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ACC305 Week 3 P7-10 P7-14 Judgment Case 7-5

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The attached tutorials are in EXCEL FORMAT; however, if you have a template from your instructor in a different format, feel free to email me and I will help you fill it out.

ACC305 Intermediate Accounting I
Textbook: Spiceland, J. D., Sepe, J. F. & Nelson, M.W. (2011). Intermediate Accounting (6th ed.). New York, N.Y.: McGraw-Hill Irwin. ISBN: 9780077500375

Week Three Problems: P7-10 (Page 388) & P7-14 (Page 389), Judgment Case 7-5 on page 391 

 7-10 Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2011, the following transactions related to receivables occurred: Feb. 28 Sold merchandise to Lennox, Inc. for $10,000 and accepted a 10%, 7-month note. 10% is an appropriate rate for this type of note. Mar. 31 Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with a discount rate of 10%. The $8,000 payment is due on March 31, 2012. Apr. 3 Sold merchandise to Carr Co. for $7,000 with terms 2/10, n/30. Evergreen uses the gross method to account for cash discounts. 11 Collected the entire amount due from Carr Co. 17 A customer returned merchandise costing $3,200. Evergreen reduced the customer's receivable balance by $5,000, the sales price of the merchandise. Sales returns are recorded by the company as they occur. 30 Transferred receivables of $50,000 to a factor without recourse. The factor charged Evergreen a 1% finance charge on the receivables transferred. The sale criteria are met. June 30 Discounted the Lennox, Inc., note at the bank. The bank's discount rate is 12%. The note was discounted without recourse. Aug. 31 Lennox, Inc., paid the note amount plus interest to the bank.

 Required: 1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold 2. Prepare any necessary adjusting entries at December 31, 2011. Adjusting entries are only recorded at year-end (round all calculations to the nearest dollar). 3. Prepare a schedule showing the effect of the journal entries in requirements 1 and 2 on 2011 income before taxes.

P 7-14 Bank reconciliation and adjusting entries Appendix 7A El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2011, reconciliation of the bank balance is as follows: The company's general ledger checking account showed the following for December: The December bank statement contained the following information: The checks that were processed by the bank in December include all of the outstanding checks at the end of November except for check #365. In addition, there are some December checks that had not been processed by the bank by the end of the month. Also, you discover that check #411 for $320 was correctly recorded by the bank but was incorrectly recorded on the books as a $230 disbursement for advertising expense. Included in the bank's deposits is a $1,300 deposit incorrectly credited to the company's account. The deposit should have been posted to the credit of the Los Gatos Company. The NSF checks have not been redeposited and the company will seek payment from the customers involved.

Required: 1. Prepare a bank reconciliation for the El Gato checking account at December 31, 2011. 2. Prepare any necessary adjusting journal entries indicated.

Judgment Case 7-5 Internal control LO1 For each of the following independent situations, indicate the apparent internal control weaknesses and suggest alternative procedures to eliminate the weaknesses.

1. John Smith is the petty cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tally the fund.

2. All of the company's cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported by the appropriate invoice and, for purchases, a receiving document. The vouchers are approved by Dean Leiser, the chief accountant, after reviewing the supporting documentation. Betty Hanson prepares the checks for Leiser's signature. Leiser also maintains the company's check register (the cash disbursements journal) and reconciles the bank account at the end of each month.

3. Fran Jones opens the company's mail and makes a listing of all checks and cash received from customers. A copy of the list is sent to Jerry McDonald who maintains the general ledger accounts. Fran prepares and makes the daily deposit at the bank. Fran also maintains the subsidiary ledger for accounts receivable, which is used to generate monthly statements to customers.

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