ACC 557 Week 5 Homework Problems - Strayer

Chapter 7

 

Exercise 7-5

 

 

 
 

Your answer is correct.

 

 

Listed below are five procedures followed by Parson Company.

1.

 

Several individuals operate the cash register using the same register drawer.

2.

 

A monthly bank reconciliation is prepared by someone who has no other cash responsibilities.

3.

 

Fran Vorbeck writes checks and also records cash payment journal entries.

4.

 

One individual orders inventory, while a different individual authorizes payments.

5.

 

Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording.


Indicate whether each procedure is an example of good internal control or of weak internal control. If it is an example of good internal control, indicate which internal control principle is being followed. If it is an example of weak internal control, indicate which internal control principle is violated.

Exercise 7-7

 

 

 
 

Your answer is correct.

 

 

LaSalle Company established a petty cash fund on May 1, cashing a check for $100. The company reimbursed the fund on June 1 and July 1 with the following results.

June 1: Cash in fund $1.75.

 

Receipts: delivery expense $31.25; postage expense $41; and miscellaneous expense $25.

July 1: Cash in fund $3.25.

 

Receipts: delivery expense $21; entertainment expense $51; and miscellaneous expense $24.75.


On July 10, LaSalle increased the fund from $100 to $150.00.

Prepare journal entries for LaSalle Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

 

Exercise 7-14

 

 

 
 

Your answer is correct.

 

 

Nayak Company has recorded the following items in its financial records.

Cash in bank

 

$41,000

Cash in plant expansion fund

 

100,000

Cash on hand

 

8,000

Highly liquid investments

 

34,000

Petty cash

 

500

Receivables from customers

 

89,000

Stock investments

 

61,000


The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments had maturities of 3 months or less when they were purchased. The stock investments will be sold in the next 6 to 12 months. The plant expansion project will begin in 3 years.

What amount should Nayak report as “Cash and cash equivalents” on its balance sheet?

Cash and cash equivalents

 

$

Problem 7-3A

 

 

On May 31, 2014, Terrell Company had a cash balance per books of $6,781.50. The bank statement from Home Town State Bank on that date showed a balance of $6,804.60. A comparison of the statement with the cash account revealed the following facts.

1.

 

The statement included a debit memo of $40 for the printing of additional company checks.

2.

 

Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Terrell Company for the correct amount.

3.

 

Outstanding checks at May 31 totaled $276.25. Deposits in transit were $1,916.15.

4.

 

On May 18, the company issued check No. 1181 for $685 to Barry Dietz on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Terrell Company for $658.

5.

 

A $3,000 note receivable was collected by the bank for Terrell Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note.

6.

 

Included with the cancelled checks was a check issued by Bridges Company to Jon Newton for $600 that was incorrectly charged to Terrell Company by the bank.

7.

 

On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Terrell Company on account.


(a) Prepare the bank reconciliation at May 31, 2014. (Reconcile the bank balance first and then the book balance.)

 

(b) Prepare the necessary adjusting entries for Terrell Company at May 31, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

 

Chapter 8

 

 

 

 

Exercise 8-3

 

 

The ledger of Elburn Company at the end of the current year shows Accounts Receivable $110,000, Sales Revenue $840,000, and Sales Returns and Allowances $28,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a)

 

If Elburn uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Elburn determines that T. Thum’s $1,400 balance is uncollectible.

(b)

 

If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.

(c)

 

If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.

 

 

Exercise 8-5

 

 

 

 

 

At December 31, 2013, Crawford Company had a balance of $15,000 in Allowance for Doubtful Accounts. During 2014, Crawford wrote off accounts totaling $14,100. One of those accounts ($1,800) was later collected. At December 31, 2014, an aging schedule indicated that the balance in Allowance for Doubtful Accounts should be $19,000.

Prepare journal entries to record the 2014 transactions of Crawford Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

 

Exercise 8-14

 

Lashkova Company had accounts receivable of $100,000 on January 1, 2014. The only transactions that affected accounts receivable during 2014 were net credit sales of $1,000,000, cash collections of $920,000, and accounts written off of $30,000.

(a)

 

 

 
 

Your answer is correct.

 

 

Compute the ending balance of accounts receivable.

Ending balance of accounts receivable

 

$

 

(b)

 

 

 
 

Your answer is correct.

 

 

Compute the accounts receivable turnover ratio for 2014. (Round answer to 2 decimal places, e.g. 2.50.)

Accounts receivable turnover ratio

 

 

 

(c)

 

 

 
 

Your answer is correct.

 

 

Compute the average collection period in days. (Round answer to 1 decimal place, e.g. 25.5.)

Average collection period in days

 

 

days

 

 

Problem 8-7A

 

 

 

 

 

On January 1, 2014, Derek Company had Accounts Receivable $139,000, Notes Receivable $30,000, and Allowance for Doubtful Accounts $13,200. The note receivable is from Kaye Noonan Company. It is a 4-month, 12% note dated December 31, 2013. Derek Company prepares financial statements annually. During the year, the following selected transactions occurred.

Jan. 5

 

Sold $24,000 of merchandise to Zwingle Company, terms n/15.

20

 

Accepted Zwingle Company’s $24,000, 3-month, 9% note for balance due.

Feb. 18

 

Sold $8,000 of merchandise to Gerard Company and accepted Gerard’s $8,000, 6-month, 8% note for the amount due.

Apr. 20

 

Collected Zwingle Company note in full.

30

 

Received payment in full from Kaye Noonan Company on the amount due.

May 25

 

Accepted Isabella Inc.’s $4,000, 3-month, 7% note in settlement of a past-due balance on account.

Aug. 18

 

Received payment in full from Gerard Company on note due.

25

 

The Isabella Inc.’s note was dishonored. Isabella Inc.’s is not bankrupt; future payment is anticipated.

Sept. 1

 

Sold $12,000 of merchandise to Fernando Company and accepted a $12,000, 6-month, 10% note for the amount due.


Journalize the transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to the nearest whole dollar, e.g. 5,275.)

 

 

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