . . .  .

Adjusted cash balance,

234

            

 

Adjusted cash balance,

 

            

12/31/11  . . . . . . . . . . . . . . . . .

$17,400

12/31/11. . . . . . . . . . . . . . . . .

$17,400

 

 

Marketable Securities

The company invested $26,000 in a portfolio of marketable securities on December 22, 2011. The portfolio’s market value on December 31, 2011, had increased in value to $28,500.

 

Notes Receivable

On November 1, 2011, The Scooter Warehouse sold 25 scooters to Bermuda Fantasy Resort   for

$65,000. The resort paid $5,000 at the point of sale and issued a one-year, $60,000, 5 percent note for the remaining balance. The note, plus accrued interest, is due in full on October 31, 2012. The Scooter Warehouse adjusts for accrued interest revenue monthly.

 

Accounts Receivable

The Scooter Warehouse uses a balance sheet approach to account for uncollectible accounts expense. Outstanding accounts receivable on December 31, 2011, total $450,000. After aging these accounts, the company estimates that their net realizable value is $435,000. Prior to making any adjustment to record uncollectible accounts expense, The Scooter Warehouse’s Allowance for Doubtful Accounts has a credit balance of $4,000.

 

Instructions

a.       Prepare the journal entry necessary to update the company’s accounts immediately after per- forming its bank reconciliation on December 31, 2011.

 

 

                                                                                                                                                                                                                       

 

b.       Prepare the journal entry necessary to adjust the company’s marketable securities to market value at December 31, 2011.

c.       Prepare the journal entry necessary to accrue interest in December 2011.

d.       Prepare the journal entry necessary to report the company’s accounts receivable at their net realizable value at December 31, 2011.

e.       Discuss briefly how the entry performed in part d affects the accounts receivable turnover rate. Does the write-off of an account receivable affect the accounts receivable turnover rate differ- ently than the entry performed in part d? Explain.

 

the cash account in the general ledger of hendry corporation shows a balance of 96 9 1323174

The Cash account in the general ledger of Hendry Corporation shows a balance of $96,990 at December 31, 2011 (prior to performing a bank reconciliation). The company’s bank statement shows a balance of $100,560 at the same date. An examination of the bank statement reveals the following:

1.    Deposits in transit amount to $24,600.

2.    Bank service charges total $200.

3.    Outstanding checks total $31,700.

4.    A $3,600 check marked “NSF” from Kent Company (one of Hendry Corporation’s customers) was returned to Hendry Corporation by the bank. This was the only NSF check that Hendry Corporation received during 2011.

5.    A canceled check (no. 244) written by Hendry Corporation in the amount of $1,250 for office equipment was incorrectly recorded in the general ledger as a debit to Office Equipment of

$1,520, and a credit to Cash of $1,520.

 

In addition to the above information, Hendry Corporation owns the following assets at December 31, 2011: (1) money market accounts totaling $75,000, (2) $3,000 of high-grade, 90-day, commer- cial paper, and (3) highly liquid stock investments valued at $86,000 at December 31, 2011 (these investments originally cost Hendry Corporation $116,000).

On December 1, 2011, Hendry Corporation sold an unused warehouse to Moran Industries for

$100,000. Hendry accepted a six-month, $100,000, 6 percent note receivable from Moran. The note, plus accrued interest, is due in full on May 31, 2012. Hendry Corporation adjusts for accrued interest revenue monthly.

Hendry Corporation uses the income statement approach to compute its uncollectible accounts expense. The general ledger had reported Accounts Receivable of $2,150,000 at January 1, 2011. At that time, the Allowance for Doubtful Accounts had a credit balance of $40,000. Throughout 2011, the company wrote off actual accounts receivable of $140,000 and collected $21,213,600 on account from credit customers (this amount includes the $3,600 NSF check received from Kent Company). Credit sales for the year ended December 31, 2011, totaled $20,000,000. Of these credit sales, 2 percent were estimated to eventually become uncollectible.

 

Instructions

a.       Prepare Hendry Corporation’s bank reconciliation dated December 31, 2011, and provide the journal entry necessary to update the company’s general ledger balances.

b.       Compute cash and cash equivalents to be reported in Hendry Corporation’s balance sheet dated December 31, 2011.

c.       Prepare the adjusting entry necessary to account for the note receivable from Moran Industries at December 31, 2011.

d.       Determine the net realizable value of Hendry Corporation’s accounts receivable at December 31, 2011.

e.       Determine the total dollar amount of financial assets to be reported in Hendry Corporation’s balance sheet dated December 31, 2011.

f.       Assume that it is normal for firms similar to Hendry Corporation to take an average of 45 days to collect an outstanding receivable. Is Hendry Corporation’s collection performance above or below this average?