Ac300 Unit 9 Wiley

Exercise 7-2

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Presented below are a number of independent situations.

For each individual situation, determine the amount that should be reported as cash.

1. Checking account balance $926,100; certificate of deposit $1,419,300; cash advance to subsidiary of $990,000; utility deposit paid to gas company $198.

Cash balance		
$Entry field with correct answer

2. Checking account balance $505,150; an overdraft in special checking account at same bank as normal checking account of $20,000; cash held in a bond sinking fund $244,910; petty cash fund $373; coins and currency on hand $1,420.

Cash balance		
$Entry field with correct answer

3. Checking account balance $606,690; postdated check from a customer $14,820; cash restricted due to maintaining compensating balance requirement of $113,770; certified check from customer $9,020; postage stamps on hand $640.

Cash balance		
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4. Checking account balance at bank $47,050; money market balance at mutual fund (has checking privileges) $48,340; NSF check received from customer $834.

Cash balance		
$Entry field with correct answer

5. Checking account balance $703,730; cash restricted for future plant expansion $514,750; short-term Treasury bills $190,100; cash advance received from customer $967 (not included in checking account balance); cash advance of $7,750 to company executive, payable on demand; refundable deposit of $26,200 paid to federal government to guarantee performance on construction contract.

Cash balance		
$Entry field with correct answer




Exercise 7-4

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Your accounts receivable clerk, Mary Herman, to whom you pay a salary of $2,145 per month, has just purchased a new Audi. You decided to test the accuracy of the accounts receivable balance of $167,310 as shown in the ledger.

The following information is available for your first year in business.
(1)		Collections from customers		$283,140
(2)		Merchandise purchased		457,600
(3)		Ending merchandise inventory		100,100
(4)		Goods are marked to sell at 40% above cost		

Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account.

The ending balance of accounts receivable from customers		$Entry field with correct answer
Apparent shortage		$Entry field with correct answer




Problem 7-3
Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow's Accounts Receivable account was $584,900 and the Allowance for Doubtful Accounts had a credit balance of $40,300. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below.


Days Account Outstanding

Amount
Probability of
Collection
Less than 16 days		$311,000		0.97
Between 16 and 30 days		110,700		0.90
Between 31 and 45 days		84,200		0.85
Between 46 and 60 days		40,600		0.80
Between 61 and 75 days		22,100		0.57
Over 75 days		16,300		00


	
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(a)

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What is the appropriate balance for Allowance for Doubtful Accounts at year-end?

Balance for Allowance for Doubtful Accounts		$Entry field with correct answer
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(b)

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Show how accounts receivable would be presented on the balance sheet.

Manilow Corporation
Balance Sheet (Partial)
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(c)

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What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

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