expects that 9 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales‚ production and selling costs are 78 percent‚ and accounts receivable turnover is five times. Assume income taxes of 30 percent and an increase in sales of $80‚000. No other asset buildup will be required to service the new accounts. a. What is the level of accounts receivable needed to support this sales expansion? Investment in Accounts receivables = 80‚000/ 5 = $16‚000 b. What would
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36‚000 Total 2014 gross profit $71‚000 Requirement 2 2013 deferred gross profit balance: 2013 initial gross profit ($360‚000 – 234‚000) $126‚000 Less: Gross profit recognized in 2013 (52‚500) Balance in deferred gross profit account $73‚500 2014 deferred gross profit balance: 2013 initial gross profit ($360‚000 – 234‚000) $ 126‚000 Less: Gross profit recognized in 2013 (52‚500) Gross profit recognized in
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(c) July Sale Entry. Accounts Receivable 16‚000‚000 Allowance for Returns 1‚920‚000 ($16‚000‚000 X 12%) Sales Revenue—Texts 14‚080‚000 (d) October Collection. Cash 14‚000‚000 Sales Revenue—Texts* 80‚000 Allowance for Returns 1‚920‚000 Accounts Receivable 16‚000‚000 *A debit to either Sales Revenue—Texts or Sales Returns could be made here. EXERCISE 18-2 (15-20 minutes) (a) 1. 6/3 Accounts Receivable—Kim Rhode 5‚000 Sales 5‚000
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Problem 4-3. Luft Corporation’s accounts had the following beginning balances: Account | | Dr. | | Cr. | Accounts Payable | | | | $ | 3‚070 | Accounts Receivable | | $ | 2‚160 | | | Accumulated Depreciation | | | | 2‚800 | Allowance for doubtful accounts | | | | 70 | Cash | | | | 1‚440 | | | Fixed Assets (at cost) | | | 6‚200 | | | Inventories | | | | 1‚730 | | | Note Payable (current) | | | | | 600 | Owner’s Equity | |
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P9-4A Wall Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year end. Number of Days Outstanding Total 0-30 31-60 61-90 91-120 Over 120 Accounts receivable $375‚000 $220‚000 $90‚000 $40‚000 $10‚000 $15‚000 % uncollectible 1% 4% 5% 8% 10% Calculate the total estimated bad debts based on the above information. Total Accounts receivable % uncollectible Estimated bad debts $375‚000 0-30 $220‚000 1% 31-60
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Chapter 7 Inventories 6. Ending inventory is made up of the oldest purchases when a company uses a. first-in‚ first-out b. last-in‚ first-out c. average cost d. retail method 11. The inventory method that assigns the most recent costs to cost of goods sold is a. FIFO b. LIFO c. Average d. specific identification 12. Inventory costing methods place primary emphasis on assumptions about a. flow of goods b. flow of costs c. flow of goods or flow of costs depending on the method d. neither flow
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occurrence Audit Objectives: Substantiate the existence of receivables and the occurrence of revenue transactions. Prove none of the account receivables are fictitious. Completeness Audit objectives: Establish the completeness of receivables and revenue transactions. Rights and obligations Audit objectives: Determine the client has rights to the recorded receivables. Prove the accounts receivable are collectible in the normal course of business and
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Level of Learning: 1 9. A decrease in cash dividends payable means that dividends declared were less than dividends paid. Answer: True Learning Objective: 4 Level of Learning: 2 10. When one enters a $50‚000 credit entry to the Land account in a spreadsheet for the statement of cash flows‚ it
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CH. 3 HOMEWORK DISCUSSION QUESTION 3‚ 4 & 5 3.) Bill Simon says‚ “We should get rid of the FASB and SEC since free market forces will make sure that companies report reliable information.” Do you agree? Why or why not? I disagree for several reasons. One‚ investors view profits a measure of managers’ performance‚ therefore giving managers an incentive to use their accounting discretion to distort reported profits by making biased assumptions. Many top managers receive bonus compensation if they
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should have a credit and collections policy in order to protect your accounts receivable. You probably go to great lengths to conceive (or license)‚ design‚ manufacture‚ warehouse‚ market‚ sell and ship great product. Obviously‚ these are essential to your businesses success. For without great product‚ in stock‚ how can you make sales? But a sale that doesn’t get paid is not a sale. It is a loss. Your company’s accounts receivable is a short-term asset. Along with cash and inventory is one of the
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