1.

Under the allowance method of recognizing bad debts in trade accounts receivable, the effect of
writing off an account to an entity’s working capital is (no effect)
2. JG Company had an accounts receivable balance of 40,000 on December 31, 2001, and 65,000 on
December 31, 2002. The company wrote off 10,000 of accounts receivable during 2002, and
collected 2,000 on an account written off in 2000. Sales for the year 2002 totaled 520,000. All sales
were on account. The amount collected from customers on account receivable during 2002 was
(487,000).
3. RGI Company had an accounts receivable balance of 45,000 on December 31, 2001, and 60,000 on
December 31, 2002. The company wrote off 12,000 of accounts receivable during 2002, and
collected 2,500 on an account written off in 2000. Sales for the year 2002 totaled 550,000. All sales
were on account. The amount collected from customers on accounts receivable during 2002 was
(525,000)
4. At the close of its first year of operations, December 31, 2004, Linn Company had accounts
receivable of 490,000, after deducting the related allowance for doubtful accounts. During 2004, the
company had charges to bad debts expense of 90,000 and wrote off, as uncollectible, accounts
receivable of 40,000. What should the company report on its balance sheet at December 31, 2004 as
accounts receivable before the allowance for doubtful accounts? (540,000)
5. Before year-end adjusting entries, Bass Company’s account balances at December 31, 2004, for
accounts receivable and the related allowance for uncollectible accounts were 700,000 and 45,000,
respectively. An aging of accounts receivable indicated that 62,500 of the December 31 receivables
are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is
(637,500)
6. During the year, Jantz Company made an entry to write off a 4,000 uncollectible account. Before this
entry was made, the balance in accounts receivable was 80,000 and the balance in the allowance
account was 4,500. The net realizable value of accounts receivable after the write-off entry was
(75,500)
7. The following is available for Reagan Company:

Allowance for doubtful accounts at December 31, 2003 8,000

Credit sales during 2004 400,000
Accounts receivable deemed worthless and written off during 2004 9,000

As a result of a review and aging of accounts receivable in early January 2005, however, it has been
determined that an allowance for doubtful accounts of 9,500 is needed at December 31, 2004. What
amount should Raegan record as “bad debt expense” for the year ended December 31, 2004?
(10,500)

Use the following information for the next two questions:

A trial balance before adjustments included the following:

Debit Credit
Sales 425,000
Sales return and allowance 14,000
Accounts receivable 53,000
Allowance for doubtful accounts 760
8. If the estimate of uncollectible is made by taking 1% of net sales, the amount of the adjustment is
(4,110)
9. If the estimate of uncollectible is made by taking 10% of gross account receivables, the amount of
the adjustment is (4,540)
10. For the month of December, the records of Balin Corporation show the following information:

Cash received on accounts receivable 70,000

Cash sales 60,000
Accounts receivable, December 1 160,000
Accounts receivable, December 31 148,000
Accounts receivable written off as uncollectible 2,000

The corporation uses the direct write-off method in accounting for uncollectible accounts receivable

What are the gross sales for the month of December? (120,000)
11. An analysis and aging of accounts receivable of Lucille Company at December 31, 2002, showed the
following:

Accounts receivable 840,000

Allowance for Doubtful Accounts (before adjustments) 36,000
Accounts estimated to be uncollectible 76,800

Compute the net realizable value of the accounts receivable of Lucille Company at December 31,
2002 (763,200)
12. On July 1, 2002, Cornell Corp. received a one-year note with a face value of 900,000 and a stated
interest rate of 15 percent in exchange for a machine with a fair value of 1,000,000. Compute the
effective interest rate for Cornell Corp. (3.5 percent)
13. A 10 percent, 3,000, 3-month note receivable discounted at 12 percent for 2 months will result in net
proceeds of (3,013.50)
14. Thor Company provided the following data on December 31, 2013:

Checkbook balance 4,000,000

Bank Statement balance 5,000,000
Check drawn on Thor’s account, payable to supplier, dated and recorded on 500,000
December 31, 2013, but not mailed until January 15, 2014
Cash in sinking fund 2,000,000

On December 31, 2013, what amount should be reported as cash under current assets? (4,500,000)
15. Burr Company had the following account balances on December 31, 2013:

Cash in bank 2,250,000

Cash in hand 125,000
Cash restricted for addition to plant (expected to be disbursed in 2024) 1,600,000

Cash in bank included 600,000 of compensating balance against short-term borrowing arrangement.
The compensating balance is not legally restricted as to withdrawal. In the December 31, 2013
 statement of financial position, what total cash should be reported under current assets?
(2,375,000)

16. On December 31, 2013, West Company had the following cash balances:

Cash in bank 1,800,000

Petty cash fund (all funds were reimbursed on 12/31/2013) 50,000
Time deposit (due February 1, 2014) 250,000
Cash in bank included 600,000 of compensating balance against short-term borrowing arrangement
on December 31, 2013. The compensating balance is legally restricted as to withdrawal. In the
December 31, 2013 statement of financial position, what total amount should be reported as cash
and cash equivalents? (1,250,000)
17. In preparing the August 31, 2013 bank reconciliation, Apex Company provided the following
information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Return of customer’s check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000
On August 31, 2013, what is the adjusted cash in bank? (1,855,000)
18. In preparing the bank reconciliation on December 31, 2013, Case Company provided the following
data:

Balance per bank statement 3,800,000

Deposit in transit 520,000
Amount erroneously credited by bank to Case’s account 40,000
Bank service charge for December 5,000
Outstanding checks 675,000
What is the adjusted cash in bank on December 31, 2013? (3,605,000)
19. The cash account in the ledger of Kate Company shows a balance of 1,652,000 at December 31. The
bank statement, however, shows a balance of 2,090,000 at the same date. The only reconciling items
consist of a bank service charge of 2,000, a large number of outstanding checks totaling 590,000 and
a deposit in transit. What is the deposit in transit In the December 31 bank reconciliation: (150,000)
20. Orr Company prepared an aging of accounts receivable on December 31, 2013 and determined that
the net realizable value of accounts receivable was 2,500,000. Additional information is as follows:

Allowance for doubtful accounts on January 1 280,000

Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000
For the year ended December 31, 2013, what amount should be recognized as doubtful accounts
expense? (100,000)
21. Barr Company showed the following at year-end:

Allowance for doubtful accounts (debit balance) (16,000)

Net sales 7,100,000
 The entity estimated its uncollectible receivables at 2% of net sales. What is the allowance for
doubtful accounts at year-end? (126,000)

22-23. Apex Company accepted from a customer a 1,000,000 face amount, 6-month, 8% note dated April
15, 2013. On the same date, the entity discounted the net without recourse at Union Bank at a 10%
discount rate.

22. What amount of cash was received from the discounting? (988,000)
23. What is the loss on note receivable discounting? (12,000)
24.