Exercise and Problem

1. Consider the following: Cash in Bank checking account of $18,500, Cash

on hand of $500, Post-dated checks received totaling $3,500, and
Certificates of deposit totaling $124,000. How much should be reported as
cash in the balance sheet?
a. $ 18,500.
b. $ 19,000.
c. $ 22,500.
d. $136,500.

2. Kennison Company has cash in bank of $15,000, restricted cash in a

separate account of $3,000, and a bank overdraft in an account at another
bank of $1,000. Kennison should report cash of
a. $14,000.
b. $15,000.
c. $17,000.
d. $18,000.

3. Lawrence Company has cash in bank of $22,000, restricted cash in a

separate account of $4,000, and a bank overdraft in an account at another
bank of $2,000. Lawrence should report cash of
a. $20,000.
b. $22,000.
c. $25,000.
d. $26,000

4. Steinert Company has the following items at year-end:

Cash in bank $35,000
Petty cash 500
Short-term paper with maturity of 2 months 8,200
Postdated checks 2,100
Steinert should report cash and cash equivalents of
a. $35,000.
b. $35,500.
c. $43,700.
d. $45,800.

5. If a company purchases merchandise on terms of 1/10, n/30, the cash

discount available is quivalent to what effective annual rate of interest
(assuming a 360-day year)?
a. 1%
b. 12%
c. 18%
d. 30%

6. AG Inc. made a $15,000 sale on account with the following terms: 1/15,
n/30. If the company uses the net method to record sales made on credit,
how much should be recorded as revenue?
a. $14,700.
b. $14,850.
c. $15,000.
d. $15,150
7. AG Inc. made a $15,000 sale on account with the following terms: 1/15,
n/30. If the company uses the gross method to record sales made on credit,
what is/are the debit(s) in the journal entry to record the sale?
a. Debit Accounts Receivable for $14,850.
b. Debit Accounts Receivable for $14,850 and Sales Discounts for $150.
c. Debit Accounts Receivable for $15,000.
d. Debit Accounts Receivable for $15,000 and Sales Discounts for $150.

8. AG Inc. made a $15,000 sale on account with the following terms: 2/10,
n/30. If the company uses the net method to record sales made on credit,
what is/are the debit(s) in the journal entry to record the sale?
a. Debit Accounts Receivable for $14,700.
b. Debit Accounts Receivable for $14,700 and Sales Discounts for $300.
c. Debit Accounts Receivable for $15,000.
d. Debit Accounts Receivable for $15,000 and Sales Discounts for $300.

9. Wellington Corp. has outstanding accounts receivable totaling $1.27 million

as of December 31 and sales on credit during the year of $6.4 million. There
is also a debit balance of $3,000 in the allowance for doubtful accounts. If
the company estimates that 1% of its net credit sales will be uncollectible,
what will be the balance in the allowance for doubtful accounts after the
year-end adjustment to record bad debt expense?
a. $12,700.
b. $15,700.
c. $61,000.
d. $67,000.

10. Wellington Corp. has outstanding accounts receivable totaling $6.5 million
as of December 31 and sales on credit during the year of $24 million. There
is also a credit balance of $12,000 in the allowance for doubtful accounts. If
the company estimates that 8% of its outstanding receivables will be
uncollectible, what will be the amount of bad debt expense recognized for
the year?
a. $ 532,000.
b. $ 520,000.
c. $1,920,000.
d. $ 508,000.

11. Wellington Corp. has outstanding accounts receivable totaling $5 million as

of December 31 and sales on credit during the year of $25 million. There is
also a debit balance of $20,000 in the allowance for doubtful accounts. If
the company estimates that 8% of its outstanding receivables will be
uncollectible, what will be the balance in the allowance for doubtful
accounts after the year-end adjustment to record bad debt expense?
a. $2,000,000.
b. $ 380,000.
c. $ 400,000.
d. $ 420,000.

12. At the close of its first year of operations, December 31, 2012, Ming
Company had accounts receivable of $1,080,000, after deducting the
related allowance for doubtful accounts. During 2012, the company had
charges to bad debt expense of $180,000 and wrote off, as uncollectible,
accounts receivable of $80,000. What should the company report on its
 balance sheet at December 31, 2012, as accounts receivable before the
allowance for doubtful accounts?
a. $1,340,000
b. $1,180,000
c. $980,000
d. $880,000

13. Before year-end adjusting entries, Dunn Company's account balances at

December 31, 2012, for accounts receivable and the related allowance for
uncollectible accounts were $1,200,000 and $90,000, respectively. An aging
of accounts receivable indicated that $125,000 of the December 31
receivables are expected to be uncollectible. The net realizable value of
accounts receivable after adjustment is
a. $1,165,000.
b. $1,075,000.
c. $985,000.
d. $1,110,000.

14. During the year, Kiner Company made an entry to write off a $16,000
uncollectible account. Before this entry was made, the balance in accounts
receivable was $200,000 and the balance in the allowance account was
$18,000. The net realizable value of accounts receivable after the write-off
entry was
a. $200,000.
b. $198,000.
c. $166,000.
d. $182,000.

15. The following information is available for Murphy Company:

Allowance for doubtful accounts at December 31, 2011
$ 16,000
Credit sales during 2012
800,000
Accounts receivable deemed worthless and written off during 2012
18,000

As a result of a review and aging of accounts receivable in early January

2013, however, it has been determined that an allowance for doubtful
accounts of $11,000 is needed at December 31, 2012. What amount
should Murphy record as "bad debt expense" for the year ended December
31, 2012?
a. $9,000
b. $11,000
c. $13,000
d. $27,000

Use the following information for questions 16 and 17.

A trial balance before adjustments included the following:
Debit Credit
Sales 850,000
Sales returns and allowance $28,000
Accounts receivable 86,000
Allowance for doubtful accounts 1,520
16. If the estimate of uncollectibles is made by taking 2% of net sales, the
amount of the adjustment is
a. $13,400.
b. $16,440.
c. $17,000.
d. $19,480.
17. If the estimate of uncollectibles is made by taking 10% of gross account
receivables, the amount of the adjustment is
a. $7,080.
b. $8,600.
c. $8,448.
d. $10,120.

18. Lankton Company has the following account balances at year-end:

Accounts receivable $80,000
Allowance for doubtful accounts 4,800
Sales discounts 3,200
Lankton should report accounts receivable at a net amount of
a. $72,000.
b. $75,200.
c. $76,800.
d. $80,000.

19. Smithson Corporation had a 1/1/12 balance in the Allowance for Doubtful
Accounts of $20,000. During 2012, it wrote off $14,400 of accounts and
collected $4,200 on accounts previously written off. The balance in
Accounts Receivable was $400,000 at 1/1 and $480,000 at 12/31. At
12/31/12, Smithson estimates that 5% of accounts receivable will prove to
be uncollectible. What is Bad Debt Expense for 2012?
a. $4,000.
b. $14,200.
c. $18,400.
d. $24,000.

20. Black Corporation had a 1/1/12 balance in the Allowance for Doubtful
Accounts of $18,000. During 2012, it wrote off $12,960 of accounts and
collected $3,780 on accounts previously written off. The balance in
Accounts Receivable was $360,000 at 1/1 and $432,000 at 12/31. At
12/31/12, Black estimates that 5% of accounts receivable will prove to be
uncollectible. What should Black report as its Allowance for Doubtful
Accounts at 12/31/12?
a. $8,640.
b. $8,820.
c. $12,420.
d. $21,600.

21. Shelton Company has the following account balances at year-end:

Accounts receivable $120,000
Allowance for doubtful accounts 7,200
Sales discounts 4,800
Shelton should report accounts receivable at a net amount of
a. $108,000.
b. $112,800.
c. $115,200.
 d. $120,000.
22. Vasguez Corporation had a 1/1/12 balance in the Allowance for Doubtful
Accounts of $30,000. During 2012, it wrote off $21,600 of accounts and
collected $6,300 on accounts previously written off. The balance in Accounts
Receivable was $600,000 at 1/1 and $720,000 at 12/31. At 12/31/12,
Vasguez estimates that 5% of accounts receivable will prove to be
uncollectible. What is Bad Debt Expense for 2012?
a. $6,000.
b. $21,300.
c. $27,600.
d. $36,000.

23. Mc Glone Corporation had a 1/1/12 balance in the Allowance for Doubtful
Accounts of $25,000. During 2012, it wrote off $18,000 of accounts and
collected $5,250 on accounts previously written off. The balance in
Accounts Receivable was $500,000 at 1/1 and $600,000 at 12/31. At
12/31/12, McGlone estimates that 5% of accounts receivable will prove to
be uncollectible. What should McGlone report as its Allowance for Doubtful
Accounts at 12/31/12?
a. $12,000.
b. $12,250.
c. $17,250.
d. $30,000.

24. Laventhol Corporation had accounts receivable of $100,000 at 1/1. The

only transactions affecting accounts receivable were sales of $1,200,000
and cash collections of $1,150,000. The accounts receivable turnover is
a. 8.0.
b. 8.8.
c. 9.6.
d. 12.0.

25. If a petty cash fund is established in the amount of $250, and contains
$150 in cash and $95 in receipts for disbursements when it is replenished,
the journal entry to record replenishment should include credits to the
following accounts
a. Petty Cash, $75.
b. Petty Cash, $100.
c. Cash, $95; Cash Over and Short, $5.
d. Cash, $100.
26. If the month-end bank statement shows a balance of $72,000, outstanding
checks are $24,000, a deposit of $8,000 was in transit at month end, and a
check for $1,000 was erroneously charged by the bank against the account,
the correct balance in the bank account at month end is
a. $55,000.
b. $57,000.
c. $41,000.
d. $87,000.

27. In preparing its bank reconciliation for the month of April 2012, Henke, Inc.
has available the following information.
Balance per bank statement, 4/30/12 $34,140
NSF check returned with 4/30/12 bank statement 450
Deposits in transit, 4/30/12 5,000
 Outstanding checks, 4/30/12 5,200
Bank service charges for April 20
What should be the correct balance of cash at April 30, 2012?
a. $34,370
b. $33,940
c. $33,490
d. $33,470

28. Finley, Inc.s checkbook balance on December 31, 2012 was $42,400. In
addition, Finley held the following items in its safe on December 31.
(1) A check for $900 from Peters, Inc. received December 30, 2012, which
was not included in the checkbook balance.
(2) An NSF check from Garner Company in the amount of $1,800 that had
been deposited at the bank, but was returned for lack of sufficient funds
on December 29. The check was to be redeposited on January 3, 2013.
The original deposit has been included in the December 31 checkbook
balance.
(3) Coin and currency on hand amounted to $2,900.
The proper amount to be reported on Finley's balance sheet for cash at
December 31, 2012 is
a. $42,600.
b. $40,800.
c. $44,400.
d. $43,550.

29. The cash account shows a balance of $90,000 before reconciliation. The
bank statement does not include a deposit of $4,600 made on the last day
of the month. The bank statement shows a collection by the bank of $1,880
and a customer's check for $640 was returned because it was NSF. A
customer's check for $900 was recorded on the books as $1,080, and a
check written for $158 was recorded as $194. The correct balance in the
cash account was
a. $91,024.
b. $91,096.
c. $91,456.
d. $95,696.

30. In preparing its May 31, 2012 bank reconciliation, Catt Co. has the
following information Balance per bank statement, 5/31/12
$35,000
Deposit in transit, 5/31/12 5,400
utstanding checks, 5/31/12 4,900
Note collected by bank in May 1,250
The correct balance of cash at May 31, 2012 is
a. $40,400.
b. $34,250.
c. $35,500.
d. $36,750.

31. On the December 31, 2012 balance sheet of Vanoy Co., the current
receivables consisted of the following:
Trade accounts receivable $ 60,000
Allowance for uncollectible accounts (2,000)
 Claim against shipper for goods lost in transit (November 2012)
3,000
elling price of unsold goods sent by Vanoy on consignment
at 130% of cost (not included in Vanoy 's ending inventory)
26,000
Security deposit on lease of warehouse used for storing
some inventories 30,000
Total $117,000

At December 31, 2012, the correct total of Vanoy's current net

receivables was
a. $61,000.
b. $87,000.
c. $91,000.
d. $117,000.

32. Ace Co. prepared an aging of its accounts receivable at December 31,
2012 and determined that the net realizable value of the receivables was
$600,000. Additional information is available as follows:
Allowance for uncollectible accounts at 1/1/12credit balance $
68,000
Accounts written off as uncollectible during 2012
46,000
ccounts receivable at 12/31/12 650,000
Uncollectible accounts recovered during 2012 10,000
For the year ended December 31, 2012, Ace's uncollectible accounts
expense would be
a. $50,000.
b. $46,000.
c. $32,000.
d. $18,000.

33. For the year ended December 31, 2012, Dent Co. estimated its allowance
for uncollectible
accounts using the year-end aging of accounts receivable. The following
data are available:
Allowance for uncollectible accounts, 1/1/12 $84,000
Provision for uncollectible accounts during 2012
(2% on credit sales of $3,000,000) 60,000
Uncollectible accounts written off, 11/30/12 69,000
Estimated uncollectible accounts per aging, 12/31/12 104,000
After year-end adjustment, the uncollectible accounts expense for 2012
should be
a. $69,000.
b. $60,000.
c. $104,000.
d. $89,000.

34. Nenn Co.'s allowance for uncollectible accounts was $190,000 at the end
of 2012 and $180,000 at the end of 2011. For the year ended December
31, 2012, Nenn reported bad debt expense of $26,000 in its income
statement. What amount did Nenn debit to the appropriate account in
2012 to write off actual bad debts?
a. $10,000
 b. $16,000
c. $26,000
d. $36,000

35. In preparing its August 31, 2012 bank reconciliation, Bing Corp. has
available the following information:
Balance per bank statement, 8/31/12 $18,650
Deposit in transit, 8/31/12 3,900
Return of customer's check for insufficient funds, 8/30/12 600
Outstanding checks, 8/31/12 2,750
Bank service charges for August 100
At August 31, 2012, Bing's correct cash balance is
a. $19,800.
b. $19,200.
c. $19,100.
d. $17,500.

36. Tresh, Inc. had the following bank reconciliation at March 31, 2012:
Balance per bank statement, 3/31/12 $37,200
Add: Deposit in transit 10,300
47,500
Less: Outstanding checks 12,600
Balance per books, 3/31/12 $34,900
Data per bank for the month of April 2012 follow:
Deposits $43,700
Disbursements 49,700
All reconciling items at March 31, 2012 cleared the bank in April.
Outstanding checks at April 30, 2012 totaled $6,000. There were no
deposits in transit at April 30, 2012. What is the cash balance per books at
April 30, 2012?
a. $25,200
b. $28,900
c. $31,200
d. $35,500

Problem

Entries for bad debt expense.

1. A trial balance before adjustment included the following:

Debit Credit
Accounts receivable $120,000
Allowance for doubtful accounts 730
Sales $510,000
Sales returns and allowances 8,000

Give journal entries assuming that the estimate of uncollectibles is

determined by taking (1) 5% of gross accounts receivable and (2) 1%
of net sales.
 2. The trial balance before adjustment of Risen Company reports the
following balances:
Dr. Cr.
Accounts receivable $150,000
Allowance for doubtful accounts $ 2,500
Sales (all on credit) 850,000
Sales returns and allowances 40,000

Instructions
(a) Prepare the entries for estimated bad debts assuming that doubtful
accounts are estimated
to be (1) 6% of gross accounts receivable and (2) 1% of net sales.
(b) Assume that all the information above is the same, except that the
Allowance for Doubtful
Accounts has a debit balance of $2,500 instead of a credit balance. How will
this difference
affect the journal entries in part (a)?

3. Prepare journal entries to record the following merchandising

transaction of Dean Company, which applies the perpetual inventory
system . Dean company offers all of its credit customer credit term of
2/10, n/30

4. Target Store uses the periodic inventory system and had the following transactions
during the month of May:
 Prepare the required journal entries that Target Store must make to
record these transactions

5. A company made the following merchandise purchases and sales during the month
of May:

There was no beginning inventory. If the company uses the weighted

average inventory valuation method and the perpetual inventory
system, what would be the cost of its
ending inventory?