P7-2A

Arial Ltd. maintains a petty cash fund for small expenditures. The following
transactions occurred over a 2-month period.
July 1 Established petty cash fund by writing a check on Coulter Bank for €200.
15 Replenished the petty cash fund by writing a check for €198.00. On this date,
the fund consisted of €2.00 in cash and the following petty cash receipts:
freight-out €87.00, postage expense €51.40, entertainment expense €46.60, and
miscellaneous expense €11.20.
31 Replenished the petty cash fund by writing a check for €192.00. At this date,
the fund consisted of €8.00 in cash and the following petty cash receipts:
freight-out €82.10, charitable contributions expense €45.00, postage expense
€25.50, and miscellaneous expense €39.40.
Aug. 15 Replenished the petty cash fund by writing a check for €187.00. On this date,
the fund consisted of €13.00 in cash and the following petty cash receipts:
freight-out €75.60, entertainment expense €43.00, postage expense €33.00, and
miscellaneous expense €37.00.
16 Increased the amount of the petty cash fund to €300 by writing a check for €100.
31 Replenished the petty cash fund by writing a check for €277.00. On this date,
the fund consisted of €23 in cash and the following petty cash receipts:
postage expense €133.00, travel expense €95.60, and freight-out €47.10.
Instructions
(a) Journalize the petty cash transactions.

E7-8
Ankara A.S¸. uses an imprest petty cash system. The fund was established on March 1
with a balance of 100. During March, the following petty cash receipts were found in the
petty cash box.

Date Receipt For Amount

No.
3/5 1 Stamp Inventory 39
7 2 Freight-Out 17
9 3 Miscellaneous Expense 6
11 4 Travel Expense 24
14 5 Miscellaneous Expense 7

The fund was replenished on March 15 when the fund contained 4 in cash. On March 20,
the amount in the fund was increased to 150.
Instructions
Journalize the entries in March that pertain to the operation of the petty cash fund.

E8-6
On December 31, 2016, Russell NV estimated that 2% of its net sales of €360,000 will
become uncollectible. The company recorded this amount as an addition to Allowance for
Doubtful Accounts. On May 11, 2017, Russell NV determined that the B. Vetter account
was uncollectible and wrote off €1,100. On June 12, 2017, Vetter paid the amount previ-
ously written off.
Instructions
Prepare the journal entries on December 31, 2016, May 11, 2017, and June 12, 2017.

BE8-4
At the end of 2017, Endrun Ltd. has accounts receivable of £700,000 and an allowance for doubtful
accounts of £54,000. On January 24, 2018, the company learns that its
receivable from Marcello is not collectible, and management authorizes a write-off of
£6,200.
(a) Prepare the journal entry to record the write-off.
(b) What is the cash realizable value of the accounts receivable (1) before the write-off and
(2) after the write-off?

E8-1
Presented below are selected transactions of Federer AG. Federer sells in large quantities to other
companies and also sells its product in a small retail outlet.
March 1 Sold merchandise on account to Lynda Co. for CHF3,800, terms 2/10, n/30.
3 Lynda Co. returned merchandise worth CHF600 to Federer.
9 Federer collected the amount due from Lynda Co. from the March 1 sale.
15 Federer sold merchandise for CHF200 in its retail outlet. The customer used
his Federer credit card.
31 Federer added 1.5% monthly interest to the customer’s credit card balance.

Instructions
Prepare journal entries for the transactions on page 410.

P8-7A
On January 1, 2017, Derek Co. had Accounts Receivable €139,000, Notes Receivable €30,000, and
Allowance for Doubtful Accounts €13,200. The note receivable is from
Kaye Noonan Ltd. It is a 4-month, 9% note dated December 31, 2016. Derek prepares
financial statements annually at December 31. During the year, the following selected
transactions occurred.
Jan. 5 Sold €24,000 of merchandise to Zwingle SE, terms n/15.
20 Accepted Zwingle’s €24,000, 3-month, 6% note for balance due.
Feb. 18 Sold €8,000 of merchandise to Gerard AG and accepted Gerard’s €8,000,
6-month, 7% note for the amount due.
Apr. 20 Collected Zwingle note in full.
30 Received payment in full from Kaye Noonan on the amount due.
May 25 Accepted Isabella Ltd.’s €4,000, 3-month, 7% note in settlement of a past-due
balance on account.
Aug. 18 Received payment in full from Gerard on note due.
25 The Isabella note was dishonored. Isabella is not bankrupt; future payment
is anticipated.
Sept. 1 Sold €10,000 of merchandise to Fernando Co. and accepted a €10,000,
6-month, 8% note for the amount due.
Instructions
Journalize the transactions.
P8-7B
On January 1, 2017, Valdez SA had Accounts Receivable €91,000 and Allowance for
Doubtful Accounts €8,100. Valdez prepares financial statements annually at December 31.
During the year, the following selected transactions occurred.
Jan. 5 Sold €8,400 of merchandise to Patrick Co., terms n/30.
Feb. 2 Accepted an €8,400, 4-month, 5% promissory note from Patrick for the
balance due.
12 Sold €13,500 of merchandise to Marguerite SA and accepted Marguerite’s
€13,500, 2-month, 6% note for the balance due.
26 Sold €7,000 of merchandise to Felton Co., terms n/10.
Apr. 5 Accepted a €7,000, 3-month, 8% note from Felton Co. for the balance due.
12 Collected Marguerite note in full.
June 2 Collected Patrick note in full.
July 5 Felton Co. dishonors its note of April 5. It is expected that Felton will
eventually pay the amount owed.
15 Sold €11,000 of merchandise to Planke Co. and accepted Planke’s €11,000,
3-month, 8% note for the amount due.
Oct. 15 Planke Co.’s note was dishonored. Planke Co. is bankrupt, and there is no
hope of future settlement.
Instructions
Journalize the transactions.

P7-2B
De Smet SA maintains a petty cash fund for small expenditures. The following
transactions occurred over a 2-month period.
July 1 Established petty cash fund by writing a check on Star Bank for €100.
15 Replenished the petty cash fund by writing a check for €94.90. On this date,
the fund consisted of €5.10 in cash and the following petty cash receipts:
freight-out €51.00, postage expense €20.50, entertainment expense €23.10, and
miscellaneous expense €4.10.
31 Replenished the petty cash fund by writing a check for €92.90. At this date, the
fund consisted of €7.10 in cash and the following petty cash receipts: freight-
out €43.50, charitable contributions expense €20.00, postage expense €20.10,
and miscellaneous expense €9.30.
Aug. 15 Replenished the petty cash fund by writing a check for €98.00. On this date,
the fund consisted of €2.00 in cash and the following petty cash receipts:
freight-out €40.20, entertainment expense €21.00, postage expense €14.00, and
miscellaneous expense €19.80.
16 Increased the amount of the petty cash fund to €150 by writing a check for €50.
31 Replenished the petty cash fund by writing a check for €137.00. On this date,
the fund consisted of €13 in cash and the following petty cash receipts: freight-
out €74.00, entertainment expense €43.20, and postage expense €17.70.
Instructions
(a) Journalize the petty cash transactions.
(b) Post to the Petty Cash account
P8-6B
Gehrig Co. closes its books monthly. On June 30, selected ledger account balances are:
Notes Receivable €60,000
Interest Receivable 435
Notes Receivable include the following.
Date Maker Face Term Interest
May 16 Fulton Ltd. €12,000 60 days 9%
May 25 Ascot Co. 30,000 60 days 10%
June 30 Trayer Corp. 18,000 6 months 12%

During July, the following transactions were completed.

July 5 Made sales of €7,200 on Gehrig Co. credit cards.
14 Made sales of €1,300 on Visa credit cards. The credit card service charge is 3%.
14 Added €510 to Gehrig Co. credit card customer balances for fi nance charges
on unpaid balances.
15 Received payment in full from Fulton Ltd. on the amount due.
24 Received notice that the Ascot Co. note has been dishonored. (Assume that
Ascot Co. is expected to pay in the future.)
Instructions
(a) Journalize the July transactions and the July 31 adjusting entry for accrued interest
receivable. (Interest is computed using 360 days.)
(b) Enter the balances at July 1 in the receivable accounts. Post the entries to all of the
receivable accounts.

CP8
Victoria Company, Ltd.’s statement of financial position at December 31, 2016, is
presented below.
VICTORIA COMPANY, LTD.
Statement of Financial Position
December 31, 2016
Inventory £ 9,400 Share capital—ordinary £20,000
Accounts receivable 19,780 Retained earnings 12,730
Allowance for doubtful accounts (800) Accounts payable 8,750
Cash 13,100 £41,480
£41,480
During January 2017, the following transactions occurred. Victoria uses the perpetual
inventory method.
Jan. 1 Victoria accepted a 4-month, 8% note from Leon plc in payment of Leon’s
£1,500 account.
3 Victoria wrote off as uncollectible the accounts of Barker Ltd. (£450) and
Elmo Co. (£330).
8 Victoria purchased £17,200 of inventory on account.
11 Victoria sold for £25,000 on account inventory that cost £17,500.
15 Victoria sold inventory that cost £780 to Joe Haribo for £1,200. Haribo
charged this amount on his Visa First Bank card. The service fee charged
Victoria by First Bank is 3%.
17 Victoria collected £22,900 from customers on account.
21 Victoria paid £16,300 on accounts payable.
 24 Victoria received payment in full (£330) from Elmo on the account written off
on January 3.
27 Victoria purchased supplies for £1,400 cash.
31 Victoria paid other operating expenses, £3,218.
Adjustment data:
1. Interest is recorded for the month on the note from January 1.
2. Bad debts are expected to be 5% of the January 31, 2017, accounts receivable.
3. A count of supplies on January 31, 2017, reveals that £470 remains unused.

Instructions
(You may want to set up T-accounts to determine ending balances.)
(a) Prepare journal entries for the transactions on page 419 and the adjusting entries. (Include
entries for cost of goods sold using the perpetual system.)
(b) Prepare an adjusted trial balance at January 31, 2017.
(c) Prepare an income statement and a retained earnings statement for the month ending
January 31, 2017, and a classified statement of financial position as of January 31, 2017.

LaSalle SA established a petty cash fund on May 1, cashing a check for €100.
The company reimbursed the fund on June 1 and July 1 with the following results.
June 1: Cash in fund €1.75. Receipts: delivery expense €31.25; postage expense
€41.00; and miscellaneous expense €25.00.
July 1: Cash in fund €3.25. Receipts: delivery expense €21.00; entertainment
expense €53.00; and miscellaneous expense €24.75.
On July 10, LaSalle increased the fund from €100 to €150.

Instructions
Prepare journal entries for LaSalle SA for May 1, June 1, July 1, and July 10.