CHAPTER 7 Problem 7-1 Requirement 1 a. Accounts receivable 200,000 Cash in bank 200,000 b. Cash in bank 250,000 Accounts payable 250,000 c. Cash in bank 100,000 Accounts payable 100,000 d. Accounts receivable 450,000 Cash 450,000 Requirement 2 Cash in bank per book 3,000,000 Customer check outstanding for 18 months ( 200,000) Undelivered check 250,000 Postdated check delivered 100,000 Collection on January 2017 recorded on December 31, 2016 cC 450,000) Adjusted cash in bank 2,700,000 Time deposit - 30 days 1,000,000 Petty cash fund —.20,000 Total cash and cash equivalent 3,220,000 Requirement 3 The money market placement of P2,000,000 due on June 30, 2017 should be separately shown as current asset. The sinking fund of P1,500,000 is presented as noncurrent asset. Problem 7-2 Requirement 1 a. Accounts receivable 150,000 Cash on hand 150,000b. Expenses Receivable from employee Petty cash fund 15,000 Requirement 2 Cash on hand Postdated check Adjusted cash on hand Petty cash fund Unreplenished petty cash expenses (10,000) Postdated employee check Adjusted petty cash Cash on hand Petty cash fund Security Bank current account PNB current account Bond sinking fund 2,500,000) Total cash and cash equivalents 6,885,000 Requirement 3 10,000 5,000 1,000,000 (150,000) 850,000 50,000 (3,000) 35,000 850,000 35,000 2,000,000 1,500,000 *The BSP 120-day treasury bill of P3,000,000 is separately shown as current asset. “The overdraft in BDO current account of P200,000 is shown as current liability. “The BPI Time deposit of P2,000,000 is shown as noncurrent investment because itis restricted for land acquisition. Problem 7-3 Requirement 1 a. Accounts receivable (100,000 + 150,000) Cash on hand b. Advances to employees Cash short or over Petty cash fund 15,000 . Cash in bank (200,000 + 300,000) Accounts payable Requirement 2 Cash on hand NSF customer check Postdated customer check 250,000 250,000 10,000 5,000 500,000 500,000 1,000,000 ( 100,000) (150,000)Adjusted on hand 750,000 Currency and coins Check drawn payable to petty cashier Adjusted petty cash Cash in bank Undelivered company check Postdated company check delivered 300,000 Adjusted cash in bank 4,500,000 Cash on hand Petty cash fund Cash in bank Saving deposit 2,000,000 Total cash Problem 7-4 Requirement 1 Cash on hand NSF customer check Postdated customer check Adjusted cash on hand Petty cash fund: Currency and coins Philippine Bank current account 5,000,000 Undelivered company check Postdated company check delivered 45,000 Adjusted balance Cash on hand Petty cash fund Philippine Bank current ity Bank current account No. | City Bank current account No. 2 Asia Bank saving deposit 250,000 Asia Bank time deposit Total cash and cash equivalent Requirement 2 1, Accounts receivable Cash on hand 50,000 ¢ 2,000 33,000 35,000 4,000,000 200,000 750,000 35,000 4,500,000 7,285,000 200,000 (35,000) (15,000) 150,000 5,000 25,000 5,070,000 150,000 5,000 5,070,000 4,000,000 100,000) -2,000,000 11,375,000 50,0002. Receivable from officer 2,000 Expenses 12,000 Cash short or over 1,000 Petty cash 15,000 3. Philippine Bank current 70,000 Accounts payable 70,000 4. City Bank current 100,000 Bank overdraft 100,000 Problem 7-5 Fluctuating Fund System Imprest Fund System 1. Petty cash fund 10,000 1. Petty cash fund 10,000 Cash in bank 10,000 Cash in bank 10,000 2. Postage 1,500 2. No entry Supplies 5,500 Transportation 1,200 Miscellaneous expense 800 Petty cash fund 9,000 3. Petty cash fund 14,000 3. Petty cash fund 5,000 Cash in bank 14,000 Postage 1,500 Supplies 5,500 Transportation 1,200 Miscellaneous expense 800 Cash in bank 14,000Problem 7-6 Fluctuating Fund System 1. Petty cash fund ‘10,000 Cash in bank 10,000 2. Postage 1,500 ‘Supplies 3,000 Petty cash fund 4,500 3. Transportation 1,000 Accounts payable 3,500 Petty cash fund 4,500 4, Petty cash fund 19,000 Cash in bank 19,000 Problem 7-7 Fluctuating Fund System May 2 Petty cash fund 10,000 Cash in bank 10,000 10,000 2 May Imprest Fund System Petty cash fund 10,000 Cash in bank No entry No entry Petty cash fund 10,000 Postage 1,500 Supplies 3,000 Transportation ‘1,000 Accounts payable 3,500 Cash in bank 19,000 Imprest Fund System 2 Petty cash fund 10,000 Cash in bank 10,00029 Postage 1,000 29 Postage 1,000 Supplies 3,000 Supplies 3,000 Transportation 2500 Transportation 2,500 Miscellaneous expense 1,500 Miscellaneous expense 1,500 Petty cash fund 8,000 Petty cash fund 8,000 Petty cash fund 8,000 Cash in bank 8,000 June 30 Supplies 2,000 June 30 Supplies 2,000 Accounts payable 1,000 Accounts payable 1,000 Transportation 1,000: Transportation 1,000 Petty cash fund 4,000 Petty cash fund 4,000 July 1 Petty cash fund 4,000 Supplies 2,000 Postage 1,000 Transportation 1,000 To reverse the adjustment made on June 30. 5,000, July 15 Supplies 1,500 3,500 Postage 500 1,500 Transportation 500 1,500 Miscellaneous expense 500 Miscellaneous expense ' 500 Petty cash fund 3,000 Cash in bank 12,000 Petty cash fund 12,000 Cash in bank 12,000 Problem 7-8 2016 Nov. 2 Petty cash fund 10,000 Cash in bank 10,000 30 Postage 2,000 Supplies 5,000 Petty cash fund 10,000 Cash in bank 17,000 Dec. 31 Postage 3,000 Supplies 4,000 Special deposit 2,000 Petty cash fund 9,000 2017 Jan. 1 Petty cash fund 9,000 Postage 3,000 Supplies 4,000 Special deposit 2,000 2 No entry31 Postage Supplies Accounts payable Cash short or over Cash in bank Problem 7:9 Requirement 1 2016 Dec. 1 Petty cash fund Cash in bank 20 Distribution costs Miscellaneous expenses Equipment Cash in bank 31 Receivable from employee Distribution costs Transportation Petty cash fund 2017 Jan. 1 Petty cash fund Receivable from employee 2,000 Distribution costs Transportation 15 Noentry 2017 Jan, 31 Distribution costs Administrative expenses Transportation Purchases Cash in bank Requirement 2 Petty cash Less: Petty cash expenses from December 21, 2016 to January 31, 2017: Distribution costs (1,500 + 500) Administrative expenses Transportation (500 + 1,000) Purchases Petty cash before replenishment Problem 7-10 Answer B Problem 7-11 Answer A 6,000 7,000 1 19,000 10,000 10,000 5,000 2,000 2,000 9,000 2,000 1,500 500 4,000 4,000 1,500 500 2,000 2,000 1,500 1,200 6,700 10,000 2,000 2,000 1,500 6,701Problem 7-12 Answer B Problem 7-13 Answer C Problem 7-14 Answer B Problem 7-15 Answer B Petty cash fund (50,000 - 10,000) Cash on hand (500,000 - 100,000) Cash in bank ~ current account Cash in bank - payroll account Time deposit Cash in sinking fund Total cash and cash equivalents 8,940,000 Problem 7-16 Answer A Petty cash fund Undeposited collections Cash in bank Total Problem 7-17 Answer C Checking account #101 Checking account #201 Time deposit account 250,000 90-day Treasury bill Total cash and cash equivalent Problem 7-18 Answer B Question 1 Answer B Checkbook balance Postdated customer check NSF check Undelivered company check Cash on hand Change fund Adjusted balance Question 2 Answer C Treasury bill Money market placement 3,000,000 Total cash equivalents 40,000 400,000 4,000,000 1,000,000 2,000,000 1,500,000 50,000 1,100,000 2,500,000 3,650,000 1,750,000 ( 100,000) 500,000 2,400,000 8,000,000 (2,000,000) ( 500,000) 1,500,000 2,440,000 2,500,000 5,500,000Problem 7-19 Answer B Problem 7-20 Answer C Problem 7-21 Answer B Problem 7-22 Answer C Cash on hand and in bank Saving deposit 1,000,000 Total Problem 7:23 Question 1 Answer A Question 2 Answer A Problem 7-24 Answer D Checking account at Second Bank Payroll account Value added tax account Foreign bank account 2,000,000 Traveler's check Petty cash fund Money order Total unrestricted cash Problem 7-25 Answer B Security bank Currency and coins Petty cash fund (50,000 - 10,000) Total Problem 7-26 Answer A Checkbook balance Customer check not included in checkbook balance 200,000 Undelivered check payable to supplier Adjusted cash in bank 4,600,000 Coins and currencies on hand Petty cash: Coins and currencies Replenishment check 48,000 5,000,000 6,000,000 5,500,000 500,000 400,000 300,000 20,000 1,000 8,900,000 3,155,000 00 300,000 5,000 43,000Total Problem 7-27 Answer D Problem 7-28 Answer C Coins and currency Accommodation check Total Problem 7-29 Answer C Coins and currency Replenishment check 4,000 Total Problem 7-30 Answer C Total petty cash Currency and coins Amount of replenishment 7,000 Problem 7-31 NOV aWNo oNUeeEag 8 aA 10. D Problem 8-1 Balance per book Add: CM for note collected Total Less: DM for service charge Problem 7-32 NA PPh = >PONBA>O 4,948,000 22,000 15,000 37,000 2,000 Problem 7-33 woENONANnCO PLeNOvayy> 65,000 30,000 95,000 2,000Adjusted book balance Balance per bank Add: Deposit in transit Total Less: Outstanding checks: No. 102 105 107 Adjusted bank balance Adjusting entries: 1. Cash in bank Note receivable 2. Bank service charge Cash in bank Problem 8-2 Balance per book Add: CM for note collected Total Less: DM for service charge NSF check Book error (52,000 - 25,000) Adjusted book balance Balance per bank Add: Deposit in transit Erroneous bank debit 68,000 Total Less: Outstanding checks: No. 770 775 777 Adjusted bank balance Adjusting entries: 1. Cash in bank Bank service charge Note receivable 2. Bank service charge Accounts receivable Accounts payable Cash in bank 93,000 108,000 80,000 188,000 15,000 30,000 50,000 95,000 93,000 30,000 30,000 2,000 2,000 110,000 45,000 155,000 5,000 10,000 27,000 _ 42,000 113,000 135,000 60,000 8,000 203,000 20,000 30,000 40,000 —_90,000 113,000 45,000 5,000 50,000 5,000 10,000 27,000 42,000Problem 8-3 Balance per book Add: CM for note collected Total Less: DM for service charge Adjusted book balance Balance per bank Add: Deposit in transit Total Less: Outstanding checks: No. 116 122 124 125 Adjusted bank balance Adjusting entries 1. Cash in bank Bank service charge Note receivable 250,000 Interest income 30,000 2. Bank service charge Cash in bank 60,000 180,000 120,000 250,000 270,000 10,000 5,000 2,840,000 _ 270,000 3,110,000 —__5,000 3,105,000 3,265,000 —450.000 3,715,000 5,000Problem 8-4 Balance per book 5,000,000 Add: Note collected by bank 2,150,000 Total 7,150,000 Less: Bank service charge 50,000 NSF check 500,000 550,000 Adjusted book balance 6,600,000 Balance per bank 4,450,000 Deposit in transit 3,000,000 Total 7,450,000 Less: Outstanding checks _ 0,00 Adjusted bank balance 6,600,000 Adjusting entries 1, Cash in bank 2,150,000 Bank service charge 50,000 Note receivable 2,000,000 Interest income 200,000 2. Bank service charge 50,000 Accounts receivable 500,000 Cash in bank 550,000Problem 8-5 Book balance Add: Collection of note Interest on note Book error on check no. 175 Total Less: Bank service charge Payment for light and water NSF check Adjusted book balance Bank balance Add: Deposit in transit Total Less: Bank error Outstanding checks 2,750,000 Adjusted bank balance Adjusting entries 1. Cash in bank Note receivable 2,500,000 Interest income Accounts payable 2. Bank service charge Light and water Accounts receivable Cash in bank 1,405,000 2,500,000 150,000 45,000 2,695,000 4,100,000 5,000 245,000 220,000 470,000 3,630,000 5,630,000 —750,000 6,380,000 1,100,000 1,650,000 3,630,000 2,695,000 150,000 45,000 5,000 245,000 220,000 470,000Problem 8-6 a. Balance per book - April 30 Credit memo for note collected Outstanding checks: No. 1331 1332 1334 1335 Total Less: Bank service charge NSF check Undeposited collections Balance per bank - April 30 b. Adjusting entries 1. Cash in bank Note receivable 2. Bank service charge Accounts receivable Cash in bank 30,000 c. Balance per book - April 30 CM for note collected Bank service charge NSF check Adjusted cash in bank 1,130,000 Problem 8-7 a. Balance per bank Add: Undeposited collections NSF check DM for safety deposit Unrecorded check Total Less: Checks outstanding Overstatement of creditor’s check Understatement of customer's check Balance per book b. Adju: ing entries: 1, Cash in bank Accounts payable Accounts receivable 2. Accounts receivable Bank service charge Accounts payable Cash in bank 1,100,000 60,000 40,000 30,000 60,000 10,000 5,000 25,000 270,000 300,000 1,000,000 60,000 60,000 5,000 25,000 1,100,000 60,000 ¢ 5,000) (25,000) 3,500,000 550,000 50,000 5,000 125,000 730,000 4,230,000 650,000 270,000 180,000 1,100,000 3,130,000 450,000 270,000 180,000 50,000 5,000 125,000 180,000c. Balance per book 3,130,000 Overstatement of creditor's check 270,000 Understatement of customer's check = 180,000 Total 3,580,000 Less: NSF check 50,000 DM for safety box 5,000 Unrecorded check 125,000 180,000 Adjusted book balance 3,400,000 Problem 8-8 Balance per book 2,700,000 Add: Proceeds of bank loan 940,000 Note collected by bank 435,000 —_1,375,000 Total 4,075,000 Less: Service charge 10,000 Customer's check charged back 50,000 -60,000 Adjusted book balance 4,015,000 Balance per bank 4,000,000 Add: Deposit in transit 475,000 Incorrect deposit 90,000 Erroneous bank charge 150,000 Erroneous debit memo 200,000 =__915,000 Total 4,915,000 Less: Outstanding checks 600,000 Erroneous bank credit 300,000 900,000 Adjusted bank balance 4,015,000Adjusting entries: 1. Cash in bank Bank service charge Interest expense (60,000 x 1/6) Prepaid interest expense Loan payable (940,000/94%) Note receivable 400,000 Interest income 2. Bank service charge Accounts receivable Cash in bank Problem 8-9 Balance per book Add: Proceeds of bank loan Total Less: Understatement of check in payment of account (200,000 - 20,000) Petty cash fund 190,000 Adjusted book balance Balance per bank Add: Undeposited collections Erroneous bank charge Deposit omitted from bank statement 500,000 Total Less: Erroneous bank credit Outstanding checks 674,000 Adjusted bank balance Adjusting entry Cash in bank Interest expense (84,000 x 1/12) Prepaid interest expense Accounts payable Petty cash fund Supplies Transportation Postage Loan payable (516,000/86%) Problem 8-10 1,375,000 5,000 10,000 50,000 1,000,000 40,000 10,000 50,000 60,000 5,000,000 516,000 5,516,000 180,000 10,000 __ 5,326,000 5,500,000 300,000 50,000 150,000 _ 6,000,000 130,000 544,000 5,326,000 326,000 7,000 77,000 180,000 4,000 2,000 3,000 1,000 600,000Balance per book Add: Overstatement of check number 765 Check number 555 stopped for payment Total Less: Service charge NSF check Adjusted book balance Balance per bank Add: Undeposited collections 275,000 Total Less: Outstanding checks: Number 761 762 763 764 765 Adjusted bank balance Adjusting entries 1. Cash in bank Accounts payable Miscellaneous income 10,000 2. Bank service charge Accounts receivable Cash in bank 3. Receivable from cashier Accounts receivable Sales discounts 10,000 Problem 8-11 Balance per book Service charge 10,000) Debit memo for printed checks Proceeds of bank loan 570,000 Proceeds of customer's note 810,000 NSF check Adjusted book balance Balance per bank Outstanding checks Deposit in transit 500,000 Bank error in recording check 20,000 10,000 5,000 85,000 55,000 40,000 25,000 65,000 30,000 30,000 5,000 85,000 40,000 1,300,000 30,000 1,330,000 90,000 1,240,000 1,200,000 1,475,000 235,000 1,240,000 20,000 90,000 30,000 1,719,000 ( (12,000) (77,000) 000,000 3,195,000 ( 685,000) (90,000)Stolen check deducted by bank in error 80,000 Adjusted bank balance 1. Cash in bank Interest expense Loan payable Note receivable Interest income 10,000 2. Service charge (10,000 + 12,000) Accounts receivable Cash in bank Problem 8-12 Answer A Balance per bank Deposit in transit 325,000 Total Outstanding checks Adjusted bank balance Problem 8-13 Answer D Per bank statement Deposit in transit 520,000 Outstanding checks Bank error 40,000) Adjusted bank balance Problem 8-14 Answer A Balance per book Bank charges Customer note collected by bank 1,500,000 Interest on customer note 60,000 NSF customer check Depositor’s note charged to account (1,000,000) Adjusted book balance Problem 8-15 Answer B Balance per bank Add: Deposit in transit Total 3,000,000 1,380,000 30,000 600,000 800,000 22,000 77,000 99,000 1,805,000 2,130,000 (275,000) 1,855,000 3,800,000 ( 675,000) ( 3,605,000 4,000,000 (10,000) ( 250,000) 4,300,000 2,000,000 —200,000 2,200,000Less: Outstanding checks 400,000 Erroneous bank credit 300,000 700,000 Adjusted bank balance 1,500,000 The adjusted cash in bank can also be computed by starting with the balance per book. Balance per book 850,000 Add: Proceeds of note collected = 750,000 Total 1,600,000 Less: NSF checks (150,000 - 50,000) = 100,000 Adjusted book balance 1,500,000 Problem 8-16 Answer C Balance per book 8,500,000 Note collected by bank 950,000 Book error (200,000 - 20,000) ( 180,000) NSF check ( 250,000) Bank service charge Adjusted book balance Problem 8-17 Answer A Problem 8-18 Answer B Problem 8-19 Answer B February 28 book balance 1,460,000 Note collected by bank 100,000 Interest earned on note 10,000 NSF check (130,000) Bank service charges (2,000 + 3,000) ¢ 5,000) Adjusted book balance 1,435,000 Balance per bank statement (SQUEEZE) 1,532,000 Deposit in transit 85,000 Bank error - erroneous charge 20,000 Outstanding checks (202.000) Adjusted bank balance 1,435,000 The bank statement balance is “squeezed” by working back from the adjusted balance. Problem 8-20 Answer B Problem 8-21 Answer B Problem 8-22 Answer B Balance per bank 2,800,000transit Outstanding check Adjusted cash in bank 2,895,000 Cash on hand Total cash Problem 8-23 Question | Answer A Balance per book (SQUEEZE) 2,120,000 Add: Proceeds of bank loan Proceeds of note collected Total Less: Bank service charge DAIF check Adjusted book balance Question 2 Answer B Balance per bank (SQUEEZE) 3,070,000 Add: Deposit in transit Bank error (200,000 - 20,000) 630,000 Total Less: Outstanding checks (750,000 - 50,000) Adjusted bank balance Problem 8-24 Question | Answer A Book balance Note collected 1,900,000 Book error (1,930,000 ~ 1,390,000) NSF check Service charge 50,000) Adjusted book balance Bank balance Deposit in transit 1,450,000 Checks outstanding (770,000 - 70,000) 700,000) 500,000 435,000 5,000 50,000 450,000 (_100,000) 935,000 3,055,000 55,000 3,000,000 180,000 3,700,000 200,000 3,000,000 19,000,000 (540,000) (760,000) C— 19,550,000 18,800,000Adjusted bank balance Question 2 Answer A 1. Cash in bank Note receivable Interest income 2. Accounts payable Accounts receivable Service charge Cash in bank Problem 8-25 Question | Answer A Balance per bank statement Deposit in transit 1,200,000 Outstanding checks (1,500,000 - 200,000) Bank error 150,000) Adjusted bank balance Question 2 Answer A Balance per ledger (SQUEEZE) Note collected by bank Service charge 20,000) NSF checks Book error Question 3 Answer A Cash in bank Currency and coins on hand Petty cash fund Total cash Problem 8-26 NOVEwNE Pannep>og 1,900,000 540,000 760,000 50,000 1,700,000 200,000 1,350,000 8,000,000 (1,300,000) Cc 2,750,000 7,070,000 1,100,000 ¢ ( 500,000) 2,750,000 7,750,000 900,000 50,000 8,700,000See ome CHAPTER 9 Problem 9-1 Bank reconciliation - June 30 Book balance Add: Credit memo for note collected 300,000 Total Less: NSF check 100,000 Service charge 4,000 Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks 854,000 Adjusted bank balance Bank reconciliation ~ july 31 Book balance Add: Credit memo for bank loan 500,000 Total Less: Service charge Adjusted book balance Bank balance Add: Deposit in transit Total Less: Outstanding checks 1,851,000 Adjusted bank balance 1,000,000 1,300,000 104,000 1,196,000 1,650,000 — 400,000 2,050,000 1,196,000 1,400,000 1,900,000 1,000 1,899,000Adjusting entries, July 31 1. Cash in bank 500,000 Bank loan payable 500,000 2. Bank service charge 1,000 Cash in bank 1,000 Computation of deposit in transit - July 31 Deposit in transit - June 30 400,000 Add; Deposits during July: Book debits 4,000,000 Less: June credit memo for note collected 300,000 3,700,000 Total 4,100,000 Less: Deposits credited by bank during July: Bank credits 3,500,000 Less: July credit memo for bank loan 500,000 3,000,000 Deposit in transit ~ July 31 1,100,000 Computation of outstanding checks - July 31 Outstanding checks, June 30 854,000 Add: Checks drawn by company during July: Book credits 3,600,000 Less: June debit memos for NSF check 100,000 Service charge 4,000 104,000 3,496,000 Total 4,350,000 Less: Checks paid by bank during July: Bank debits 2,500,000 Less: July service charge 1,000 2,499,000 Outstanding checks, July 31 1,851,000 Problem 9:2 Reconciliation - October 31 Adjusted book balance 600,000 Bank balance 400,000 Add: Deposit in transit 300,000 Total 700,000 Less: Outstanding checks 100,000 Adjusted bank balance 600,000 Reconciliation - November 30Book balance 1,000,000 Add: Understatement of collection from customer 90,000 Total 1,090,000 Less: Understatement of check disbursement 270,000 Adjusted book balance 820,000 Bank balance 930,000 Add: Deposit in transit 190,000 Check of Susan Company charged in error 200,000 390,000 Total 1,320,000 Less: Outstanding checks 400,000 Deposit of Susan Company erroneously credited 100,000 500,000 Adjusted bank balance 820,000 Adjusting entries - November 30 1. Cash in bank 90,000 Accounts receivable 90,000 2. Accounts payable 270,000 Cash in bank 270,000 Computation of outstanding checks - October 31 Outstanding checks - October 31 (SQUEEZE) 100,000 Add: Checks issued by depositor: Book disbursements 1,800,000 Understatement of check paid 270,000 2,070,000 Total 2,170,000 Less: Checks paid by bank: Bank disbursements 1,970,000 Check of Susan Company charged in error (200,000) 1,770,000 Outstanding checks - November 30 400,000 Computation of deposit in transit - November 30 Deposit in transit - October 31 300,000 Add: Cash receipts deposited during November: Book receipts 2,200,000 Understatement of collection from customer 90,000 2,290,000 Total 2,590,000 Less: Deposits credited by bank during November: Bank receipts 2,500,000 Deposit of Susan Company erroneously credited (_100,000) 2,400,000 Deposit in transit - November 30 190,000Problem 9-3 a. Reconciliation on July 1 Adjusted book balance 1,270,000 Bank balance 1,720,000 Add: Deposit in transit _500,000 Total 2,220,000 Less: Outstanding checks _ 950,000 Adjusted bank balance 1,270,000 Reconciliation on July 31 Book balance 470,000 Add: Note collected by bank 1,500,000 Total 1,970,000 Less: Bank service charge _ 20,000 Adjusted book balance 1,950,000 Bank balance 2,700,000 Add: Deposit in transit 400,000 Total 3,100,000 Less: Outstanding checks: Check # 107 650,000 108 500,000 1,150,000 Adjusted bank balance 1,950,000 b. Adjusting entries on July 31 1. Cash in bank 1,500,000 Note receivable 1,500,000 2. Bank service charge 20,000 Cash in bank 20,000 Computation of deposit in transit - July 1 Deposit in transit - July 1 (SQUEEZE) 500,000 Cash receipts per book 3,400,000 Total Less: Deposits credited by bank 3,500,000 Deposit in transit - July 31 —400,000Computation of outstanding checks - July | Outstanding checks - July 1 (SQUEEZE) 950,000 Checks drawn by depositor 4,200,000 Total 5,150,000 Less: Checks paid by bank 4,000,000 Outstanding checks - July 31 1,150,000 Problem 9-4 Balance per book - November 30 500,000 Less: Service charge 10,000 NSF check 50,000 Customer's note erroneously recorded as cash receipt 100,00¢ 160,000 Adjusted book balance 340,000 Balance per bank - November 30 600,000 Add: Deposit in transit Total Less: Outstanding checks 380,000 Adjusted bank balance 340,000 Deposit in transit - October 31 45,000 Cash receipts deposited: Book debits 710,000 October collections recorded in November (45,000) Customer’s note recorded as cash receipt (00,000) 565,000 Total 610,000 Less: Deposits credited by bank: Bank credits 500,000 Correction of bank error (10,000) 490,000 Deposit in transit - November 30 120,000 Outstanding checks - October 31 125,000Checks issued by depositor: Book credits 1,200,000 October bank service charge ( 5,000) 1,195,000 Total 1,320,000 Checks paid by bank: Bank debits 1,000,000 November bank service charge (10,000) November NSF check 50,000) 940,000 Outstanding checks - November 30 = 380,000 Adjusting entry Bank service charge 10,000 Accounts receivable 50,000 Note receivable 100,000 Cash in bank 160,000 Problem 9-5 March 31 Receipts Disbursements April 30 Book balance 200,000 800,000 720,000 280,000 Note collected by bank March 60,000 _( 60,000) April 100,000 100,000 Service charge March (8,000) (8,000) April 2,000 (2,000) NSF check March ( 20,000) ( 20,000) April 30,000 ( 30,000) Deposit in transit March 31 ( 80,000) 80,000 April 30 (220,000) (220,000) Outstanding checks March 31 178,000 178,000 April 30 (372,000) 372,000 Bank balance 330,000 700,000 530,000 Adjusting entry Bank service charge 10,000 Accounts receivable 50,000 Note receivable 100,000 Cash in bank 160,000 Problem 9-6 July 31 Receipts Disbursements August 31Bank balance Book error on collection Book error on payment 540,000 Bank error on deposit Bank error on payment 400,000 NSF check: July August Note collected by bank: July ‘August Deposit in transit: July August Outstanding checks: July August Book balance Problem 9-7 Book balance Bank service charge November 30 December 31 4,000) Collection of note November 30 December 31 300,000) Adjusted book balance 2,856,000 Bank balance Outstanding checks November 30 December 31 592,000) Deposit in transit November 30 December 31 800,000 5,000,000 3,940,000 1,860,000 (180,000) (180,000) ( 540,000) ( 200,000) ( 200,000) (400,000) 100,000 100,000 (50,000) 50,000 ( 200,000) 200,000 ( 300,000) ( 300,000) 600,000 = (_ 600,000) 480,000 480,000 100,000) 650,000 3,600,000 ( 100,000) ( (650,000) 1,200,000 4,400,000 2,000,000 Nov.30 Receipts Disbursements Dec. 31 2,032,000 3,160,000 (2,000) ( 2,568,000 1,440,000 2,000) 4,000 ( 200,000 (300,000) ___ Cc 2,468,000 ( 200,000) 1,830,000 1,442,000 1,890,000 2,090,000 1,080,000 —2,900,000 ( 180,000) 592,000 ( ( 180,000) 80,000 ( 498,000 80,000) 498,000 Check erroneously charged by bank November 30 December 31 50,000 Adjusted bank balance Adjusting entry 40,000 ( 40,000) ($0,000) __ 1,830,000 2,468,000 1,442,000 -—2,856,000Bank service charge 4,000 Note receivable 300,000 Cash in bank 304,000 Problem 9:8 Sept.30 Receipts Disbursements Oct. 31 Book balance 1,900,000 1,400,000 2,400,000 900,000 NSF check: September 30 (60,000) (60,000) October 31 40,000 ( 40,000) Collection of accounts receivable September 30 30,000 ( 30,000) October 31 50,000 50,000 Overstatement of check September 30 90,000 ( 90,000) October 31 (120,000) 20,000 Adjusted balance 1,960,000 1,330,000 2:260,000 1,030,000 Bank balance 2,100,000 1,200,000 2,500,000 800,000 Deposit in transit September 30 130,000 ( 130,000) October 31 260,000 260,000 Outstanding checks September 30 ( 270,000) ( 270,000) October 31 30,000 ( 30,000) Adjusted balance 1,960,000 1,330,000 2,260,000 1,030,000 Adjusting entries on October 31 1. Accounts receivable 40,000 Cash in bank 40,000 2. Cash in bank 170,000 Accounts receivable 50,000 Salaries 120,000 Problem 9:9 May 31 Receipts Disbursements june 30 Balance per book 2,500,000 5,300,000 5,400,000 2,400,000 Bank service charge: May 31 (20,000) (20,000) June 30 25,000 ( 25,000) NSF check: June 30 200,000 (200,000) Interest collected: June 30 75,000 75,000 Book error: June 30 (_ 300,000) 300,000Adjusted balance 2,480,000 5,375,000 Balance per bank 2,700,000 5,500,000 Deposit in transit May 31 625,000 ( 625,000) June 30 500,000 Outstanding checks May 31 ( 845,000) June 30 Adjusted balance 2,480,000 5,375,000 Adjusting entries on June 30 1, Cash in bank Interest income Equipment 2. Bank service charge Accounts receivable Cash in bank Problem 9-10 Answer D Balance per ledger Service charges Collection of note 1,500,000 Book error 100,000) Unrecorded check for traveling expenses Adjusted book balance Balance per bank Deposit in transit 1,400,000 Total Outstanding checks (SQUEEZE) Adjusted bank balance 5,305,000 5,600,000 ( 845,000) 550,000 5,305,000 375,000 25,000 200,000 2,550,000 2,600,000 500,000 (550,000) 2,550,000 75,000 300,000 225,000 3,750,000 (50,000) (500,000) 4,600,000 6,200,000 7,600,000 3,000,000 4,600,000Problem 9-11 Answer C Outstanding checks - May 31 3,000,000 Checks issued by depositor in June: Total credits to cash in June Service charge in May recorded in June 8,900,000 Total Checks paid by bank in June: Checks and charges by bank in June Service charge in June NSF check in June Outstanding checks - June 30 Problem 9-12 Question 1 Answer B Outstanding checks - May 31 100,000 Checks recorded by book in June Total Less: Checks recorded by bank in June Outstanding checks - June 30 Question 2 Answer D Deposits outstanding - May 31 Deposits recorded by book in June Total Less: Deposits recorded by bank in June 1,600,000 Deposits outstanding - June 30 Question 3 Answer A Balance per book - June 30 Service charges Collection by bank NSF check Adjusted book balance Balance per bank - June 30 Deposits outstanding - June 30 Checks outstanding - June 30 400,000) Adjusted bank balance 9,000,000 (____100,000; 11,900,000 8,000,000 (50,000) (1,000,000) —_6,950,000 4,950,000 2,500,000 2,600,000 2,200,000 —400,000 300,000 1,800,000 2,100,000 500,000 2,100,000 (50,000) 550,000 (_100,000) 2,500,000 2,400,000 500,000 (cm 2,500,000Problem 9-13 Question 1 Answer B Checks outstanding - November 30 30,000 Checks recorded by book in December Total Checks recorded by bank in December Checks outstanding - December 31 Question 2 Answer A Deposits in transit - November 30 Deposits recorded by book - December 1,800,000 Total Deposits recorded by bank - December 620,000) Deposits in transit - December 31 Question 3 Answer B Balance per bank - December 31 1,830,000 Deposits in transit - December 31 Outstanding checks - December 31 90,000) Adjusted bank balance Balance per book Note collected by bank NSF check Adjusted book balance Problem 9-14 Question 1 - Answer D Balance per bank - November 30 3,600,000 December deposits Total December disbursements (4,400,000) Balance per bank - December 31 4,700,000 Deposit in transit - December Outstanding checks - December 500,000) Adjusted bank balance - December 31 300,000 2,100,000 480,000 480,000 ¢ 2,220,000 1,810,000 420,000 (10,000) 2,220,000 5,500,000 9,100,000 700,000 4,900,000Balance per book - December 31 (SQUEEZE) Note collected by bank NSF check Service charge 50,000) Adjusted book balance Question 2 - Answer B Bank receipts in December Noted collected Deposit in transit - November Deposit in transit - December Cash receipts per book in December 4,400,000 Question 3 - Answer C Bank disbursements in December NSF check Service charge 50,000) Outstanding checks - November (1,200,000) Erroneous bank credit in November 200,000) Outstanding checks - December 500,000 Book disbursements in December Problem 9-15 Question | Answer B Balance per bank - June 30 July bank deposits 9,000,000 July bank disbursements 7,000,000) Balance per bank - July 31 July deposit in transit 1,000,000 July outstanding checks Adjusted bank balance Balance per book - July 31 (SQUEEZE) Note collected by bank in July NSF check in July Service charge in July 10,000) Adjusted book balance 4,300,000 1,000,000 (350,000) ¢ 4,900,000 5,500,000 (1,000,000) ( 800,000) 700,000 4,400,000 (350,000) ¢ 3,100,000 3,000,000 5,000,000 (_ 600,000) 5,400,000 5,350,000 200,000 ( 140,000) i. 5,400,000 The balance per book on July 31 is “squeezed” by working back from the adjusted balance.Question 2 Answer A Deposit per bank statement for July 9,000,000 Note collected by bank in July Deposit in transit - June 30 Deposit in transit - July 31 Cash receipts per book for July Question 3 Answer A Disbursements per bank statement for July 7,000,000 NSF check in July Service charge in July 10,000) Outstanding checks - June 30 Outstanding checks - July 31 600,000 Cash disbursements per book for July Proof of the cash balance per book - July 31 Balance per book - June 30 Book receipts for July 9,400,000 Book disbursements for July (6,550,000) Balance per book - July 31 Problem 9-16 Question 1 Answer A Balance per bank - June 30 Bank deposits for July 6,500,000 Bank disbursements for July 0, r bank - July 31 Deposit in transit - July Outstanding checks Adjusted bank balance ( 200,000) ( 400,000) 1,000,000 9,400,000 ( 140,000) ¢ ( 900,000) 6,550,000 2,500,000 5,350,000 9,800,000 7,300,000 600,000 (4,000,000) 6,900,000The adjusted bank balance is also the cash balance per book because there are no book reconciling items. Question 2 Answer A Bank deposits for July 6,500,000 Deposit in transit - July 31 600,000 Deposit in transit - June 30 (400,000) ts per book for July 6,700,000 Question 3 Answer A Cash rec Bank disbursements for July 9,000,000 Outstanding checks - July 31 1,000,000 Outstanding checks - June 30 (1,400,000) Cash disbursements per book for July 8,600,000 Problem 9-17 Question 1 Answer A Balance per bank - March 31 4,650,000 Bank deposits for April 6,000,000 Bank disbursements for April (5,000,000) Balance per bank - April 30 5,650,000 Deposit in transit - April 30 1,500,000 Outstanding checks - April 30 (750,000) Adjusted bank balance 6,400,000 Question 2 Answer B Bank deposits for April 6,000,000 Deposit in transit ~ April 30 1,500,000 Deposit in transit - March 31 4,000,000) Cash receipts per book for April 6,500,000 Question 3 Answer C Bank disbursements for April 5,000,000 Outstanding checks - April 30 750,000 Outstanding checks - March 31 (4,250,000) Cash disbursements per book for April 4,500,000 The adjusted bank balance is also the cash balance per ledger because there are no book reconciling items.Problem 10-1 a. Accounts receivable 775,000 Notes receivable 100,000 Installments receivable 300,000 Advances to sup} 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) Notes receivable 100,000 Installments receivable 300,000 Advances to suppliers 150,000 Claim receivable 15,000 Subscription 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 class payables”. Problem 10-2 a. Accounts receivable - January 1 Charge sales Total Less: Collections from customers Writeoff Merchandise returns Allowances to customers Accounts receivable - December 31 b. Subscription receivable Deposit on contract Claim receivable Advances to employees Advances to affiliated Advances to supplier Accounts receivable © Accounts receivable Claim receivable Advances to employees Advances to supplier Total trade and other receivables stomers’ credit balances and advances from customers should be d as current liabilities and included as part of “trade and other 600,000 6,000,000 6,600,000 5,300,000 35,000 40,000 25,000 5.400,000 1,200,000 150,000 120,000 60,000 10,000 100,000 50,000 490,000 1,200,000 60,000 10,000 50,000 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 as other noncurrent asset. The advances to affiliates should be classified as noncurrent and presented as long-term investment. Problem 10-3 1. Accounts receivable 3,600,000 Sales 3,600,000 2. Notes receivable 400,000 Accounts receivable 400,000 3. Doubtful accounts 90,000 Allowance for doubtful accounts 90,000 4. Allowance for doubtful accounts 20,000 Accounts receivable 20,000 5. Sales return 15,000 Accounts receivable 15,000 6. Cash 2,450,000 Accounts receivable 2,450,000 7. Sales discount 45,000 Accounts receivable 45,000 8. Cash 150,000 Notes receivable 150,000 Accounts receivable 670,000 Less: Allowance for doubtful accounts 70,000 Net realizable value 600,000 Problem 10-4 FOB destination and freight collect 1, Accounts receivable 500,000 Freight out 10,000 Sales 500,000 Allowance for freight charge 10,000 2. Cash 475,000 Sales discount 15,000 Allowance for freight charge 10,000 Accounts receivable 500,000FOB destination and freight prepaid 1. Accounts receivable Freight out Sales Cash 2. Cash Sales discount Accounts receivable FOB shipping point and freight collect 1. Accounts receivable Sales 2. Cash Sales discount Accounts receivable FOB shipping point and freight prepaid 1. Accounts receivable Sales Cash 2. Cash Sales discount Accounts receivable Problem 10-5 1. Accounts receivable Sales 2. Cash Sales discount Accounts receivable 3. Cash Accounts receivable 4. Sales return Accounts receivable 100,000 5. Sales return Allowance for sales return 40,000 500,000 10,000 500,000 10,000 485,000 15,000 500,000 500,000 500,000 485,000 15,000 500,000 510,000 500,000 10,000 495,000 15,000 510,000 4,000,000 4,000,000 1,470,000 30,000 1,500,000 1,000,000 1,000,000 100,000 40,000Problem 10-6 Gross method Net method 1 Accounts receivable 49,000 Sales 49,000 2 Accounts receivable 196,000 sales 196,000 fash 196,000 Accounts receivable ‘ash 50,000 Accounts receivable Sales discount forfeited July 1 Accounts receivable 50,000 July sales 50,000 2 Accounts receivable 200,000 Sales 200,000 12 Cash 196,000 12 c: Sales discount 4,000 196,000 ‘Accounts receivable 200,000 30 Cash 50,000 30 C Accounts receivable 50,000 49,000 1,000 Problem 10-7 Accounts receivable - customers (7,800,000 + 400,000) 8,200,000 Allowance for doubtful accounts 200,000) Accounts receivable - officers Debit balances ~ creditors Total trade and other receivables 8,800,000 Problem 10-8 Answer A Accounts receivable Trade installments receivable (850,000 - 50,000) Accounts receivable from officers Accounts on which postdated checks are held Total trade accounts receivable 500,000 _300,000 3,500,000 800,000 150,000 200,000 4,650,000Problem 10-9 Answer A Trade accounts receivable Allowance for doubtful accounts. 100,000) Claim receivable Total trade and other receivables 2,200,000 Problem 10-10 Answer B Accounts receivable-January 1 Credit sales Collections from customers Sales return Accounts written off Accounts receivable-December 31 Allowance for doubtful accounts Allowance for sales return Net realizable value Problem 10-11 Answer A Accounts receivable - January 1 1,300,000 Add: Credit sales Total Less: Collection from customers Accounts written off 4,875,000 Accounts receivable - December 31 1,825,000 Problem 10-12 Answer C Accounts receivable (SQUEEZE) Allowance for doubtful accounts (900,000 - 200,000) Net realizable value Problem 10-13 Answer B Allowance - January 1 300,000 Doubtful accounts expense Recovery of accounts written off 100,000 Total Accounts written off Allowance - December 31 2,000,000 ( 300,000 1,300,000 5,500,000 (5,000,000) ( 150,000) (100,000) 1,550,000 ( 250,000) (50,000) 1,250,000 5,400,000 6,700,000 4,750,000 125,000 6,700,000 (700,000) 6,000,000 650,000 1,050,000 450,000 600,000Problem 10-14 Answer D Allowance - January | 280,000 Uncollectible accounts expense (SQUEEZE) 100,000 Recovery of accounts written off 50,000 Total 430,000 Accounts written off (230,000) Allowance - December 31 (2,700,000 - 2,500,000) 200,000 Problem 10-15 Answer A Allowance - December 31, 2016 180,000 Doubtful accounts expense 50.000 Total 230,000 Accounts written off (SQUEEZE) 30,000 Allowance - December 31, 2017 200,000 Problem 10-16 Answer B Only the bad debt expense decreases working capital. The writeoff does not affect anymore the working capital because the effect is offsetting. Problem 10-17 Answer A Allowance - 12/31/2016 (4,800,000 - 4,725,000) 75,000 Recovery of accounts written off 40,000 Doubtful accounts expense (SQUEEZE) 195,000 Total 310,000 Accounts written off (160,000) Allowance - 12/31/2017 (5,250,000 - 5,100,000) 150,000 Problem 10-18 Problem 10-19 Problem 10-20 Problem 10-21 1D we wc LA 2D 2A 2d. 2A 3.D 3.D 3 3A 4A 4c 4A 4.D 5.D 5. 5. 5. ¢ 6D 6c 7D 72D 8. 9A 10. €Problem 11-1 a. Credit sales (75% x 5,000,000) Doubtful accounts (2% x 3,750,000) 75,000 Doubtful accounts Allowance for doubtful accounts 75,000 b, Doubtful accounts (196 x 5,000,000) Allowance for doubtful accounts 50,000 & Required allowance Less: Credit balance of allowance 20,000 Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts 60,000 d. Required allowance (10% x 500,000) 50,000 Less: Credit balance of allowance 20,000 Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts 30,000 Problem 11-2 a, Required allowance (5% x 600,000) Add: Debit balance in allowance account 10,000 Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts 40,000 b. Required allowance ‘Add: Debit balance in allowance account 10,000 Doubtful accounts expense Doubtful accounts Allowance for doubtful accounts 60,000 ¢, Doubtful accounts (2% x 1,900,000) 75,000 50,000 60,000 30,000 40,000 60,000 38,000 3,750,000 80,000 60,000 30,000 30,000 40,000 50,000Allowance for doubtful accounts 38,000 Problem 11-3 a. Doubtful accounts (3% x 8,000,000) Allowance for doubtful accounts 240,000 b. Doubtful accounts Allowance for doubtful accounts 170,000 Allowance - January 1 100,000 Doubtful accounts (SQUEEZE) 170,000 Recovery Total Accounts written off Allowance ~ December 31 (8% x 2,000,000) © Doubtful accounts Allowance for doubtful accounts 210,000 Allowance ~ January 1 100,000 Doubtful accounts (SQUEEZE) 210,000 Recovery Total Accounts written off Allowance - December 31 Problem 11-4 Requirement a 1. Accounts receivable Sales 2. Cash Sales discount Accounts receivable (2,450,000 / 98%) 3. Cash Accounts receivable 4, Allowance for doubtful accounts Accounts receivable 30,000 5. Accounts receivable 240,000 170,000 20,000 290,000 130,000 160,000 210,000 20,000 330,000 130,000 200,000 7,000,000 7,000,000 2,450,000 50,000 2,500,000 3,900,000 3,900,000 30,000 10,000Allowance for doubtful accounts 10,000 Cash 10,000 Accounts receivable 10,000 6. Sales return 70,000 ‘Accounts receivable 70,000 Requirement b Doubtful accounts 40,000 Allowance for doubtful accounts 40,000 Rate = 40,000/1,000,000 = 4% Allowance for doubtful accounts - December 31 (4% x 1,500,000) 60,000 Less: Allowance before adjustment 20,000 Doubtful accounts expense 40,000 Requirement ¢ Accounts receivable - December 31 1,500,000 Allowance for doubtful accounts ( 60,000) Net realizable value 1,440,000 Problem 11-5 Requirement a 1. Cash 800,000 Accounts receivable 7,200,000 Sales (800,000/10%) 8,000,000 2. Cash 684,000 Sales discount (5% x 720,000) 36,000 Accounts receivable (10% x 7,200,000) 720,000 3. Cash 5,940,000 Accounts receivable 5,940,000 4, Sales discount 10,000 Allowance for sales discount 10,000 5. Sales return 80,000 Accounts receivable 80,0006. Allowance for doubtful accounts 60,000 Accounts receivable 60,000 Accounts receivable 10,000 Allowance for doubtful accounts 10,000 Cash 10,000 Accounts receivable 10,000 7. Doubtful accounts 70,000 Allowance for doubtful accounts 70,000 Required allowance ~ December 31 (5% x 2,400,000) 120,000 Less: Allowance before adjustment 50,000 Doubtful accounts 70,000 Rate = 100,000/2,000,000 = 5% Requirement b Accounts receivable 2,400,000 Less: Allowance for doubtful accounts 120,000 Allowance for sales discount 10,000 _ 130,000 Net realizable value 2,270,000 Problem 11-6 Requirement a 1. Accounts receivable 2,600,000 Sales (3,070,000 - 470,000) 2,600,000 2. Cash (2,455,000 - 1,455,000) 1,000,000 Accounts receivable 1,000,000 3. Cash 1,455,000 Sales discount 45,000 Accounts receivable (1,455,000/97%) 1,500,000 4, Allowance for doubtful accounts 20,000 Accounts receivable 20,000 5. Cash 470,000 Sales 470,0006. Sales return and allowances Accounts receivable 55,000 7. Sales return and allowances Cash 8. Accounts receivable Allowance for doubtful accounts 5,000 Cash Accounts receivable Requirement b Doubtful accounts Allowance for doubtful accounts 50,000 Credit sales Less: Sales discount Sales return and allowances Net credit sales Doubtful accounts (2,500,000 x 2%) 50,000 Requirement c Accounts receivable Less: Allowance for doubtful accounts Net realizable value Problem 11-7 Requirement a 1. Accounts receivable Sales 2. Cash Sales discount Accounts receivable (4,410,000 x 98%) 3. Cash Sales discount Accounts receivable (2,475,000 / 99%) 4, Accounts receivable Allowance for doubtful accounts 15,000 Cash Accounts receivable 55,000 10,000 10,000 5,000 5,000 5,000 50,000 2,600,000 45,000 55,000 100,000 2,500,000 625,000 60,000 565,000 7,935,000 7,935,000 4,410,000 90,000 4,500,000 2,475,000 25,000 2,500,000 15,000 15,000 15,0005. Cash 1,100,000 Accounts receivable 1,100,000 (8,000,000 - 4,410,000 - 2,475,000 - 15,000) 6. Allowance for doubtful accounts 55,000 Accounts receivable 55,000 7. Sales return 30,000 Accounts receivable 30,000 Requirement b Rate (60,000 / 1,500,000) 4% Required allowance (4% x 1,250,000) 50,000 Allowance before adjustment (60,000 + 15,000 - 55,000) 20,000 Increase in allowance 30,000 Doubtful accounts 30,000 Allowance for doubtful accounts 30,000 Requirement c Accounts receivable - December 31 1,250,000 Allowance for doubtful accounts ( 50,000) Net realizable value 1,200,000Problem 11-8 Percent of Required Amount —__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 1,200,000 100% 120,000 3,270,000 280,000. 2. Allowance - January 1 170,000 Recoveries 30,000 Doubtful accounts expense (SQUEEZE) 345,000 Total 545,000 Less: Writeoff (235,000 + 30,000) 265,000 Required allowance - December 31 280,000 63 3. Doubtful accounts expense 345,000Allowance for doubtful accounts 345,000 4, Accounts receivable Less: Allowance for doubtful accounts Net realizable value Problem 11-9 1. 1,000,000 x 1% 400,000 x 5% 300,000 x 10% 200,000 x 25% 60,000 x 100% 1,960,000 2. Allowance ~ January 1 90,000 Recoveries Doubtful accounts (SQUEEZE) Total Less: Writeoff (100,000 + 40,000) Allowance - December 31 170,000 3. Doubtful accounts Allowance for doubtful accounts 20,000 Correct amount Recorded (2% x 9,000,000) Understatement 20,000 3,270,000 280,000 2,990,000 10,000 20,000 30,000 50,000 60,000 120,000 20,000 200,000 310,000 140,000 200,000 180,000 20,0004, Accounts receivable - December 31 1,960,000 Less: Allowance for doubtful accounts 170,000 Net realizable value 1,790,000 Problem 11-10 2013 2014 2015 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 76,000 Percentage to be used in computing the allowance 3,800,000 2. Credit sales for 2016 3,000,000 Multiply by bad debt percentage 2% Provision for doubtful accounts 60,000 3. Accounts receivable - January 1, 2016 250,000 Add: Credit sales for 2016 3,000,000 Recoveries 5,000 3,005,000 Total 3,255,000 Less: Collections in 2016 2,615,000 Writeoff 40,000 2,655,000 Accounts receivable - December 31, 2016 600,000 64 4. Allowance for doubtful accounts - January 1 20,000 ‘Add: Doubtful accounts for 2016 60,000 Recoveries 5,000 65,000 Total 85,000 Less: Writeoff 40,000 Allowance for doubtful accounts - December 31 45,000 Problem 11-11 1. Accounts receivable - December 31, 2015 600,000 Add: Sales for 2016 5,000,000 Recovery of accounts written off 10,000 5,010,000 Total 5,610,000 Less: Collection from customers 4,360,000 Accounts written off 50,000 Accounts settled by issuance of note Accounts receivable - December 31, 2016 200,000 4,610,000 1,000,0002. Allowance for doubtful accounts - December 31, 2015 30,000 Add: Recovery of accounts written off 10,000 Total 40,000 Less: Accounts written off 50.000 Allowance before adjustment - December 31, 2016 (debit balance) (10,000) 3. Required allowance - December 31, 2016 On current accounts (700,000 x 5%) 35,000 On past due accounts (300,000 x 20%) 60,000 Total 95,000 4, Required allowance ~ December 31, 2016 95,000 Add: Debit balance before adjustment 10,000 Increase in allowance 105,000 5. Doubtful accounts 105,000 Allowance for doubtful accounts 105,000 Problem 11-12 170,000 - 10,000 258,000 - 20,000 Rate in 2015 = woo = OIG Rate in 2016 = = 017 10,000,000 14,000,000 1. Retained earnings (.016 x 1,250,000) 20,000 Allowance for doubtful accounts 20,000 2. Allowance - January 1, 2016 20,000 Recoveries - 2016 10,000 Doubtful accounts - 2016 (SQUEEZE) 92,000 Total 122,000 Less: Writeoff - 2016 88,000 Allowance - December 31, 2016 (.017 x 2,000,000) 34,000 3. Accounts receivable ~- December 31, 2016 2,000,000 Less: Allowance for doubtful accounts 34,000 Net realizable value 1,966,000Problem 11-13 1, Allowance - January 1, 2016 Doubtful accounts recorded (2% x 20,000,000) 400,000 Recovery Total Less: Writeoff (300,000 + 100,000) Allowance balance before adjustment 550,000 2. 5,000,000 x 5% 2,000,000 x 10% 1,000,000 x 25% 500,000 - 100,000 x 75% Required allowance ~ December 31, 2016 3. Doubtful accounts 450,000 Allowance for doubtful accounts (1,000,000 - 550,000) 450,000 Problem 11-14 1, Allowance - 1/1/2016 (1% x 2,800,000) 8,000 2. Allowance - 1/1/2016 Doubtful accounts recorded in 2016 (1% x 3,000,000) 00 «Recovery Allowance before adjustment - December 31, 2016 38,000 3. 300,000 x 176 80,000 x 5% 60,000 x 20% 25,000 x 80% Required allowance - 12/31/2016 500,000 50,000 950,000 400,000 250,000 200,000 250,000 300,000 1,000,000 28,000 65,000 3,000 4,000 12,000 20,000 32,0004. Doubtful accounts 1,000 Allowance for doubtful accounts (39,000 - 38,000) 1,000 Problem 11-15 Answer C Problem 11-16 Answer B 0 -60 days (1,200,000 x 1%) 61 - 120 days (900,000 x 2%) Over 120 days (1,000,000 x 6%) 60,000 Allowance - December 31, 2016 90,000 Allowance -January 1, 2016 60,000 Uncollectible accounts expense (SQUEEZE) 80,000 Recovery Total Accounts written off Allowance - December 31, 2016 90,000 Problem 11-17 Answer D Allowance for sales discount (5,000,000 x 2% x 50%) Problem 11-18 Answer A Problem 11-19 Answer B Doubtful accounts expense (3% x 3,000,000 + 10,000) 100,000 Problem 11-20 Answer A Doubtful accounts expense (2% x 7,000,000) Problem 11-21 Answer D Allowance - January | 200,000 Doubtful accounts expense (5% x 8,000,000) Recovery of accounts written off 50.000 Total Accounts written off Allowance - December 31 550,000 Problem 11-22 Answer D 12,000 18,000 20,000 160,000 (20,000) 140,000 400,000 650,000 (100,000)Allowance - January 1 250,000 Doubtful accounts expense (SQUEEZE) Total Accounts written off 205,000 Allowance - December 31 220,000 Problem 11-23 Answer B Accounts receivable Allowance for doubtful accounts (5% x 2,000,000) 100,000) Net realizable value Problem 11-24 Answer A Allowance for bad debts - 12/31/2015 60,000 Bad debts expense for 2016 (2% x 3,500,000) Total Allowance for bad debts - 12/31/2016 80,000 Accounts written off in 2016 50,000 Problem 11-25 Question | Answer A Purchases Ending inventory Cost of sales Question 2 Answer A Sales (3,750,000 x 140%) Credit sales (5,250,000 x 80%) Collections (3,000,000) Accounts written off Accounts receivable - December 31 175,000 Question 3 Answer B Provision for doubtful accounts (4,200,000 x 5%) Accounts written off Allowance for doubtful accounts - December 31 185,000 175,000 425,000 2,000,000 ( 4,500,000 (_750,000) 3,750,000 5,250,000 4,200,000 (25,000) 210,000 (25,000)Problem 11-26 Question | Answer A Accounts receivable - 12/31/2015 Credit sales (5,900,000 - 2,100,000) 3,800,000 Total Cash received from credit customers (3,024,000) Sales discounts (3,024,000 / 96% = 3,150,000 - 3,024,000) Accounts receivable written off Sales returns and allowances 250,000) Accounts receivable - 12/31/2016 Question 2 Answer B Credit sales Sales discounts Sales returns and allowances 250,000) Net credit sales Allowance for bad debts - 12/31/2015, 90,000 Recovery of accounts written off 80,000 Bad debt expense for 2016 (2% x 3,484,000) Total Accounts written off Allowance for bad debts - 12/31/2016 188,480 Problem 11-27 Question | Answer B Allowance - January 1 1,000,000 Recoveries 50,000 Writeoff (200,000 + 100,000) 01 Allowance - December 31 before adjustment Question 2 Answer A 0 - 60 days (6,000,000 x 10%) 61 - 180 days (2,000,000 x 20%) 181 - 360 days (1,500,000 x 30%) 950,000 4,750,000 ( 126,000) (50,000) ( 1,300,000 3,800,000 ( 126,000) ( 3,424,000 68,480 238,480 (50,000) ( 750,000 600,000 400,000 450,000Over 360 days (500,000 - 100,000 x 50%) Required allowance - 12/31/2016 Question 3 Answer C Allowance - 1/1/2016 Recoveries 50,000 Doubtful accounts expense (SQUEEZE) Total Writeoff (200,000 + 100,000) 300,000) Required allowance - 12/31/2016 Question 4 Answer D Doubtful accounts expense Recorded amount (2% x 20,000,000) 400,000 Year-end adjustment to the allowance account 500,000 Question 5 Answer B Accounts receivable - December 31, 2016 Allowance for doubtful accounts (1,650,000) Net realizable value 200,000 1,650,000 1,000,000 200,000 1,450,000 ( 1,650,000 900,000 9,900,000 8,250,000Problem 11-28 Answer C Chicken House Landmark Hotel Other accounts receivable (5% x 9,500,000) 475,000 Total impairment loss 3,975,000 Problem 11-29 Answer A Trisha Company Francis Company Other accounts receivable (4% x 8,500,000) 340,000 Total pairment loss 1,840,000 Problem 11-30 Problem 11-31 awNe o>>o PENAnewne eNe>>owoR CHAPTER 12 Problem 12-1 2016 Jan. 1 Cash Notes receivable Land Gain on sale of land Dec. 31 Accrued interest receivable Interest income (12% x 6,000,000) 2017 Dec. 31 Accrued interest receivable Interest income (12% x 6,720,000) 2018 Jan. 1 Cash Notes receivable 6,000,000 Accrued interest receivable 1,526,400 1,500,000 2,000,000 500,000 1,000,000 1,000,000 6,000,000 5,000,000 2,000,000 720,000 720,000 806,400 806,400 7,526,400Problem 12-2 1 Notes receivable 600,000 Sales Unearned interest income Jan. 540,000 60,000 Dec. 31 Cash 200,000 Notes receivable 200,000 31 Unearned interest income 30,000 Interest income 30,000 Year Notes receivable Fraction Interest income 2016 600,000 6/12 30,000 2017 400,000 4/\2 20,000 2018 200,000 2/i2 10,000 1,200,000 60,000 Problem 12-3 Face value 900,000 Present value (300,000 x 2.4018) 720,540 Unearned interest income 179,460 Present value 720,540 Cash received 100,000 Sales price 820,540 Cost of generator 700,000 Gross income 20,540 Jan. 1 Cash 100,000 Notes receivable 900,000 Sales 820,540 Unearned interest income 179,460 70 Dec. 31 Cash 300,000 Notes receivable 300,000 31 Unearned interest income 86,465 Interest income 86,465 Date Collection Interest’ Principal Present value Jan. 1, 2016 720,540 Dec. 31, 2016 300,000 = 86,465 213,535 507,005 Dec. 31, 2017 300,000 —-60,841-—-239,159 267,846 Dec. 31, 2018 300,000 32,154 267,846 :~Propiem 12-4 Requirement 1 12/31/2016 Note receivable 2,500,000 Sales (500,000 x 3.99) 1,995,000 Unearned interest income 505,000 12/31/2017 Cash 500,000 Note receivable 500,000 Unearned interest income 159,600 Interest income (8% x 1,995,000) 159,600 Requirement 2 Note receivable (2,500,000 - 500,000) 2,000,000 Unearned interest income (505,000 - 159,600) « 345,400) Carrying amount - 12/31/2017 1,654,600 Requirement 3 Interest income for 2018 (8% x 1,654,600) 132,368 Problem 12-5 Face value of note 400,000 Present value (400,000 x 7118) 284,720 Unearned interest income 115,280 Present value 284,720Cash received Sales price 409,720 Carrying amount Gain on sale 2016 Jan. 1 Cash Notes receivable Accumulated depreciation Equipment Gain on sale of equipment 59,720 Unearned interest income Dec. 31 Unearned interest income Interest income Date Interest income Jan. 1, 2016 Dec. 31, 2016 34,166 Dec. 31,2017 38,266 Dec. 31,2018 42,848 2017 Dec. 31 Unearned interest income Interest income 38,266 125,000 350,000 59,720 125,000 400,000 150,000 500,000 115,280 34,166 34,166 71 Present value 284,720 318,886 357,152 400,000 Unearned interest 115,280 81,114 42,848 38,2662018 Dec. 31 Unearned interest income 42,848 Interest income 42,848 2019 Jan. 1 Cash 400,000 Notes receivable 400,000 Problem 12-6 1._ Note receivable from sale of building due 5/1/2017 2,500,000 Accrued interest on note receivable from sale of building from 5/1/2016 to 12/31/2016 (5,000,000 x 9% x 8/12) 300,000 Principal payment of note receivable from sale of land due on 7/1/2017: Annual instaliment 880,000 Interest from 7/1/2016 to 7/1/2017 (10% x 2,800,000) 280,000 600,000 Accrued interest on NR from sale of land from 7/1/2016 to 12/31/2016 (1/2 x 280,000) 140,000 Total current receivables - 12/31/2016 3,540,000 2._ NR from sale of building due 5/1/2018 2,500,000 NR from officer 2,000,000 NR from sale of land - noncurrent portion:Principal 2,800,000 Due 7/1/2017 (600,000) 2,200,000 Total noncurrent notes receivable - 12/31/2016 6,200,000 Problem 12-7 Answer B Note receivable - june 30, 2015 1,500,000 Less: Payment on July 1, 2016 500,000 Balance - July 1, 2016 1,000,000 Accrued interest from July 1, 2016 to June 30, 2017 (1,000,000 x 8%) 80,000 Problem 12-8 Answer B Interest income from July to December 2016 (10% x 5,000,000 x 6/12 250,000 Problem 12-9 Answer A (2,500,000 - 2,300,000) 200,000 Problem 12-10 Answer B Note receivable 1,700,000 Present value equal to cash price (1,600,000 x 90%) 1,440,000 Interest revenue _260,000Problem 12-11 Answer C November 2016 (500,000 x 1%) 5,000 December 2016 (500,000 x 1%) 5,000 Accrued interest receivable 10,000 Problem 12-12 Answer B Total payments (500,900 x 5) 2,504,500 Present value of note 1,948,500 Total interest revenue 556,000 Problem 12-13 Answer A First payment on January 1, 2016 600,000 Present value of remaining six payments (600,000 x 4.36) 2,616,000 Correct sales revenue 3,216,000 Problem 12-14 Answer C The note receivable is shown at the present value on December 31, 2016. Face value - remaining nine payments (500,000 x 9) 4,500,000 Present value (500,000 x 6.25) 3,125,000Unearned interest income 1,375,000 Problem 12-15 Question 1 Answer A NR from Zeta Question 2 Answer B NR from Yola (1,150,000 x .68) Problem 12-16 Question 1 Answer B Present value of NR (500,000 x 3.99) 1,995, Question 2 Answer C Interest income for 2017 (8% x 1,995,000) Question 3 Answer A NR - 12/31/2017 (2,500,000 ~ 500,000) Unearned interest income - 12/31/2017 (505,000 - 159,600) 345,400) Carrying amount - 12/31/2017 Question 4 Answer A Interest income for 2018 (8% x 1,654,600) Problem 12-17 Question 1 Answer Question 2 Answer Question 3 Answer owno Question 4 Answer Problem 12-18 Question 1 Answer C (2,712,000 - 2,200,000) Question 2 Answer B Note receivable - December 31, 2016 Present value (1,200,000 x 1.76) 2,112,000 Unearned interest income 288,000 1,000,000 782,000 159,600 2,000,000 ( 1,654,600 32.368 2,825,000 825,000 339,000 2,664,000 512,000 2,400,000Interest income for 2017 (9% x 2,112,000) 190,080 Question 3 Answer B Note receivable - December 31, 2017 1,200,000 Unearned interest income - 12/31/2017 (288,000 - 190,080) « 97,920) Carrying amount ~ December 31, 2017 1,102,080 Problem 12-19 Answer D Note receivable 4,000,000 Less: Present value (4,000,000 x .75) 3,000,000 Unearned interest income 1,000,000 The unearned interest income is amortized 3 years using the effective interes! method as follows: Present value, January 1, 2016 3,000,000 Interest income for 2016 (10% x 3,000,000) 300,000 Present value, December 31, 2016 3,300,000 Interest income for 2016 (10% x 3,300,000) 330,000 Present value, December 31, 2017 3,630,000 Interest income for 2018 (1,000,000 - 630,000) 320,000 Present value, December 31, 2018 4,000,000 Interest income for 2016 300,000 Interest income for 2017 330,000 Interest income for 2018 (simply the remainder) 370,000 Total interest income 1,000,000 Problem 12-20 1. Answer © Note receivable 6,000,000 Present value of note receivable (6,000,000 x .75) 4,500,000 Unearned interest income 1,500,000 Interest income: 2016 (10% x 4,500,000) 450,000 2017 (10% x 4,950,000) 495,000 2018 (1,500,000 - 450,000 - 495,000) 555,000 Total 1,500,0002. Answer D Present value of note receivable 4,500,000 Carrying amount of equipment 4,800,000 Loss on sale of equipment (300,000) Problem 12-21 Question 1 Answer D Present value of note receivable (1,000,000 x .712) 712,000 Carrying amount of equipment 800,000 Loss on sale (88,000) Question 2 Answer D Interest income for first year (12% x 712,000) 85,440 Question 3 Answer C Note receivable 1,000,000 Unearned interest income (288,000 - 85,440) (202,560) Carrying amount - December 31, 2016 797,440 Question 4 Answer A Interest income for 2017 (12% x 797,440) 95,693 Problem 12-22 Answer C Installment receivable - 1/1/2016 758,200 Payment on December 31, 2016 200,000 Interest for 2016 (10% x 758,200) 75,820 124,180 Carrying amount ~ 12/31/2016 634,020 Interest income for 2017 (10% x 634,020) 63,402 Problem 12-23 Answer B Note receivable - January 1, 2016 6,000,000 Principal payment on December 31, 2016: Annual payment 1,975,400 Interest (12% x 6,000,000) 720,000) 1,255,400 Carrying amount - December 31, 2016 4,744,600 Problem 12-24 Answer B Present value of note receivable (4,000,000 x .71) 2,840,000 Carrying amount of building 2,200,000 Gain on sale _640,000Problem 12-25 e 1,200,000 3,330,000 4,772,960 1,442,960 1,470,000 2,646,000 4,000,000 211,680 86 5,000,000 450,000 5,450,000 (4.207.400) 1,242,600CHAPTER 14 Problem 14-1 March | Cash Note payable - bank April 1 Cash Sales discount Accounts receivable 1,000,000 June 1 Cash Accounts receivable 2,000,000 Sept. 1 Note payable - bank Interest expense (12% x 2,000,000 x 6/12) Cash Problem 14-2 Requirement 1 2016 Oct. 1 Cash Discount on note payable (10% x 4,000,000) Note payable - bank 1 Interest expense (400,000 x 3/12) Discount on note payable 2017 Oct. 1 Note payable - bank Cash Dec. 31 Interest expense Discount on note payable Requirement 2 Current liabilities: Note payable - bank (Note 3) 4,000,000 Discount on note payable Carrying amount 3,200,000 Note 3 - Note payable - bank 2,000,000 2,000,000 980,000 20,000 2,000,000 2,000,000 120,000 2,120,000 3,600,000 400,000 4,000,000 100,000 100,000 4,000,000 4,000,000 300,000 300,000 (300,000) Accounts of P5,000,000 are pledged to secure the bank loan of P4,000,000.Problem 14-3 May 1 Accounts receivable - assigned Accounts receivable 800,000 1 Cash (640,000 - 20,000) Service charge Note payable - bank 5 Sales return Accounts receivable - assigned 30,000 May 10 Cash Sales discount (2% x 500,000) Accounts receivable - assigned 500,000 June 1 Note payable - bank Interest expense (2% x 640,000) Cash 7 Allowance for doubtful accounts Accounts receivable - assigned 10,000 800,000 620,000 20,000 640,000 30,000 88 490,000 10,000 490,000 12,800 502,800 10,00020 Cash Accounts receivable - assigned 200,000 July 1 Note payable - bank (640,000 - 490,000) Interest expense (2% x 150,000) Cash 1 Accounts receivable Accounts receivable - assigned 60,000 Accounts receivable - assigned 800,000 Less: Collections Sales discount Sales return Worthless accounts Balance Problem 14-4 July 1 Accounts receivable - assigned Accounts receivable 1,500,000 1 Cash (1,125,000 - 60,000) Service charge (4% x 1,500,000) Note payable ~ bank Aug. 1 Note payable - bank Accounts receivable - assigned 800,000 1 Interest expense (2% x 1,125,000) Cash Sept. 1 Cash Interest expense Note payable - bank Accounts receivable - assigned 500,000 Accounts receivable Accounts receivable - assigned 200,000 Collections by bank 500,000 Less: Payment of loan (1,125,000 - 800,000) 325,000 Excess collection Less: Interest (2% x 325,000) Cash remittance from bank 200,000 150,000 3,000 153,000 60,000 690,000 10,000 30,000 10,000 1,500,000 1,065,000 60,000 1,125,000 800,000 22,500 22,500 168,500 6,500 325,000 200,000 175,000 6,500 168,500