AC 302 CHAPTER 7 QUESTION AND PROBLEMS
Exercise 7 QUESTION 1
Name Date
Instructor Course
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E7-1 (Determining Cash Balance) The controller for Weinstein Co. is attempting to determine the amount of cash and cash equivalents to be reported on its December 31, 2012, balance sheet. The following information is provided.
1. Commercial savings account has a balance of: $600,000 and a commercial checking
account has a balance of $800,000 Both are held at First National Bank of Olathe.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Weinstein to
write checks on this balance, $5,000,000
3. Travel advances for executive travel for the first quarter of the next year (employee to reimburse
through salary reduction) are: $180,000
4. A separate cash fund is restricted for the retirement of long-term debt. Its balance is $1,500,000
5. Petty cash fund of: $1,000
6. An I.O.U. from Marianne Koch, a company customer, in the amount of $150,000
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to
deposit its cash receipts. At the present time, the company has no deposits at this bank.
8. The company has two certificates of deposit, each totaling $500,000 These CDs have
a maturity of 120 days.
9. Weinstein has received a check that is dated January 12, 2013, in the amount of $125,000
10. Weinstein has agreed to maintain a cash balance of $500,000 at all times at First National
Bank of Olathe to ensure future credit availability.
11. Weinstein has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in
60 days.
12. Currency and coin on hand amounted to $7,700
Instructions:
"(a) Compute the amount of cash to be reported on Weinstein Co.- balance sheet at
December 31, 2012."
Cash for Weinstein includes the following:
1. Commercial savings account at First National Bank of Olathe with a balance of: Amount
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Cash reported on December 31, 2012, balance sheet: Amount
"(b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2012,
balance sheet."
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Exercise 7-5
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E7-5 (Record Sales Gross and Net) On June 3, Bolton Company sold to Arquette Company
merchandise having a sale price of $2,000 with terms of 2/10, n/60, f.o.b.
shipping point. An invoice totaling $90 , terms n/30, was received by Arquette on
June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Arquette Company.
Instructions:
"(a) Prepare journal entries on the Bolton Company books to record all the events noted above under
each of the following bases:
(1) Sales and receivables are entered at gross selling price."
Jun 3 Account Title
Account Title
Account Title
Jun 12 Account Title
Account Title
Account Title
(2) Sales and receivables are entered at net cash discounts.
Jun 3 Account Title
Account Title
Account Title
Jun 12 Account Title
Account Title
Account Title
"(b) Prepare the journal entry under basis 2, assuming that Arquette Company did not remit payment
until July 29."
Jul 29 Account Title
Account Title
Account Title
Problem 7-1
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P7-1 (Determine Proper Cash Balance) Francis Equipment Co. closes its books regularly on December 31, but at the end of 2012 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of January were recorded as December transactions. The information is given below.
1. January cash receipts recorded in the December cash book totaled $45,640 , of which
$28,000 represents cash sales, and $17,640 represents collections on account for
which cash discounts of $360 were given.
2. January cash disbursements recorded in the December check register liquidated accounts payable
of $22,450 on which discounts of $250 were taken.
3. The ledger has not been closed for 2012.
4. The amount shown as inventory was determined by physical count on December 31, 2012.
The company uses the periodic method of inventory.
Instructions:
(a) Prepare any entries you consider necessary to correct Francis- accounts at December 31.
Dec 31, 12 Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Dec 31, 12 Account Title Amount
Account Title Amount
Account Title Amount
"(b) To what extent was Francis Equipment Co. able to show a more favorable balance sheet at
December 31 by holding its cash book open? (Compute working capital and the current ratio.)
Assume that the balance sheet that was prepared by the company showed the following amounts:"
Per Balance Sheet After Adjustment
Current assets Debit Credit Debit Credit
Cash $39,000 Amount
Receivables 42,000 Amount
Inventories 67,000 Amount
Totals: $148,000 Formula
Current Liabilities
Accounts Payable $45,000 Amount
Other Current Liabilities 14,200 Amount
Totals: $59,200 Formula
Working capital Formula Formula
Current ratio: Formula to 1 Formula to 1
Problem 7-3
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P7-3 (Bad-Debt Reportingâ€â€Aging) Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow- Accounts Receivable account
was $555,000 and the Allowance for Doubtful Accounts had a credit balance of
$40,000 The year-end balance reported in the balance sheet for the Allowance for Doubtful
Accounts will be based on the aging schedule shown below.
Days Account Outstanding Amount Probability of Collection
Less than 16 days $300,000 0.98
Between 16 and 30 days 100,000 0.90
Between 31 and 45 days 80,000 0.85
Between 46 and 60 days 40,000 0.80
Between 61 and 75 days 20,000 0.55
Over 75 days 15,000 0.00
Instructions:
(a) What is the appropriate balance for the Allowance for Doubtful Accounts at the year-end?
Days Account Outstanding Amount Probability of Collection Doubtful Accts:
0-15 days $300,000 0.98 Formula
16 - 30 days 100,000 0.90 Formula
31 - 45 days 80,000 0.85 Formula
46 - 60 days 40,000 0.80 Formula
61 - 75 days 20,000 0.55 Formula
Over 75 days 15,000 0.00 Formula
Formula
Enter text answer here.
(b) Show how Accounts Receivable would be presented on the balance sheet.
Account Title Amount
Less: Account Title Amount
Text Title Formula
(c) What is the dollar effect of the year-end bad debt adjustment on the before-tax income?
Enter text answer as desired here.
Text Title Amount
Text explanation as required. Amount
Text Title Formula
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