Exam 4: Payment for Goods and Services: Cash and Accounts Receivable

The Allowance for uncollectible accounts normally decreases total assets.

Which of the following is NOT correct when preparing a bank reconciliation?

Prepare the June bank reconciliation for Low Company using the reconciling items below.The cash balance for Low Company was $8,110.The balance on the bank statement was $12,505. a.$50 bank service charge b.$4,889 worth of outstanding checks c.$118 check for insufficient funds returned by the bank d.Low Company deposited $576 worth of checks that are not on the bank statement. e.The bank collected a note receivable for Low Company worth $275. f.The bank charged Low Company $25 to collect the note receivable.

Which financial statement shows the Allowance for uncollectible accounts?

On July 1,2012,Homer,Inc.loaned a customer $10,000 on a 3-month,9% note. Part A: Show the effect on the accounting equation of the July 31,2012 adjusting entry for interest.Include both account titles and amounts. Part B: Put an X to indicate each financial statement that is affected by the adjusting entry to accrue interest. Part C: Would your answer in Part A be different if the note were a $10,000,6-MONTH,9% note,instead of a 3-month note?

Team Instructions: Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final correct copy of the problem.Each team should turn in only one copy of the problem for grading,along with the annual report that they used.All team members will receive the same grade. Part A: Enter the June 2012 transactions and adjustments for Tim's Tams,Inc.in the accounting equation below. 1.June 1 Collected $10,000 of accounts receivable from May sales 2.June 6 Paid $5,000 of its accounts payable from May purchases 3.June 6 Paid $600 cash for supplies. 4.June 8 Purchased 1,000 caps for $6,350 on account 5.June 30 During June,Tim's Tams sold 1,000 baseball caps for $10 each on account.Cost of goods sold was $6,320. 6.June 30 Tim's Tams declared and paid a $4,000 cash dividend to its shareholder. 7.June 30 Adjusted for insurance used during the month.Recall that on May 1,Tim's paid $600 for 3 months of insurance coverage. 8.June 30 Counted the office supplies and found that $400 of supplies have not been used. 11.June 30 Recorded interest on the $16,000,4-month,6% note payable for the month Part D: Part E: Part F: The following information from April and May might be useful in answering some of the questions below:

In 2011,Seven Seas sold $20,000 worth of merchandise on account.Its accountant estimated that $400 of that amount would be uncollectible.In 2011,Saki,a Japanese customer,purchased $500 of merchandise on account from Seven Seas.In 2012,Saki declared bankruptcy while still owing the $500.What is the amount of bad debts expense Seven Seas should report on December 31,2011?

South Sea's sales were $60,000 for 2011 and $45,000 for 2012.Average net receivables were $4,000 for both 2011 and 2012.The average collection period for 2011 was ________.

The Flying Pigs rugby team went bankrupt and owed Team Shirts $364.Using the accounting equation format,prepare the entry to record the write-off.Include the account titles and amounts.

Cash and cash equivalents is a line item found on the balance sheet that represents the amounts customers owe the company.

The adjusting entry for bad debts expense affects __________.

On July 31,the accountant for Team Shirts was reviewing items related to accounts receivable.The following information was gathered for July.Credit sales for July were $13,700.Bad debts are estimated to be 3% of sales.The unadjusted balance in the Allowance for uncollectible accounts is $(750). 1.What is the amount of bad debts expense for July and on which financial statement is it found? 2.What will be the amount in the Allowance for uncollectible accounts at July 31 and on which financial statement is it found?

Identify each of the following reconciling items in the bank reconciliation process as being a reconciling item either on the bank's side (Bank)or on the company's side (Book)of the bank reconciliation. _____ 1.A bank fee for printing new checks _____ 2.Team Shirts correctly deposited a check for $882.The bank recorded the check as $828. _____ 3.Outstanding checks _____ 4.Deposits in transit _____ 5.Team Shirts deposited a check that it had recorded as $89.00.The bank correctly recorded the check as $98.

Timmy's Tires sold $18,750 worth of tires to customers using MasterCard.The credit card fee is 4% of sales.What is the amount of cash Timmy's Tires should collect from sales?

Ace Electronics accepted a promissory note from Fenstermaker,who promised to pay Ace $2,000 plus 6% interest at the end of six months.What is the amount of interest that will be paid at the end of the six-month period?

Prepare Gloria's Glassware's November bank reconciliation.Below is a list of items that will be included in the reconciliation.The balance on the bank statement was $12,575.The cash balance for Gloria's Glassware was $11,483. a.Gloria's Glassware correctly deposited a check for $87.The bank recorded the check for $78. c.Bank service charges for the month were $45. d.$1,555 worth of checks was outstanding. e.A deposit of $400 was mailed to the bank,but has not been recorded by the bank.

The current ratio provides a test of a company's ability to meet its short-term obligations.

What is the effect on the accounting equation when a company collects an account receivable?

Alpha Company's bookkeeper decided to save time by accepting the cash balance shown on the bank statement as the company's correct ending cash balance each month.Explain to the bookkeeper why a monthly bank reconciliation should be prepared.

Ace Electronics accepted a promissory note from Fenstermaker,who promised to pay Ace $2,000 plus 6% interest at the end of six months.When Fenstermaker first gives Ace the note,Fenstermaker should record ________.