Chapter 5-Homework
Question 1.)
On December 23, 2021, Silverman Sports Manufacturing sells a truckload of merchandise to the Baseball World
store in Cincinnati, Ohio. The terms of the sale are FOB destination. The truck runs into bad weather on the way to
Cincinnati and doesn't arrive until January 2, 2022. Silverman's invoice totals $160,000. The company's year-end is
December 31. What amount should Silverman reflect in its 2021 income statement for this sale?
Amount that Silverman should report as sales revenue
for this sale on the income statement in 2021 =
$0
Since the goods were sold FOB destination, revenue
is not recorded until the goods are received.
Question 2.)
On April 3, Hamilton Company sold $50,000 of merchandise on account to Ranger Corporation, terms 5/10, n/30,
FOB shipping point. Hamilton's cost of sales for this merchandise was $34,000. The merchandise left Hamilton's
facility on April 4 and arrived at Ranger on April 10. Ranger paid the invoice for the merchandise on April 11.
Sale of Merchandise (Part 1)
Journal Entry
Date Accounts Debit Credit
April 4 Accounts Receivable 50,000
Sales Revenue 50,000
Cost of sales (Part 2)
Journal Entry
Date Accounts Debit Credit
April 4 Cost of Goods Sold 34000
Inventory 34000
Ranger Corporation
Question 3.) Perform the following accounting tasks for the receivables of Able and Bowman, a law firm, at
December 31, 2021
Prepare the journal entry for the related receipt of payment from Ranger Corporation. Assume that Ranger
Corporation takes the discount if payment is within the discount period.
Journal Entry
Date Accounts Debit Credit
April 11 Sales Discounts 2,500
Cash 47,500
Accounts Receivable 50,000
Requirement 2. Indicate which company (Hamilton or
Ranger) owns the merchandise at the end of each of
the following dates:
Date Which Company owns the
merchandise
April 3 Hamilton Company
April 4 Ranger Corporation
April 10 Ranger Corporation
Requirements 1 and 2. T-accounts have been set up for Cash, Accounts Receivable, and Service Revenue. Start
with the beginning balances as follows: Cash $28,000; Accounts Receivable $103,000; and Service Revenue, $0.
Post the following 2021 transactions to the T-accounts:
a. Service revenue of $705,000, all on account
b. Collections on account, $713,000
Cash Accounts Receivable Service revenue
Beginning
Ballance
28000 Beginning
Ballance
103000 Beginning
Ballance
0
Collections 713000 Service
Revenue
705000 Collections 713000 Service
Revenue
705000
End
Balance
741000 End
Balance
95000 End
Balance
705000
Question 4.)
At the end of the current year (before adjusting entries), Autumn Corporation had a balance of $76,000 in Accounts
Receivable and a credit balance of $11,000 in Allowance for Uncollectible Accounts. Service revenue (all on credit)
for the year totaled $490,000.
Part 1
Requirement 1. Using the percent-of-sales method, calculate the amount of Uncollectible-Account Expense if
Autumn Corporation estimates its uncollectible-account expense using a rate of 2% of credit sales. What is the
ending balance of the Allowance for Uncollectible Accounts under this scenario?
Autumn Corporation has 9800 of uncollectible-account expense using the percent-of-sales method.
The ending
balance of the Allowance for Uncollectible
Accounts is
20800 under this scenario.
Requirement 2. Now assume that Autumn Corporation uses the aging-of-receivables method. Autumn Corporation
estimates that its Allowance for Uncollectible Accounts should have a credit balance of $21,000. Calculate the
amount of its Uncollectible-Account Expense. What is the ending balance of the Allowance for Uncollectible
Accounts under this scenario?
Autumn Corporation
has
10000 of uncollectible-account expense using the aging-of-receivables method.
The ending
balance of the Allowance for Uncollectible
Accounts is
21000 under this scenario.
Question 5.)
Compute the amount of interest during 2021, 2022, and 2023 for the following note receivable: On May 31, 2021,
Wyoming State Bank loaned $240,000 to Lindsey Weston on a two-year, 8% note.
Which party has a(n): (a) note receivable? (b) note payable? (c) interest revenue? (d) interest expense?
How much in total would Wyoming State Bank collect if Lindsey Weston paid off the note early on November 30,
2021?
Part 1
1. Compute the amount of interest during 2021, 2022, and 2023 for the following note receivable: On May
31, 2021, Wyoming State Bank loaned $240,000 to Lindsey Weston on a two-year, 8% note. (Round the
interest amounts to the nearest whole dollar.)
Year Amount of interest
2021 11,200
2022 19200
2023 8000
2. Which party has a(n): (a) note receivable, (b) note payable, (c) interest revenue, (d) interest expense?
a. Note receivable Wyoming State Bank
b
.
Note payable Lindsey Weston
c. Interest revenue Wyoming State Bank
d
.
Interest expense Lindsey Weston
3. How much in total would Wyoming State Bank collect if Lindsey Weston paid off the note early on November 30,
2021? (Round the interest to the nearest whole dollar.)
If Lindsey Weston paid off the note on November 30, 2021, the amount paid would be 249600
Question 6.) Northern Products reported the following amounts in its 2022 financial statements. The 2021
amounts are given for comparison.
2022
2021
Current assets:
Cash $9,500 $9,500
Short-term investments 10,500 7,000
Accounts receivable $86,500 $70,100
Less: Allowance for uncollectibles (7,500) 79,000 (5,500) 64,600
Inventory 189,000 190,000
Prepaid insurance 2,200 2,200
Total current assets 290,200 273,300
Total current liabilities 99,000 106,000
Net sales (all on account) 1,077,000 734,000
Part 1
Requirement 1. Compute
Northern's
quick (acid-test) ratio at the end of
2022.
Round to two decimal places. How does the quick ratio compare with the industry average of 0.92?
Begin by selecting the formula, then enter the amounts and compute the quick (acid-test) ratio. (Abbreviation
used: Cash* = Cash and cash equivalents. Round the quick (acid-test) ratio to two decimal places.)
Cash* + Short-term investments + Net current
receivables ÷ Total current liabilities = Quick (acid-test) ratio
Part 2
$99,000 ÷ $99,000 = 1.00
Part 3
How does the quick (acid-test) ratio compare to the industry average of 0.92?
Northern's position is Favorable compared to the industry average of 0.92
Part 4
Requirement 2. Compare days' sales outstanding for 2022 with the company's credit terms of net 30 days. Begin by
selecting the formula, then enter the amounts to calculate the days' sales outstanding. (Round interim calculations
to two decimal places, XX.XX and the days' sales outstanding (DSO) up to the next whole day.)
365 days ÷ Accounts receivable turnover = Days' sales outstanding
Part 5
365 ÷ 15.00 = 25 days
Part 6
Northern's
days' sales outstanding is better than the credit terms of net 30
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