ACC 422 Chapter 7 Excersises 1 answer below »

E7-2

(Determine Cash Balance)Presented below are a number of independent situations. Instructions For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale. 1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180. 2. Checking account balance $600,000; an overdraft in special checking account at same bank as normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund $300; coins and currency on hand $1,350. 3. Checking account balance $590,000; postdated check from customer $11,000; cash restricted due to maintaining compensating balance requirement of $100,000; certified check from customer $9,800; postage stamps on hand $620. 4. Checking account balance at bank $37,000; money market balance at mutual fund (has checking privileges) $48,000; NSF check received from customer $800. 5. Checking account balance $700,000; cash restricted for future plant expansion $500,000; short-term Treasury bills $180,000; cash advance received from customer $900 (not included in checking account balance); cash advance of $7,000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.

E7-7
(Recording Bad Debts)
Duncan Company reports the following financial information before adjustments.
Dr. Cr.
Accounts Receivable$100,000
Allowance for Doubtful Accounts$2,000
Sales (all on credit) 900,000
Sales Returns and Allowances 50,000

Instructions
Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at (a) 1% of net sales and (b) 5% of accounts receivable.
DescriptionDebitCredit

E7-18
On July 1, 2007, Agincourt Inc. made two sales.

1. It sold land having a fair market value of $700,000 in exchange for a 4-year non-interest-bearing promissory note in the face amount of $1,101,460. The land is carried on Agincourt's books at a cost of $590,000.

2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000 (interest payable annually).

Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.

Instructions
Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2007. (For multiple debit/credit entries, list in order of magnitude. Round answers to 2 decimal places. Hint: Use tables in text.)

E7-20

(Analysis of Receivables)
Presented below is information for Jones Company.
1. Beginning-of-the-year Accounts Receivable balance was $15,000.

2. Net sales (all on account) for the year were $100,000. Jones does not offer cash discounts.

3. Collections on accounts receivable during the year were $70,000.

Instructions
(a) Prepare (summary) journal entries to record the items noted above.

E7-24
(Bank Reconciliation and Adjusting Entries)
Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.
June 30 Bank Reconciliation
Balance per bank$ 7,000
Add: Deposits in Transit 1,540
Deduct: Outstanding checks(2,000)
Balance per books$ 6,540
Month of July Results
Per BankPer Books
Balance July 31$8,650$9,250
July deposits 5,000 5,810
July checks4,000 3,100
July note collected (not included in July deposits)1,000-
July bank service charge15-
July NSF check from a customer, returned by the bank (recorded by bank as a charge)335-
Instructions

(a) Prepare a bank reconciliation going from balance per bank and balance per book to correct cash balance. (For multiple entries, list in order of magnitude. List all amounts as positive amounts and subtract where necessary.)

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