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- Download: http://solutionzip.com/downloads/10-problems-on-january-10-donna-stark-uses-her-baver-co/
- Problem 1
- On January 10 Donna Stark uses her Baver Co. credit card to purchase merchandise from Baver Co. for $2,600. On February 10, she is billed for the amount due of $2,600. On February 12 Stark pays $1,600 on the balance due. On March 10 Stark is billed for the amount due, including interest at 1% per month on the unpaid balance as of February 12.
- Instructions
- Prepare the entries on Baver Co.’s books related to the transactions that occurred on January 10, February 12, and March 10.
- Problem 2
- At the beginning of the current period, Emler Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $650,000 and collections of $590,000. It wrote off as uncollectible accounts receivable of $5,000. However, a $3,000 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $20,000 at the end of the period.
- Instructions
- (a) Prepare the entries to record sales and collections during the period.
- (b) Prepare the entry to record the write-off of uncollectible accounts during the period.
- (c) Prepare the entries to record the recovery of the uncollectible account during the period.
- (d) Prepare the entry to record bad debts expense for the period.
- (e) Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts.
- (f) Calculate the net realizable value of the receivables at the end of the period.
- Problem 3
- The December 31, 2013, balance sheet of the Kramer Company had Accounts Receivable of $650,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During 2014, the following transactions occurred: sales on account $1,550,000; sales returns and allowances, $100,000; collections from customers, $1,250,000; accounts written off, $35,000; previously written off accounts of $8,000 were collected.
- Instructions
- (a) Journalize the 2014 transactions.
- (b) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 6% of accounts receivable, what is the adjusting entry at December 31, 2014?
- Problem 4
- For each entry below make a correcting entry if necessary. If the entry given is correct, then state “No entry required.”
- (a) The $70 cost of repairing a printer was charged to Equipment.
- (b) The $5,500 cost of a major engine overhaul was debited to Maintenance and Repairs Expense. The overhaul is expected to increase the operating efficiency of the truck.
- (c) The $6,000 closing costs associated with the acquisition of land were debited to Operating Expenses.
- (d) A $300 charge for transportation expenses on new equipment purchased was debited to Freight-In.
- Problem 5
- Kendrick Company was organized on January 1. During the first year of operations, the following expenditures and receipts were recorded in random order.
- Debits
- 1. Cost of real estate purchased as a plant site (land and building) $ 130,000
- 2. Accrued real estate taxes paid at the time of the purchase of the real estate 4,000
- 3. Cost of demolishing building to make land suitable for construction of a new
- building 10,000
- 4. Architect’s fees on building plans 14,000
- 5. Excavation costs for new building 30,000
- 6. Cost of filling and grading the land 5,000
- 7. Insurance and taxes during construction of building 6,000
- 8. Cost of repairs caused by a small fire shortly after completion of building 7,000
- 9. Interest paid during the year, of which $45,000 pertains to the construction
- period 74,000
- 10. Full payment to building contractor 955,000
- 11. Cost of parking lots and driveways 36,000
- 12. Real estate taxes paid for the current year on the land 4,000
- Total Debits $1,275,000
- Credits
- 13. Insurance proceeds for fire damage $3,000
- 14. Proceeds from salvage of demolished building 3,500
- Total Credits $6,500
- Instructions
- Analyze the foregoing transactions using the following tabular arrangement. Insert the number of each transaction in the Item space and insert the amounts in the appropriate columns.
- Item Land Buildings Other Account Title
- Problem 6
- On March 1, 2014, Geoffrey Company acquired real estate, on which it planned to construct a small office building, by paying $85,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $2,200. Additional expenditures before construction began included $1,500 attorney’s fee for work concerning the land purchase, $5,500 real estate broker’s fee, $9,100 architect’s fee, and $16,000 to put in driveways and a parking lot.
- Instructions
- (a) Determine the amount to be reported as the cost of the land.
- (b) For each cost not used in part (a), indicate the account to be debited.
- Problem 7
- Brewer Company has the following selected accounts after posting adjusting entries:
- Accounts Payable $ 55,000
- Notes Payable, 3-month 90,000
- Accumulated Depreciation—Equipment 14,000
- Notes Payable, 5-year, 8% 75,000
- Payroll Taxes Expense 6,000
- Interest Payable 5,000
- Mortgage Payable 180,000
- Sales Taxes Payable 23,000
- Instructions
- (a) Prepare the current liability section of Brewer Company’s balance sheet, assuming $12,000 of the mortgage is payable next year.
- (b) Comment on Brewer’s liquidity, assuming total current assets are $450,000.
- Problem 8
- On March 1, Cooper Company borrows $80,000 from New National Bank by signing a 6-month, 6%, interest-bearing note.
- Instructions
- Prepare the necessary entries below associated with the note payable on the books of Cooper Company.
- (a) Prepare the entry on March 1 when the note was issued.
- (b) Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made.
- (c) Prepare the entry to record payment of the note at maturity.
- Problem 9
- On June 1, Huntley Company borrows $50,000 from the bank by signing a 60-day, 6%, interest-bearing note.
- Instructions
- Prepare the necessary entries below associated with the note payable on the books of Huntley Company.
- (a) Prepare the entry on June 1 when the note was issued.
- (b) Prepare any adjusting entries necessary on June 30 in order to prepare the monthly financial statements. Assume no other interest accrual entries have been made.
- Prepare the entry to record payment of the note at maturity.
- Problem 10
- On May 15, Holt’s Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year. The interest rate on the note was 8%. At the time the note was due, the amount of interest owed was $1,200.
- Instructions
- (a) Determine the amount borrowed by Holt’s.
- (b) Assume the amount borrowed was $54,000. What was the interest rate if the amount of interest owed was $900?
- (c) Prepare the entry for the initial borrowing and the repayment for the facts in part (a).
- Download: http://solutionzip.com/downloads/10-problems-on-january-10-donna-stark-uses-her-baver-co/
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