Case Cash and Receivables

Topics: 1990, 1986, 1981 Pages: 7 (1037 words) Published: March 10, 2014
Case Chapter 7 Cash and Receivables
1. Petty Cash (10 min.)
The petty cash fund of $200 for Walsh Company appeared as follows on December 31, 2008: Cash $93.60
Petty cash vouchers
Freight in $21.40
Postage 40.00
Balloons for a special occasion 18.00
Meals 25.00
1. Prepare the journal entries required to establish the petty cash fund. 2. Prepare in general journal form the entry to replenish the fund. 3. On December 31, the office manager gives instructions to increase the petty cash fund by $100. Make the appropriate journal entry.

2. Bank Reconciliation (25 min.)
Reebles Food Store developed the following information in recording its bank statement for the month of March. Balance per books March 31 $ 2,905
Balance per bank statement March 31 $10,900
————————————————————————————————————— (1) Checks written in March but still outstanding $7,000.
(2) Checks written in February but still outstanding $2,800. (3) Deposits of March 30 and 31 not yet recorded by bank $5,200. (4) NSF check of customer returned by bank $1,200.
(5) Check No. 210 for $594 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as payment on account for $549. (6) Bank service charge for March was $50.
(7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable subsidiary ledger for $824 when Check No. 318 was correctly prepared for $284. The check cleared the bank in March. (8) The bank collected a note receivable for the company for $4,000 plus $150 interest revenue. Instructions

(a) Prepare a bank reconciliation for Reebles Food Store at March 31. (b) Prepare any adjusting entries necessary as a result of the bank reconciliation.

3. Sales Gross and Net ( 10 Min)
On January 4, Mary company sold to Andry Company merchandise at a sales price of $ 6,000 with terms of 2/10, n/30, f.o.b shipping point. An invoice totaling $45 was received by Andry on January 10 from John Transport Service for the freight cost. On January 12, the company received a check for the balance due from Andry Company. (A) Prepare journal entries on the Mary Company Books to record all the events noted above under: (1) Sales and receivables are entered at gross selling price (2) Sales and receivables are entered at net of cash discounts (B) Prepare journal entry under the “net of cash discounts” basis, assuming that Andry Company did not remit payment until February 2.

4. Bad Debt Reporting ( 25 Min)
From inceptions of operations to December 31, 2013, Tisdale Corporation provided for uncollectible accounts receivable under the allowance method : provisions were made monthly 6% of credit sales, bad debts written off were charged to allowance account, recoveries of bad debt previously written off were credited to allowance account. The balance in the Allowance for Doubtful Accounts was $100,000 at January 2013. During 2013, credit sales totaled $10,000,000, bad debts of $150,000 were written off, and recoveries of accounts previously written off amounted to $ 40,000. Tisdale installed a computer system in November 2013 and prepared an aging of accounts receivable for the first time as of December 31, 2013 as follows. Classification by month of sale

Balance in each category
Estimated % Uncollectible
November-December 2013
$ 1,050,000
July-October 2013
$ 860,000
January-June 2013
$ 570,000
Prior to 1/1/2013
$ 230,000
Based on the review of collectability of the account balances in the “prior to 1/1/2013” aging category, additional receivables totaling $80,000 were written off as of December 31, 2013. Effective with the year ended December 31, 2013, Tisdale adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. Instructions

(A) Prepare a schedule analyzing the changes in the Allowance for...
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