Chapter 6 Reporting and Analyzing Cash and Internal Controls
Shamara Systems most recently reconciled its bank balance on April 30 and reported two checks outstand-
ing at that time, No. 1771 for $781 and No. 1780 for $1,425.90. The following information is available for
its May 31, 2013, reconciliation.
Problem 6-5B
Prepare a bank reco
and record adjustm
From the May 31 Bank Statement
P3
PREVIOUS BALANCE
FRECKS AND DEBITS
TOTAL DEPOSITS AND CREDITS
CURRENT BALANCE
18,290.70
13,094.80
16,566.80
21,762.70
CHECKS AND DES.
DEPOSITS AND CREDITS
DAILY BALANCE
Amount
Date No. Amount
05/01 1771 781.00
05/02 1783 382.50
05/04 1782 1,285.50
05/11 1784 1,449.60
05/18
431.80 NSF
05/25 1787 8,032.50
05/26 1785 63.90
05/29
1788 654.00
05/31
14.00 SC
Date
05/04
05/14
05/22
05/25
05/26
2,438.00
2,898.00
1,801.80
7,350.00 CM
2,079.00
Date
04/30
05/01
05/02
05/04
05/11
05/14
05/18
05/22
05/25
05/26
05/29
05/31
Amount
18,290.70
17,509.70
17,127.20
18,279.70
16,830.10
19,728.10
19,296.30
21,098.10
20,415.60
22,430.70
21,776.70
21,762.70
ints receivable.
h. In adjusting the accounts on December 31, the company estimated that 1% of accounts receivable
will be uncollectible.
Required
(h) Dr. Bad Del
$9.773
Prepare journal entries to record Sherman's 2012 and 2013 summarized transactions and its year-end
adjusting entry to record bad debts expense. (The company uses the perpetual inventory system and it
applies the allowance method for its accounts receivable. Round amounts to the nearest dollar.)
At December 31, 2013, Ingleton Company reports the following results for the year:
Cash sales ...
Credit sales ..
$1,025,000
1,342,000
Problem 7-3B
Estimating and repo
bad debts
In addition, its unadjusted trial balance includes the following items:
P2
I
counts receivable ..
cwance for doubtful accounts
GO
$575,000 debit
7,500 credit
Og
Required
Check Bad debts e
(1b) $35,505, (1c) $2
1. Prepare the adjusting entry for Ingleton Co. to recognize bad debts under each of the following inde-
pendent assumptions.
a. Bad debts are estimated to be 2.5% of credit sales.
b. Bad debts are estimated to be 1.5% of total sales.
C. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31,
2013, balance sheet given the facts in part la.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31,
2013, balance sheet given the facts in part 1c.
Hovak Company has credit sales of $4.5 million for year 2013. At December 31, 2013, the company's Problem 7-4B
diusted debit balance of $3,400. Hovak prepares a schedule of its Aging accounts re
nu nerience, it estimates the percent of accounting for bac
a. Bad debts are estimated to be 2.5% of credit sales.
b. Bad debts are estimated to be 1.5% of total sales.
Check Bad debts
(1b) $35,505, (1c) $
c. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31,
2013, balance sheet given the facts in part la.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31,
2013, balance sheet given the facts in part 1c.
Hovak Company has credit sales of $4.5 million for year 2013. At December 31, 2013, the company's Problem 7-4)
Allowance for Doubtful Accounts has an unadjusted debit balance of $3,400. Hovak prepares a schedule of its Aging accounts
December 31, 2013, accounts receivable by age. On the basis of past experience, it estimates the percent of accounting for
receivables in each age category that will become uncollectible. This information is summarized here.
P2
lax
10 -
B / U
PRAWA
Arial
File Edit View insert the trade para acounting Window Help
2 0
DAL 2t de 43 100%
Expected Percent
Uncollectible
Age of
Accounts Receivable
1
December 31, 2017
Accounts Receivable
2.0%
2
Not yet due
4.0
$396,400
3
8.5
277,800
1 to 30 days past due
31 to 60 days past due
4
39.0
48,000
5
82.0
61 to 90 days past due
6,600
6
Over 90 days past due
2,800
7
8
I Sheet1 Sheet2 X Sheet3
05/25
05/26
05/29
05/31
20,415.60
22,430.70
21,776.70
21,762.70
From Shamara Systems' Accounting Records
Cash Receipts Deposited
Cash Disbursements
Check
Cash
Debit
Cash
Date
No.
Credit
May
4
2,438.00
1782
1,285.50
2,898.00
1783
382.50
1.801.80
1784
1,449.60
Ia & m
1785
63.90
26
2,079.00
1786
353.10
2,727.30
1787
8,032.50
11,944.10
644.00
1788
639.50
1789
12,850.60
Acct. No. 101
Cash
Balance
Credit
PR
Debit
Date
Explanation
16,083.80
28,027.90
30
Balance
R7
11,944.10
15,177.30
Apr.
May
12,850.60
31
Total receipts
D8
31
Total disbursements
the recordkeeper misread
aging of accounts receivable method.
2013, using
(2) Dr. Bad Debts Expense
$31,390
2. Prepare the adjusting entry to record bad debts expense at December 31, 2013.
Analysis Component
3. On July 31, 2014, Hovak concludes that a customer's $3,455 receivable (created in 2013) is uncollect.
ible and that the account should be written off. What effect will this action have on Hovak's 2014 net
income? Explain.
n 7-5B
The following selected transactions are from Springer Company.
g and journalizing notes
e transactions
2012
3
Nov.
1 Accepted a $4,800, 90-day, 8% note dated this day in granting Steve Julian a time extension on
his past-due account receivable.
Dec. 31 Made an adjusting entry to record the accrued interest on the Julian note.
2013
7.30, Cr. Interest
venue $32
130, Cr. Interest
enue $124
Jan. 30 Received Julian's payment for principal and interest on the note dated November 1.
Feb. 28 Accepted a $12,600,8%, 30-day note dated this day in granting a time extension on the past-
due account receivable from King Co.
Mar. 1 Accepted a $6,200, 50-oxy, 12% note dated this day in granting Myron Shelley a time exten-
sion on his past-due account acceivable.
30 The King Co. dishonoscd it note when presented for payment.
April 30 Received payment of principal plus interest from M. Shelley for the March 1 note.
June 15 Accepted a $2,000, 72-day, 8% note dated this day in granting a time extension on the past-due
account receivable of Ryder Solon.
21 Accepted a $9,500, 90-day, 8% note dated this day in granting J. Felton a time extension on his
past-due account receivable.
Aug. 26 Received payment of principal plus interest from R. Solon for the note of June 15.
Sep. 19 Received payment of principal plus interest from J. Felton for the June 21 note.
Nov. 30 Wrote off King's account against Allowance for Doubtful Accounts.
19, Cr. Interest
nue $190
Required
1. Prenare inurnal entries to record these transactions and events. (Round amounts to the nearest dollar.
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