Q&A Hero

Q: At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000.​Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

Q: under ifrs, the cash flow statement can be prepared using a. the direct method only b. the indirect method only c. either the direct or indirect method d. the t-account method only

Q: On January 1, 2012, Holt Corporation had $1,000,000 of common stock outstanding that was issued at par and retained earnings of $750,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year.InstructionsJournalize the declaration of a 15% stock dividend on December 10, 2012, for the following two independent assumptions.(a) Par value is $10 and market value is $16.(b) Par value is $5 and market value is $8.

Q: Journalize the following transactions in the accounts of Simmons Company:Mar. 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Co. on account. 18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Co. on account.Apr. 30 The note dated March 1 from Bynum Co. is dishonored, and the customer’s account is charged for the note, including interest.May 17 The note dated March 18 from Solo Co. is dishonored, and the customer’s account is charged for the note, including interest.July 29 Cash is received for the amount due on the dishonored note dated March 1 plus interest for 90 days at 8% on the total amount debited to Bynum Co. on April 30.Aug. 23 Wrote off against the allowance account the amount charged to Solo Co. on May 17 for the dishonored note dated March 18.

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Q: For a business that uses the allowance method of accounting for uncollectible receivables:a. Journalize the entries for the following transactions: (1) Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000. (2) In March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible. (3) In November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received. (4) In December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.b. Redo the entries in steps (a2), (a3), and (a4), assuming the company uses the direct write-off method.

Q: Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from a customer on account. (Assume a 360-day year when computing interest.)a. Determine the due date of the note.b. Determine the maturity value of the note.c. Journalize the entry for the receipt of the payment of the note at maturity.

Q: The following are selected accounts and balances from the records of Doran Corporation on June 30, 2012.InstructionsPrepare in proper form the stockholders’ equity section of the balance sheet.

Q: The following accounts appear in the ledger of Bradley, Inc., after the books are closed at December 31, 2012.InstructionsPrepare the stockholders’ equity section at December 31, 2012, assuming that part of retained earnings is restricted for plant expansion in the amount of $200,000.

Q: Watson Co. issued a 60-day, 8% note for $18,000, dated April 5, to Laker Company on account. (Assume a 360-day year when computing interest.)a. Determine the due date of the note.b. Determine the maturity value of the note.c. Journalize the entries to record the following: (1) Receipt of the note by the payee. (2) Receipt by the payee of the amount due on the note at maturity.

Q: On June 30 (the end of the period), Brown Company has a credit balance of $2,275 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025. Journalize the appropriate adjusting entry.

Q: On January 1, 2012, Mather Corporation had Retained Earnings of $525,000. During the year, Latter had the following selected transactions:1. Declared stock dividends of $40,0002. Declared cash dividends of $50,0003. A 2 for 1 stock split involving the issue of 200,000 shares of $5 par value common stock for 100,000 shares of $10 par value common stock4. Suffered a net loss of $60,000InstructionsPrepare a Retained Earnings Statement for the year.

Q: Giraldi Corporation’s stockholders’ equity section at December 31, 2011, appears below:On June 30, 2012, the board of directors of Giraldi Corporation declared a 10% stock dividend, payable on July 31, 2012, to stockholders of record on July 15, 2012. The fair market value of Giraldi Corporation’s stock on June 30, 2012, was $16.On December 1, 2011, the board of directors declared a 2 for 1 stock split effective December 15, 2012. Giraldi Corporation’s stock was selling for $18 on December 1, 2012, before the stock split was declared. Par value of the stock was adjusted. Net income for 2012 was $210,000 and there were no cash dividends declared.Instructions(a) Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split.(b) Fill in the amount that would appear in the stockholders’ equity section for Jardinn Corporation at December 31, 2012, for the following items:1. Common stock $____________2. Number of shares outstanding _____________3. Par value per share $____________4. Paid-in capital in excess of par $____________5. Retained earnings $____________6. Total stockholders’ equity $____________

Q: Journalize the following transactions of Upton Drugs:​July 8 Received a $180,000, 90-day, 8% note dated July 8 from Miracle Chemical on account.Oct. 6 The note is dishonored by Miracle Chemical.Nov. 5 Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Miracle Chemical on October 6.

Q: Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December 12, the company receives a $550 check from Chad Thomas in settlement of Thomas’s $1,100 outstanding accounts receivable. Due to Thomas’s failing health, he is closing his company and is expecting to make no further payments to Discount Mart. Journalize this transaction.

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Q: On January 1 Weiss Corporation had 60,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following transactions occurred:Apr. 1 Issued 10,000 additional shares of common stock for $10 per share.June 15 Declared a cash dividend of $1.50 per share to stockholders of record on June 30.July 10 Paid the $1.50 cash dividend.Dec. 1 Issued 4,000 additional shares of common stock for $12 per share.15 Declared a cash dividend on outstanding shares of $1.50 per share to stockholders of record on December 31.Instructions(a) Prepare the entries, if any, on each of the three dates that involved dividends.(b) How are dividends and dividends payable reported in the financial statements prepared at December 31?

Q: For each of the following scenarios, indicate the amount of the adjusting journal entry for bad debt expense to be recorded, the balance in Allowance for Doubtful Accounts after adjustment at December 31, and the net realizable value of accounts receivable at December 31.a. Based on an analysis of Simmons Company’s $380,000 balance in Accounts Receivable at December 31, it was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts before adjustment. b. Blake Company had credit sales of $900,000 at year-end, an Accounts Receivable balance of $425,000 at December 31, and an Allowance for Doubtful Accounts credit balance of $11,000 before adjustment. Blake estimates bad debt expense as ¾ of 1% of credit sales. c. Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, Allowance for Doubtful Accounts has a debit balance of $750.

Q: Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On September 15, she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt, and none of the $675 balance due on his account is expected in the liquidation process. Journalize the entry to write off Jacob Marley’s account.

Q: The stockholders’ equity section of Fleming Corporation at December 31, 2011, included the following:Dividends were not declared on the preferred stock in 2011 and are in arrears.On September 15, 2012, the board of directors of Fleming Corporation declared dividends on the preferred stock to stockholders of record on October 1, 2012, payable on October 15, 2012.On November 1, 2012, the board of directors declared a $2 per share dividend on the common stock, payable November 30, 2012, to stockholders of record on November 15, 2012.InstructionsPrepare the journal entries that should be made by Fleming Corporation on the dates indicated below:

Q: Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a customer on account. a. Determine the due date of the note.b. Determine the maturity value of the note.c. Journalize the entry for the receipt of the payment of the note at maturity.

Q: On January 1, 2012, the Black Corporation had $2,000,000 of $10 par value common stock outstanding that was issued at par and Retained Earnings of $1,000,000. The company issued 120,000 shares of common stock at $15 per share on July 1. On December 15, the board of directors declared a 10% stock dividend to stockholders of record on December 31, 2012, payable on January 15, 2013. The market value of Black Corporation stock was $17 per share on December 15 and $16 per share on December 31. Net income for 2012 was $500,000.Instructions(1) Journalize the issuance of stock on July 1 and the declaration of the stock dividend on December 15.(2) Prepare the stockholders’ equity section of the balance sheet for Black Corporation at December 31, 2012.

Q: During 2012 Kenton Corporation had the following transactions and events:1. Issued par value preferred stock for cash at par value2. Issued par value common stock for cash at an amount greater than par value3. Completed a 2 for 1 stock split in which the $10 par value common stock was changed to $5 par value stock*4. Declared a small stock dividend when the market value was higher than the par value5. Declared a cash dividend*6. Issued the shares of common stock required by the stock dividend declaration in 4. above7. Issued par value common stock for cash at par value8. Paid the cash dividendInstructionsIndicate the effect(s) of each of the foregoing items on the subdivisions of stockholders’ equity. Present your answers in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect.

Q: Discuss the two methods for recording bad debt expense. What type of company uses each method?

Q: Ritchey Corporation has the following capital stock outstanding at December 31, 2012:The preferred stock was issued at $115 per share. The common stock was issued at an average per share price of $16.InstructionsPrepare the paid-in capital section of the balance sheet at December 31, 2012.

Q: Discuss the similarities and differences between accounts receivable, notes receivable, and other receivables.

Q: A partially completed aging of receivables schedule for Lindy Designs follows:​Estimated Uncollectible AccountsAge IntervalBalancePercentageAmountNot past due$550,000 2.50%​1–30 days past due96,5004.00​31–60 days past due43,7509.50​61–90 days past due22,25016.00​91–180 days past due5,60031.00​181–365 days past due3,10060.00​Over 365 days past due 1,25095.00​Total$722,450​​​a. Complete the schedule and determine the total estimate of uncollectible accounts. Show amounts to the nearest cent (do not round).b. If Allowance for Doubtful Accounts has an unadjusted credit balance of $9,700, record the adjusting entry for bad debt expense for the year.c. If Allowance for Doubtful Accounts has an unadjusted debit balance of $9,700, record the adjusting entry for bad debt expense for the year.

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Q: Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case.a. Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates uncollectible receivables of $8,500.b. Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of credit sales, which totaled $1,000,000 for the year.

Q: The stockholders’ equity section of Piper Corporation’s balance sheet at December 31, 2011, appears below:During 2012, the following stock transactions occurred:Jan. 18 Issued 60,000 shares of common stock at $23 per share.Aug. 20 Purchased 15,000 shares of Piper Corporation’s common stock at $25 per share to be held in the treasury.Instructions(a) Prepare the journal entries to record the above stock transactions.(b) Prepare the stockholders’ equity section of the balance sheet for Piper Corporation at December 31, 2012. Assume that net income for the year was $150,000 and that no dividends were declared.

Q: Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3 to Valley Co. on account. (Assume a 360-day year when computing interest.)a. Determine the due date of the note.b. Determine the interest.c. Determine the maturity value of the note.d. Journalize the entry for the receipt of the note from Potts on February 3.e. Journalize the entry for the receipt of payment of the note at maturity by Valley Co.

Q: The following information is available for Epstein CorporationInstructions Compute the payout ratio and return on common stockholders’ equity ratio for both years. Briefly comment on your findings.

Q: Journalize the following transactions for Scott Company:​Nov. 4 Received a $6,500, 90-day, 6% note from Michael Tims in payment of his account.Dec. 31 Accrued interest on the Tims note.Feb. 2 Received the amount due from Tims on his note.

Q: Listed below are items typically found in the stockholders equity section of the balance sheet.Common stock, $10 stated valueRetained earnings8% Preferred stock, $100 par valuePaid-in capital in excess of par valuePaid-in capital in excess of stated valueTreasury stockStockholders’ equityPaid-in capitalCapital stockAdditional paid-in capitalTotal additional paid-in capitalTotal paid-in capitalRetained earningsTotal paid-in capital and retained earningsTotal stockholders’ equityInstructionsPlace each of the items listed below in the appropriate subdivision of the stockholders’ equity section of a balance sheet.

Q: Discuss the (a) focus and (b) financial statement emphasis of the percent of sales and the analysis of receivables methods of estimating bad debts.

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Q: On January 1, 2012, Browning Corporation had 75,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred:Mar. 1 Issued 60,000 shares of common stock for $675,000June 1 Declared a cash dividend of $2.00 per share to stockholders of record on June 15June 30 Paid the $2.00 cash dividendDec. 1 Purchased 5,000 shares of common stock for the treasury for $18 per shareDec. 15 Declared a cash dividend on outstanding shares of $2.50 per share to stockholders of record on December 31Net income for 2012 amounted to $951,000.InstructionsPrepare journal entries to record the above transactions.

Q: which of the following statements reflects the transferability of ownership rights in a corporation? a.if a stockholder decides to transfer ownership, he must transfer all of his shares b.a stockholder may dispose of part or all of his shares c.a stockholder must obtain permission of the board of directors before selling shares d.a stockholder must obtain permission from at least three other stockholders before selling shares

Q: Based on the following data for Jake Company and using a 365-day year, compute (a) the accounts receivable turnover and (b) days' sales in receivables for Year 2. Round to two decimal places. The industry average accounts receivable turnover is 20, and the industry average days' sales in receivables is 25. (c) Comment on Jake Company’s situation.12/31/Year 1 accounts receivable$ 100,00012/31/Year 2 accounts receivable70,000For the year ended 12/31/Year 1, sales1,050,000For the year ended 12/31/Year 2, sales1,200,000

Q: jason hansen has invested $600,000 in a privately held family corporation. the corporation does not do well and must declare bankruptcy. what amount does hansen stand to lose? a.up to his total investment of $600,000 b.zero c.the $600,000 plus any personal assets the creditors demand d.$400,000

Q: which of the following is not true of a corporation? a.it may buy, own, and sell property b.it may sue and be sued c.the acts of its owners bind the corporation d.it may enter into binding legal contracts in its own name

Q: Journalize the following transactions for Lucite Company:Nov. 14 Received a $4,800, 90-day, 9% note from Alan Albertson in payment of his account.Dec. 31 Accrued interest on the Albertson note.Feb. 12 Received the amount due from Albertson on his note

Q: which of the following would not be true of a privately held corporation? a.it is sometimes called a closely held corporation b.its shares are regularly traded on the new york stock exchange c.it does not offer its shares for sale to the general public d.it is usually smaller than a publicly held company

Q: Journalize the following transactions using the allowance method of accounting for uncollectible receivables. Apr. 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.

Q: the two ways that a corporation can be classified by ownership are a.publicly held and privately held b.stock and non-stock c.inside and outside d.majority and minority

Q: the two ways that a corporation can be classified by purpose are a.general and limited b.profit and not-for-profit c.state and federal d.publicly held and privately held

Q: which one of the following would not be considered an advantage of the corporate form of organization? a.limited liability of stockholders b.separate legal existence c.continuous life d.government regulation

Q: Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables.​Apr. 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.

Q: the chief accounting officer in a company is known as the a.controller b.treasurer c.vice-president d.president

Q: those most responsible for the major policy decisions of a corporation are the a.stockholders b.board of directors c.management d.employees

Q: For each of the following notes receivable held by Winter Company, determine the interest revenue to be reported on the income statements. Round answers to nearest whole dollar.​​Date​​Face​​Rate​​TermYear 1Interest RevenueYear 2Interest RevenueAug. 8, Year 1$15,000 7%180 days Oct. 7, Year 122,000860 days Jan. 6, Year 230,000890 days Nov. 12, Year 128,000960 days

Q: stockholders of a corporation directly elect a.the president of the corporation b.the board of directors c.the treasurer of the corporation d.all of the employees of the corporation

Q: List at least three indicators that a receivable may be uncollectible.

Q: The partially completed aging of receivables schedule for Torme Designs follows: Estimated Uncollectible AccountsAge IntervalBalancePercentageAmountNot past due$850,000 3.50% 1–30 days past due47,500 5.00 31–60 days past due21,75010.00 61–90 days past due11,25020.00 91–180 days past due5,06530.00 181–365 days past due2,50050.00 Over 365 days past due 1,14595.00 Total$939,210 ​a. Complete the schedule and determine the total estimate of uncollectible accounts. Show amounts to the nearest cent (do not round).b. Assuming Allowance for Doubtful Accounts has an unadjusted credit balance of $1,135, journalize the adjusting entry for the bad debt expense for the year.

Q: under the corporate form of business organization a.a stockholder is personally liable for the debts of the corporation b.stockholders acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation c.the corporations life is stipulated in its charter d.stockholders wishing to sell their corporation shares must get the approval of other stockholders

Q: a stock dividend will cause an increase in total contributed capital at the date the dividend is declared.

Q: For each of the following notes receivables held by Christensen Company, determine the interest revenue to be reported on the income statements for the year ended December 31. Round answers to the nearest whole dollar.DateFaceRateTermInterest RevenueAug. 8$45,000 7%45 days​Oct. 762,000560 days​Jan. 628,0004120 days​Nov. 1243,000660 days​

Q: a stock dividend is a pro rata distribution of cash to a corporations stockholders.

Q: a liability arises when the board of directors declares a stock dividend.

Q: Match each of the following descriptions to the term (a–h) it describes. Each term will be used only once.a. Face amountb. Termc. Interestd. Maturity valuee. Dishonored notef. Makerg. Notes receivableh. Interest rate The time between the date a note is issued and the due date of the note

Q: the payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

Q: return on common stockholders equity is computed by dividing net income by ending stockholders equity.

Q: the common stock distributable account is classified as a current liability.

Q: a detailed stockholders equity section in the balance sheet will list the names of individuals who are eligible to receive dividends on the date of record.

Q: restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends.

Q: retained earnings that are restricted are unavailable for dividends.

Q: a debit balance in the retained earnings account is identified as a deficit.

Q: net income of a corporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts.

Q: Match each of the following descriptions to the method of accounting for uncollectible receivables (a–d) it describes. Each term may be used more than once.a. Direct write-off methodb. Aging of receivables methodc. Percent of sales methodd. Allowance methodWhen writing off a specific uncollectible account, this method debits Bad Debt Expense

Q: dividends in arrears are liabilities of the corporation.

Q: retained earnings represents the amount of cash available for dividends.

Q: a 3-for-1 common stock split will increase total stockholders equity but reduce the par or stated value per share of common stock.

Q: a stock split results in a transfer at market value from retained earnings to paid-in capital.

Q: a stock dividend does not affect the total amount of stockholders equity.

Q: a 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

Q: the amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified.

Q: cash dividends are not a liability of the corporation until they are declared by the board of directors.

Q: dividends may be declared and paid in cash or stock.

Q: when preferred stock is cumulative, preferred dividends not declared in a given period are called dividends in arrears.

Q: Match each of the following descriptions to the term (a–i) it describes.a. Accounts receivable turnoverb. Net realizable valuec. Accounts receivabled. Aging the receivablese. Receivablesf. Direct write-off methodg. Allowance for doubtful accountsh. Bad debt expensei. Notes receivableMeasures how frequently during the year accounts receivable are being turned into cash