Financial statement data for years ending December 31 for Robinhood Company follow:

Financial statement data for years ending December 31 for Robinhood Company follow:

                                         20Y9 | 20Y8

Sales                      $7,906,000 | $6,726,000

Accounts receivable:

Beginning of year        600,000 | 540,000

End of year                 580,000 | 600,000

a. Determine the accounts receivable turnover for 20Y9 and 20Y8.

b. Determine the days’ sales in receivables for 20Y9 and 20Y8. Use 365 days and round to one decimal place.

c. Does the change in accounts receivable turnover and the days’ sales in receivables from 20Y8 to 20Y9 indicate a favorable or unfavorable change?

Answer:

a. Sales.......................................... Accounts receivable:

Beginning of year..................  

End of year...........................  

Average accts. receivable............ 

Accts. receivable turnover............ b. Sales..........................................  Average daily sales.....................  Average accts. receivable............  Days’ sales in receivables............ $ 600,000 $ 540,000 Accounts Receivable Turnover 20Y9 20Y8 $7,906,000 $6,726,000 Days’ Sales in Receivables $7,906,000 $6,726,000 13.4 11.8 ($7,906,000 ÷ $590,000) ($6,726,000 ÷ $570,000)20Y9 27.2 days 30.9 days ($7,906,000 ÷ 365 days) ($6,726,000 ÷ 365 days) $ 590,000 $ 570,000 [($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2] $ 580,000 $ 600,000 $ 590,000 $ 570,000 20Y8 $ 21,660.3 $ 18,427.4 ($590,000 ÷ $21,660.3) ($570,000 ÷ $18,427.4) c. The increase in the accounts receivable turnover from 11.8 to 13.4 and the decrease in the days’ sales in receivables from 30.9 days to 27.2 days indicate favorable changes in the efficiency of collecting receivables. 

At the end of the current year, Accounts Receivable has a balance of $3,460,000, Allowance for Doubtful Accounts

At the end of the current year, Accounts Receivable has a balance of $3,460,000, Allowance for Doubtful Accounts has a debit balance of $12,500, and sales for the year total $46,300,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $245,000.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

Answer:

a. $257,500 ($245,000 + $12,500) b. Accounts Receivable......................................................  Allowance for Doubtful Accounts.................................... Bad Debt Expense.........................................................  c. Net realizable value ($3,460,000 – $245,000)........................ $3,215,000

At the end of the current year, Accounts Receivable has a balance of $3,750,000, Allowance for Doubtful Accounts

At the end of the current year, Accounts Receivable has a balance of $3,750,000, 

Allowance for Doubtful Accounts has a credit balance of $22,750, and sales for the year total $48,400,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $390,000.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

Answer:

a. $367,250 ($390,000 – $22,750) b. Accounts Receivable......................................................  Allowance for Doubtful Accounts.................................... Bad Debt Expense.........................................................  c. Net realizable value ($3,750,000 – $390,000)........................  $3,360,000

The Campbell Soup Company manufactures and markets food products throughout the world. The following sales and receivable data

The Campbell Soup Company manufactures and markets food products throughout the world. The following sales and receivable data (in millions) were reported by Campbell Soup for two recent years:

                     Year 2 | Year 1

Sales                $8,082 | $8,268

Accounts receivable     647 |    670

Assume that the accounts receivable (in thousands) were $635 million at the beginning of Year 1.

a. Compute the accounts receivable turnover for Year 2 and Year 1. Round average accounts receivable to one decimal place and accounts receivable turnover to two decimal places.

b. Compute the days’ sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.

c.  What conclusions can be drawn from these analyses regarding Campbell’s efficiency in collecting receivables?

Answer:

a. and b.

Sales.................................... 

Average accts. receivable...... 

Accts. receivable turnover...... 

Average daily sales............... 

Days’ sales in receivables...... 

The days’ sales in receivables could also be computed by dividing 365 days by

the accounts receivable turnover as follows:

Year 2: 29.7 (365 days ÷ 12.27) (Difference due to rounding)

Year 1: 28.8 (365 days ÷ 12.67) (Difference due to rounding)

c. The accounts receivable turnover indicates a decrease in the efficiency of  

collecting accounts receivable by decreasing from 12.67 to 12.27, an unfavorable 

change. The number of days’ sales in receivables increased from 28.7 to 29.8 days, 

also indicating an unfavorable change in collections of receivables. However, 

before a final conclusion can be reached, both ratios should be compared

with those of past years, industry averages, and similar firms.

At the end of the current year, the accounts receivable account has a debit balance of $6,800,000 and sales for the year total $81,500,000

At the end of the current year, the accounts receivable account has a debit balance of $6,800,000 and sales for the year total $81,500,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:

a. The allowance account before adjustment has a debit balance of $68,250. Bad debt expense is estimated at 3⁄4 of 1% of sales.

b. The allowance account before adjustment has a debit balance of $68,250. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $575,000.

c. The allowance account before adjustment has a credit balance of $45,000. Bad debt expense is estimated at 1⁄2 of 1% of sales.

d. The allowance account before adjustment has a credit balance of $45,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $450,000.

Answer:

a. $611,250 ($81,500,000 × 0.0075) 

b. $643,250 ($575,000 + $68,250) 

c. $407,500 ($81,500,000 × 0.0050)

d. $405,000 ($450,000 – $45,000)

At the end of the current year, $59,500 of fees have been earned but have not been billed to clients. a. Journalize the adjusting entry to record the accrued fees.

At the end of the current year, $59,500 of fees have been earned but have not been billed to clients.

a. Journalize the adjusting entry to record the accrued fees.

b.  If the cash basis rather than the accrual basis had been used, would an adjusting entry have been necessary? Explain.


Answers:

a. Accounts Receivable59,500
Fees Earned59,500
Accrued fees.
b. No. If the cash basis of accounting is used, revenues are recognized only 
when the cash is received. Therefore, earned but unbilled revenues would not 
be recognized in the accounts, and no adjusting entry would be necessary.

Based upon the data presented in Exercise 2-13, (a) prepare an unadjusted trial balance, listing the accounts in their proper order

Based upon the data presented in Exercise 2-13, (a) prepare an unadjusted trial balance, listing the accounts in their proper order. (b) Based upon the unadjusted trial balance, determine the net income or net loss.


Answer:

a.
Cash69,170
Accounts Receivable4,150
Supplies240
Equipment8,000
Accounts Payable3,700
Beth Worley, Capital75,000
Beth Worley, Drawing2,500
Service Revenue12,300
Operating Expenses6,940
b. Net income, $5,360 ($12,300 – $6,940)

The following selected transactions were completed during August of the current year: 1. Billed customers for fees earned, $73,900.

The following selected transactions were completed during August of the current year:

1. Billed customers for fees earned, $73,900.

2. Purchased supplies on account, $1,960.

3. Received cash from customers on account, $62,770.

4. Paid creditors on account, $820.

a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. Journal entry explanations may be omitted.

b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transactions.

c.  Assume that the unadjusted trial balance on August 31 shows a credit balance for Accounts Receivable. Does this credit balance mean that an error has occurred?


Answer:


a. (1) Accounts Receivable73,900
Fees Earned73,900
(2) Supplies1,960
Accounts Payable1,960
(3) Cash62,770
Accounts Receivable62,770
(4) Accounts Payable820
Cash820
b.
(3) 62,770     (4) 820            (4) 820            (2) 1,960         
(2) 1,960       (1) 73,900       
(1) 73,900     (3) 62,770       
c. No. An error may not have necessarily occurred. A credit balance 
in Accounts Receivable could occur if a customer overpaid his or 
her account. Regardless, the credit balance should be investigated to 
verify that an error has not occurred.