Chapter 2 EOC assignment

 The Allowance for Doubtful Accounts is used when Bad Debt Expense is recorded prior to knowing the specific accounts receivable that will be un collectible..  Normal balance of the Al

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QUESTIONS

Financial Accounting: Tools for Decision-Making, 7th Canadian Edition (Kimmel P.D et

al., 2017)

Chapter 7 "Internal Control and Cash"

Q5: How do documentation procedures contribute to good internal control?

 Documents provide evidence that transactions and events have occurred at specified times and at specified amounts Documentation procedures helps prevent unauthorized orfraudulent use of documents so that invoices cannot be misused

Q15: Who should be responsible for preparing a bank reconciliation? Why

 The person who prepares a bank reconciliation should have no other cash duties Becauseeveryday, an independent employee can then compare the amount of cash deposited per the deposit slip with the amount of cash receipts recorded that day to ensure that funds deposited were also recorded If duties are segregated, no one would be able to steal cheques and also be able to record their receipt to cover up the theft

Q17: Paul Pascal is confused about the lack of agreement between the cash balance per books

and the balance per bank Explain the possible causes for the lack of agreement to Paul, and give

an example of each cause

and Errors

For example, if an item is on the book but has not appeared on the bank statement

( outstanding cheques and deposits in transit), the items are entered as an adjustment to balance per bank statement If an item is on the bank statement but has not been entered

on the books, ), the items are entered as an adjustment to balance per books ( bank service charges, electronic deductions, deposit )

Chapter 8 "Reporting and Analysing Receivables"

Q2: Distinguish between trade receivables and nontrade receivables.

 Trade Receivable are amounts owed by customers for goods and services sold in the course of a firm’s ordinary business activities

 Nontrade Receivable are the total claims resulting from transactions or events that are not

a firm’s ordinary business activity,

Q7: (a) What is the purpose of the account Allowance for Doubtful Accounts?

 The Allowance for Doubtful Accounts is used when Bad Debt Expense is recorded prior

to knowing the specific accounts receivable that will be un collectible The expense is matched more closely with the revenues—the goal of accounting's matching principle

(b) Although the normal balance of this account is a credit balance, it can sometimes have a debit balance Explain how and when this can happen

 Normal balance of the Allowance for Doubtful Account is credit balance, it can

sometimes have a debit balance when the Allowance for Doubtful Account decrease morethan when the Allowance for Doubtful Account increase

Q9: Why is the bad debts expense that is reported on the income statement usually not the same

amount as the allowance for doubtful accounts amount reported in the statement of financial position?

net income Bad debt expense is reported in income statement

Allowance for Doubtful Account is current asset The Statement of Financial Position included current asset and non current asset Allowance for Doubtful Account is reported The Statement of Financial Position

Q10: Mohamed cannot understand why the carrying amount of accounts receivable does not

change when an uncollectible account is written off under the allowance method Clarify this for Mohamed

 When written off under the allowance method

Allowance for Doubtful Account XX

Account Receivable XX

In beginning, Account Receivable XX

Allowance for Doubtful Account XX

Q18: Indicate how accounts receivable and allowance for doubtful accounts should be presented

on the statement of financial position

 Allowance for Doubtful Account XX

Account Receivable XX

The Statement of Financial PositionCurrent asset

Account receivable X1

Q19: Saucier Ltd has accounts receivable, notes receivable due in three months, notes

receivable due in two years, an allowance for doubtful accounts, an allowance for doubtful notes, sales tax recoverable, and income tax receivable How should the receivables be reported

on the statement of financial position?

 Current asset

Account receivable X1

Less Allowance for doubtful account X2

Carrying amount X1 – X2

Note receivale (3 months) X3

Sales tax recoverable X4

Income tax receivable X5

Q20: (a) Identify three income statement accounts that are related to receivables.

(b) Indicate where each account would be reported on the income statement

(e) 1(f) 2

Deposits recorded in books: 5000

Deposits recorded on bank statement: 4000

At the end: 1000

February

At the beginning: 1000Deposits recorded in books: 5600Deposits recorded on bank statement: 4600

At the end: 2000

November

Outstanding cheques at the beginning: 0

Cheques recorded in books: 27 100

Cheques recorded on bank statement: 25 900

Outstanding cheques at the end: 1 200

DecemberOutstanding cheques at the beginning:1 200Cheques recorded in books: 23 200Cheques recorded on bank statement: 19 700Outstanding cheques at the end: 4 700

BE7-8:

a) Kashechewan Inc corrects by reducing the cash $90

The bank adds back to the bank balance $415

 Adjusted cash balance per bank: 17,080

Balance per books : 16,320

bank services charges 90

 Adjusted cash balance per books: 17,080

BE7-11:

Debit account cash 2,170

Credit account receivable 2,170

Debit account expense 90

Credit account cash 90

Debit account receivable 1,320

Credit account cash 1,320

Chapter 8 "Reporting and Analysing Receivables"

BE8-2

July 1

Debit account Receivable $58000

Credit sale Revenue $58000

Debit cost of goods sold $32000

Credit inventory $32000

July 8

Debit sale return $6400

Credit account Receivable $6400

Debit inventory $4320

Credit cost of goods sold $4320

July 9 Debit cash $50568Debit sale discount $1032Credit account receivable $51600

Aug 1 Debit note Receivable $51600 Credit account receivable $51600

Sep 1 Debit cash $52632Credit note receivable $51600Credit interest receivable $1032

April 28

Debit account Receivable $26000

Credit sale Revenue $26000

Debit cost of goods sold $18000

Credit Inventory $18000

May 1

Debit account Receivable $35000

Credit sale Revenue $35000

Debit cost of goods sold $24000

Credit inventory $24000

May 3 Debit sale return $1200

Credit account Receivable $1200

Debit inventory $850

Credit cost of goods sold $850

May 6

Debit cash $24304

Debit sale discount $496

Credit account receivabe $24800

June 1

Debit note Receivable $35000

Credit account receivable $35000

July 1

Debit cash $35525

Credit note receivable $35000

Credit interest receivable $525

BE8-4

Chiu Corp

Account receivable

Debit bad debt expense $31665

Credit allowance for doubtful account $31665

c)Adjusted = 44 840 + 8 920 = 53 760

Debit bad debt expense $31665

Credit allowance for doubtful account $31665

BE8-6

a)

3 600

4 800

7 200

8 000

Total uncollectible : 23 680

b)Adjusted = 23 680 – 3 600 = 23 080

Debit bad debt expense 23 080

Credit allowance for doubtful account 23 080

c)Adjusted = 23 680 + 5 400 = 29 080

Debit bad debt expense 29 080

Credit allowance for doubtful account 29 080

BE8-7

Debit account receivable $480000

Credit Allowance for doubtful account $480000

Debit account receivable $11000

Credit allowance for doubtful account $11000

Debit cash $11000

Credit Account receivable $11000

BE8-9 August 1

Debit note Receivable $26000

Credit account receivable $26000

August 31

Debit interest receivable $1560 Credit interest revenue $1560

Sept 31

Debit interest receivable $1560

Credit interest revenue $1560

Oct 1

Debit cash $29120

Credit interest receivable $3120

Credit note Receivable $26000

BE8-10 Jan 2 Debit account Receivable $48000 Credit sale Revenue $48000

Debit cost of goods sold $32000

Credit inventory $32000

Feb 1 Debit note receivable $48000

Credit account receivable $48000

Apr 30

Debit interest receivable 480000 3/12 7% = $840

Credit interest revenue $840

May 1

Debit interest receivable $280

Credit interest revenue $280

June 1

Debit interest receivable $280

Credit interest revenue $280

July 1

Debit cash $49400

Credit note Receivable $48000

Credit interest receivable $840

Credit interest Revenue $560

BE8-11

April 1

Debit note receivable $10000

Credit sale revenue $10000

Debit cost of goods sold $6000

Credit inventory $6000

Dec 31

Debit interest receivable $10000 9% 9/12 = $675

Credit interest revenue $675

1/1

Debit interest receivable $75

Credit interest revenue $75

2/1 Debit interest receivable $75

Credit interest revenue $75

3/1

Debit interest receivable $75

Credit interest revenue $75

4/1

Debit cash $ 10900

Credit note Receivable $10000

Credit interest receivable $675

Credit interest Revenue $225

BE8-13 Current asset Account Receivable $470000

Less Allowance for doubtful account $30000

Carrying amount $440000

Cash $150000

Inventory $380000

Notes receivable—due November 1, 2018 $300000

Prepaid rent $ 8,000

Sales tax recoverable $ 38,000

Held for trading investments $ 330,000

Non current Asset

Notes receivable—due April 1, 2021 $ 400,000

Debit account cash 2,600

Credit account receivable 2,600

Debit account cash 199,680

Credit account receivable 199,680

Debit account receivable 176,978Credit account cash 176,978

Debit account payable to employees 39,170Credit account cash 39,170

E7-6:

Applicable

JournalEntryRequired

Deposits in transit on 30th June: 2 000

Deposits in transit in books: 14 750

Deposits in transit on bank statement: 15 820

Deposits in transit on 31st July: 930

Deposits in transit on 31st July: 930

Deposits in transit in books: 22 900

Deposits in transit on bank statement: 22 500

Deposits in transit on 31st August: 1 330

Outstanding chequeson 30th June: 570

Chequesin books: 18 200

Cheques on bank statement: 17 200

Outstanding cheques on 31st July: 1 570

Outstanding chequeson 31st July: 1 570

Chequesin books: 22 700

Cheques on bank statement: 23 520

Outstanding cheques on 31st August: 750

Balance per books : 8 953

Add:

EFT 1 276

Error 90

Deduct:

bank services charges 40

 Adjusted cash balance per books: 10 279

Debit account cash 1 276

Credit account receivable 1 276

Debit account cash 90

Credit account receivable 90

Debit account expense 40

Credit account cash 40

 Adjusted cash balance per bank: 15,342

Balance per books : 16 757

Add:

Deduct:

NSF 1,350

NSF fee 25

Bank services charges 40

 Adjusted cash balance per books: 15,342

Chapter 8 "Reporting and Analysing Receivables"

Compton’s books

Jan 6

Debit account receivable $45200

Credit sale revenue $45200

Debit cost of goods sold $26500

Credit inventory $26500

Jan 15

Debit cash $44296

Debit sale discount $904

Credit Account receivable $45200

Singh’s books Jan 6

Debit inventory $45200

Account Payable $45200

Jan 15 Debit account payable $45200

Credit cash $904

Credit purchased discount $44296

E8-3

a) the adjusting entry at December 31= 31 600

b) the adjusting entry at December 31 = 38 400

E8-4

(a)

5 200

5 040

10 200

12 800

Total uncollectible : 33 240

(b) adjusted = 33 240 – 8 800 = 24 440

Debit bad debt expense 24440

Credit allowance for doubtful account 24440

(c) Carrying amount = 336 760

E8-5

(a)

Debit bad debt expense $18800

Credit allowance for doubtful account $18800

Debit allowance for doubtful account $1900

Credit account receivable $1900

Debit cash $1900

Credit account receivable $1900

Debit account receivable $1900

Credit allowance for doubtful account $1900

18 800

1 900

16 800

Debit note receivable $24000

Credit account receivable $24000

Debit cash $24226

Credit note receivable $24000

Credit interest receivable $226

Debit interest receivable $116000 x 9% x 4/12 = $3480 $24000 x 6% x 2.5/12 = $300 Credit interest revenue $3780

Debit bad debt expense $18200

Credit allowance for doubtful account $18200

E8-10 statement of financial position Current asset Account receivable $18200

Less Allowance for doubtful accounts $ 1300

Carrying amount $16900

Notes receivable (current) $ 25000

Less Allowance for doubtful notes (current) $5000

Carrying amount $20000

Sales tax recoverable $ 3150

Prepaid insurance $1500

Inventory $26400

Cash $7500

Advances to employees $2900

Non asset

Sale $370000

Sale discount $12000

Net sale $358000

Gross profit $358000

Operating epense Bad debt expense $2000

income from operations $356000

other revenue and expense Interest expense $2400

Interest revenue $ 6000

Net income $359600

Intermediate Financial Accounting - Volume 1 (Version 2019 - Revision A) by (Glenn

Arnold & Suzanne Kyle):

6-6

allowance = 4% x 225,000 + 2,340 = 11,340

Debit account 642 11,340

Credit account 229 11,340

1,410

1,605

840

2,800

Total = 6,655

Debit account 642 8,995

Credit account 229 8,995

Allowance = 2% x 225,000 – 2,340 = 2,160

Debit account 642 2,160

 X = 155 000

Debit account 229 155 000

Credit account 642 155 000

b net account receivable = 50 950 000 – 500 000 = 50 450 000

Introduction to Financial Accounting (Version 2019 - Revision A) by (Henry Dauderis &

monthly bank reconciliations and making any necessary journal entries

(b) They should Segregation of Duties, Documentation

 Adjusted cash balance per bank: 18,046

Balance per books : 12,934

Add:

EFT 5,230

Deduct:

Service charges and credit card fees 118

 Adjusted cash balance per books: 18,046

Debit account cash 5,230

Credit account receivable 5,230

Debit account expense 118

Credit account cash 118

(a) Cash equivalents include bank accounts and marketable securities, which are debt

securities with maturities of less than 90 days Since cash equivalents are closely related

to cash, the true meaning of the cash account is not distorted on the balance sheet

(b) Restricted cash may be classified as a current or non-current asset depending on how longit's expected to remain restricted If the cash in question is expected to be used within oneyear of the balance sheet date, the cash should be classified as a current asset However, if

it is anticipated that the cash will remain unavailable for use for more than a year, then it should be classified as a non-current asset

Chapter 8 "Reporting and Analysing Receivables"

P8-1A:

a)

Debit account receivable $5400000

Credit sale revenue $5400000

Debit cost of goods sold $2970000

Credit inventory $2970000

Debit sale return and allowance $80000

Credit account receivable $80000

Debit inventory $44000

Credit cost of goods sold $44000

Debit sash $5400000

Credit account receivable $5400000

Debit interest receivable $400000

Credit interest revenue $400000

Debit allowance for doubtful account $160000

Credit account receivable $160000

Debit cash $72000