Accounting Chap 9

In: Business and Management

Submitted By ranasaadjaved
Words 9074
Pages 37
CHAPTER 9
RECEIVABLES
DISCUSSION QUESTIONS
1.

Receivables are normally classified as (1) accounts receivable, (2) notes receivable, or
(3) other receivables.

2.

Dan’s Hardware should use the direct write-off method because it is a small business that has a relatively small number and volume of accounts receivable.

3.

Contra asset, credit balance

4.

The accounts receivable and allowance for doubtful accounts may be reported at a net amount of $661,500 ($673,400 – $11,900) in the Current Assets section of the balance sheet.
In this case, the amount of the allowance for doubtful accounts should be shown separately in a note to the financial statements or in parentheses on the balance sheet. Alternatively, the accounts receivable may be shown at the gross amount of $673,400 less the amount of the allowance for doubtful accounts of $11,900, thus yielding net accounts receivable of
$661,500.

5.

(1) The percentage rate used is excessive in relationship to the accounts written off as uncollectible; hence, the balance in the allowance is excessive.
(2) A substantial volume of old uncollectible accounts is still being carried in the accounts receivable account.

6.

An estimate based on analysis of receivables provides the most accurate estimate of the current net realizable value.

7.

a.
b.

8.

The interest will amount to $5,100 ($85,000 × 6%) only if the note is payable one year from the date it was created. The usual practice is to state the interest rate in terms of an annual rate, rather than in terms of the period covered by the note.

9.

Debit Accounts Receivable for $243,600
Credit Notes Receivable for $240,000
Credit Interest Revenue for $3,600

10.

Sailfish Company
Notes Receivable

Cash
Accounts Receivable [$240,000 + ($240,000 × 6% × 90 ÷ 360)]
Interest Revenue
($243,600 × 30 ÷ 360 × 9% =…...

Similar Documents

Advanced Accounting 1e Solutions Manuel Chap 3

...CHAPTER 3 CONSOLIDATION SUBSEQUENT TO DATE OF ACQUISITION QUESTION SOLUTIONS 3-1. An 80 percent ownership requires the preparation of consolidated financial statements. Regardless of the method used to account for the investment on the parent’s financial records, the investment income or dividend income is replaced on the consolidated income statement by the subsidiary’s revenue and expense accounts. The equity method is required if the parent prepares separate financial statements. Search term “ownership” reveals 8 hits. The relevant item in this instance is paragraph 17, reproduced below: 17. The Board concludes that the equity method of accounting for an investment in common stock should also be followed by an investor whose investment in voting stock gives it the ability to exercise significant influence over operating and financial policies of an investee even though the investor holds 50% or less of the voting stock. Ability to exercise that influence may be indicated in several ways, such as representation on the board of directors, participation in policy making processes, material intercompany transactions, interchange of managerial personnel, or technological dependency. Another important consideration is the extent of ownership by an investor in relation to the concentration of other shareholdings, but substantial or majority ownership of the voting stock of an investee by another investor does not necessarily preclude the ability to exercise significant......

Words: 20856 - Pages: 84

Chap 6 Accounting Class Notes

...of 25 years on January 1, 2006. Wyeth has an investment cost of $421,087 in the machine, which has a useful life of 25 years. Wyeth has an investment cost of $421,087 in the machine, which has a useful life of 25 years and no salvage value at the end of that time. Your client is interested in earning an 11% return on its investment and has agreed to accept 25 equal rental payments at the end of each of the next 25 years. Instructions: You are requested to provide Wyeth with the amount of each of the 25 rental payments that will yield an 11% return on investment. An ordinary annuity* Present value discount factor= Present value ? * 8.42174= 421,087 ?= 50,000 Accounting Applications of Present Value Techniques: Monetary assets and monetary liabilities are valued at the present value of future cash flows. Accounting Applications of Present Value Techniques: (1) Notes Receivable: Example: On July 1, 2012, Rentoul Inc. rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000 (interest payable annually). Assume the current market interest rate is 12%. 7/1/12 Notes Receivable...............400,000.00 Discount on Notes Receivable..... 178,836.32 Service Revenue............................... 221,163.68 Computation of the present value of the note: Maturity value ...................................................... $400,000.00 (a) Present value of $400,000 due in 8 years at 12%: $400,000 X .40388= $161,552 (b) Present value of $12,000......

Words: 1082 - Pages: 5

Accounting Chapter 9

...CHAPTER 9 Break-Even Point and Cost-Volume-Profit Analysis QUESTIONS 1. The variable costing income statement classifies costs by the way they behave. Variable costs are deducted from revenues to determine contribution margin and then fixed costs are deducted from contribution margin to determine operating profit. Break-even analysis involves a study of fixed costs, variable costs and revenues to determine the volume at which total costs equal total revenues. Hence, variable costing provides the variable and fixed cost classification needed to compute break-even. The absorption costing income statement uses a functional classification--manufacturing and nonmanufacturing costs--to compute gross profit and then operating income respectively. A functional classification requires cost to be classified based on the reason it was incurred, i.e., selling, administrative, or production. This classification does not separate variable from fixed costs and is therefore not useful in computing breakeven. 2. The break-even point is the starting point for CVP analysis because before a company can earn profits, it must first cover all of its variable and fixed costs; the point at which all costs are just covered is the break-even point. The formula approach requires solving for the exact break-even using the following algebraic equation: R(X)– V(X) – FC = 0; where R is revenue per unit, X is volume, V is variable cost per unit, and FC is fixed cost. The......

Words: 9008 - Pages: 37

Chap. 11

...those pertaining to the primary government. Blending is when the component units’ transactions and balances are reported as if they were part of the primary government — that is, the component units’ funds are accounted for just as they were funds of the primary government. Blending is required when the primary government and the component units are controlled by governing boards having the same members or the component unit provides services solely to the primary government. If those conditions are not satisfied then discrete presentation is required. 3. Discrete presentation, as it must be applied in government-wide statements, allows for the aggregation of any number of different component units, irrespective of type and basis of accounting. Therefore, it is said, the information is overly aggregated and hence of little value. This problem is mitigated by the requirement of Statement No. 34 that the government provide detailed financial information about each of its major component units. 4. The three main sections of the CAFR are: • the introductory section; • the financial section and • the statistical section. The main components of the financial section are: • the auditor’s report • the management discussion and analysis (MD&A) • the basic financial statements • required supplementary information other than the MD&A • combining statements and schedules 5. The combining statements......

Words: 1020 - Pages: 5

Chap 1

...earnings and the value to you of the work environment and prestige that your education provides), minus the opportunity cost of attending school. As noted in the text, the opportunity cost of attending school is generally greater than the cost of books and tuition. It is rational for an individual to enroll in graduate when his or her net present value is greater than zero. b. Since this increases the opportunity cost of getting an M.B.A., one would expect fewer students to apply for admission into M.B.A. Programs. 8. a. Her accounting profits are $180,000. These are computed as the difference between revenues ($200,000) and explicit costs ($20,000). b. By working as a painter, Jaynet gives up the $100,000 she could have earned under her next best alternative. This implicit cost of $100,000 is in addition to the $20,000 in explicit costs. Since her economic costs are $120,000, her economic profits are $200,000 - $120,000 = $80,000. Page 2 Michael R. Baye 9. ⎛ 1+ i ⎞ First, recall the equation for the value of a firm: PV firm = π 0 ⎜ ⎜ i − g ⎟ . Next, solve this ⎟ ⎝ ⎠ (1 + i )π 0 equation for g to obtain g = i − . Substituting in the known values implies a PV firm growth rate of g = 0.10 − 275,000 be a reasonable rate of growth: 0.06 < 0.10 (g < i ) . (1 + 0.10)10,000 = 0.06 , or 6 percent. This would seem to 10. Effectively, this question boils down to the question of whether it is a good investment to spend an extra $100 on a refrigerator that will save......

Words: 2176 - Pages: 9

Chap 16

...Chapter 16 Accounting for Income Taxes AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may approach assessment and its documentation differently, one approach is to provide specific questions on exams that become the basis for assessment. To aid faculty in this endeavor, we have labeled each question, exercise, and problem in Intermediate Accounting, 7e, with the following AACSB learning skills: Questions 16–1 16–2 16–3 16–4 16–5 16–6 16–7 16–8 16–9 16–10 16–11 16–12 16–13 16–14 16–15 AACSB Tags Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Diversity, Reflective thinking Analytic Analytic Analytic Analytic Analytic Analytic Reflective thinking Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Analytic Exercises (cont.) 16–6 16–7 16–8 16–9 16–10 16–11 16–12 16–13 16–14 16–15 16–16 16–17 16–18 16–19 16–20 16–21 16–22 16–23 16–24 16–25 16–26 16–27 16–28 16–29 16–30 AACSB Tags Reflective thinking Analytic Analytic Analytic Analytic Analytic Communications Analytic Analytic Analytic Analytic, Reflective thinking Analytic Analytic Analytic Analytic......

Words: 17693 - Pages: 71

Accounting Standards 9

...Accounting Standard (AS) 9 Revenue Recognition (This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.) Introduction 1. This Standard deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise. The Standard is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from -- the sale of goods, -- the rendering of services, and -- the use by others of enterprise resources yielding interest, royalties and dividends. 2. This Standard does not deal with the following aspects of revenue recognition to which special considerations apply: (i) Revenue arising from construction contracts;6 (ii) Revenue arising from hire-purchase, lease agreements; (iii) Revenue arising from government grants and other similar subsidies; (iv) Revenue of insurance companies arising from insurance contracts. 3. Examples of items not included within the definition of "revenue" for the purpose of this Standard are: (i) Realised gains resulting from the disposal of, and unrealised gains resulting from the holding of, non-current assets e.g. appreciation in the value of fixed assets; (ii) Unrealised holding gains resulting from the change in value of current......

Words: 3176 - Pages: 13

Accounting Standards 9

...Exposure Draft Accounting Standard (AS) 9 (Revised 20XX) (Corresponding to IAS 18) Revenue (Last date for Comments: June 07, 2010) Issued by Accounting Standards Board The Institute of Chartered Accountants of India 2 Exposure Draft Accounting Standard 9 (Revised 20XX) (Corresponding to IAS 18) Revenue Contents Objective Scope Definitions Measurement of revenue Identification of the transaction Sale of goods Rendering of services Interest, royalties and dividends Disclosure Effective date 1–6 7–8 9–12 13 14–19 20–28 29–34 35–36 37–39 Paragraphs Appendices A Revenue—Barter Transactions Involving Advertising Services (Corresponding to SIC 31) Customer Loyalty Programmes (Corresponding to IFRIC 13) Agreements for the Construction of Real Estate (Corresponding to IFRIC 15) Transfers of Assets from Customers (Corresponding to IFRIC 18) B C D 3 E References to matters contained in other Accounting Standards F Illustrative examples Sale of goods Rendering of services Interest, royalties and dividends Recognition and measurement G H Comparison with IAS 18, Revenue Major differences between the Exposure Draft of AS 9 (Revised 20XX), Revenue, and the existing AS 9 (Issued 1985) 4 INVITATION TO COMMENT The Accounting Standards Board of the Institute of Chartered Accountants of India invites comments on any aspect of this Exposure Draft of the Accounting Standard (AS) 9 (Revised 20XX), Revenue. The Board would particularly welcome......

Words: 16852 - Pages: 68

Chap 1

...messages: ignore arguments and opinions that might support the other party’s position – Two-sided messages: mention and describe the opposing point of view and show how and why it is less desirable – Message components • Negotiators can help the other party understand and accept their arguments by breaking them into smaller, more understandable pieces 8-8 The Central Route to Influence: The Message and Its Delivery • Message Structure (cont.) – Repetition • Enhances the likelihood that the message will be understood – Conclusions • With people who are very intelligent, or have not yet made up their minds, leave the conclusion open • For people whose ideas are already wellformulated and strong, state the conclusion 8-9 The Central Route to Influence: The Message and Its Delivery • Persuasive style: how to pitch the message – Encourage active participation – Use vivid language and metaphors – Incite the receiver’s fears – Violate the receiver’s expectations 8-10 Peripheral Routes to Influence The receiver attends less to the substance of persuasive arguments and is instead susceptible to more “automatic” influence through subtle cues • Usually occurs when the target of influence is either unmotivated or unable to attend carefully to the substance contained within a persuasive message 8-11 Aspects of Messages that Foster Peripheral Influence • Message order – Important points should be made early exposing......

Words: 726 - Pages: 3

Accounting

...Pasadena City College Syllabus - MANAGERIAL ACCOUNTING - ACCT 001B Fall 2015 – 70008 (Revised) Date: Time: Location: September 1 – December 15, 2015 Tuesdays/Thursdays; 7:00am – 9:30am R 307, Building R Instructor: E-mail: Phone: Chee-Sum Tan, MBA, CPA, CFA, ABV, CGMA ctan8@pasadena.edu 626-524-1674 Required Material: Textbook: Accounting: Tools for Business Decision Making (5th Edition); Kimmel, Weygandt, Kieso, Wiley Publishing (WITH “WILEYPLUS”). WILEYPLUS IS REQUIRED Calculator: Basic calculator Supplies: Pen, pencil, 3 scantrons Learning Objective: This course is designed to provide an understanding of managerial accounting information useful to managers responsible for conducting business operations and decision making. Upon the successful completion of this course, students must be able to measure, analyze and report managerial accounting information for the purpose of planning, budgeting and control. Students are also required to have a solid understanding and working knowledge of the concepts and principles of managerial accounting.  Learn operational processes like job order costing, process costing and activity-based costing concept  Perform cost-volume-profit analysis, relevant costing, capital budgeting for profitability and decision making  Understand performance reports and budgets for planning and control purposes  Demonstrate mastery of managerial accounting concepts and principles through satisfactorily......

Words: 984 - Pages: 4

Cost Accounting Chapter 9

... CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS 9-1 No. Differences in operating income between variable costing and absorption costing are due to accounting for fixed manufacturing costs. Under variable costing, only variable manufacturing costs are included as inventoriable costs. Under absorption costing, both variable and fixed manufacturing costs are included as inventoriable costs. Fixed marketing and distribution costs are not accounted for differently under variable costing and absorption costing. 9-2 The term direct costing is a misnomer for variable costing for two reasons: a. Variable costing does not include all direct costs as inventoriable costs. Only variable direct manufacturing costs are included. Any fixed direct manufacturing costs and any direct nonmanufacturing costs (either variable or fixed) are excluded from inventoriable costs. b. Variable costing includes as inventoriable costs not only direct manufacturing costs but also some indirect costs (variable indirect manufacturing costs). 9-3 No. The difference between absorption costing and variable costs is due to accounting for fixed manufacturing costs. As service or merchandising companies have no fixed manufacturing costs, these companies do not make choices between absorption costing and variable costing. 9-4 The main issue between variable costing and absorption costing is the proper timing of the release of fixed manufacturing costs as costs of the period: a. at the time of......

Words: 13275 - Pages: 54

Acc 227 Week 9 Final Project Cost Accounting Analysis

...ACC 227 WEEK 9 FINAL PROJECT COST ACCOUNTING ANALYSIS To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-9-final-project-cost-accounting-analysis/ Contact us at: nerdypupil@gmail.com ACC 227 WEEK 9 FINAL PROJECT COST ACCOUNTING ANALYSIS ACC 227 Week 9 Final Project Cost Accounting Analysis Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 9 Final Project Cost Accounting Analysis in order to ace their studies. ACC 227 WEEK 9 FINAL PROJECT COST ACCOUNTING ANALYSIS To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-9-final-project-cost-accounting-analysis/ Contact us at: nerdypupil@gmail.com ACC 227 WEEK 9 FINAL PROJECT COST ACCOUNTING ANALYSIS ACC 227 Week 9 Final Project Cost Accounting Analysis Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 9 Final Project Cost Accounting Analysis in order to ace their studies. ACC 227 WEEK 9 FINAL PROJECT COST ACCOUNTING ANALYSIS To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-9-final-project-cost-accounting-analysis/ Contact us at: nerdypupil@gmail.com ACC 227 WEEK 9 FINAL PROJECT COST ACCOUNTING ANALYSIS ACC 227 Week 9 Final Project Cost Accounting Analysis Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 9 Final Project Cost Accounting Analysis in order to ace their......

Words: 493 - Pages: 2

Solution of Intermadiate Accounting Chap 14 , 13th Edition

...20, 23, 24, 25 2, 3, 4, 9, 10, 11 5, 6, 7, 8, 11 1, 2, 3, 4, 5, 6, 7 3, 4, 6, 7, 8, 10 Brief Exercises Exercises 1, 2 Problems 10, 11 Concepts for Analysis 1, 2, 3 2. 3, 4, 5, 6, 7, 8, 9, 10, 11 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15 12, 13, 14, 15 16, 17, 18 19 1, 2, 3, 4, 5, 6, 7, 10 1, 2, 3, 4, 5, 6, 7, 10, 11 2, 4, 5, 6, 7, 10 8, 9 10 1, 3, 6 3. 1, 2, 3, 4 4. 5. 6. Retirement and refunding of debt. Imputation of interest on notes. Disclosures of long-term obligations. Troubled debt restructuring. 12, 13 14, 15, 16, 17, 18 19, 20, 21, 22, 23, 24 27, 28, 29, 30, 31, 32 11 12, 13, 14, 15 9 3, 4, 5 1, 3, 5 *7. 20, 21, 22, 23, 24, 25, 26 13, 14, 15 *This material is discussed in the Appendix to the Chapter. Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 14-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. Describe the formal procedures associated with issuing long-term debt. Identify various types of bond issues. 1, 2 Brief Exercises Exercises Problems 3. Describe the accounting valuation for bonds at date of issuance. Apply the methods of bond discount and premium amortization. Describe the accounting for the extinguishment of debt. Explain the accounting for long-term notes payable. Explain the reporting of off-balance sheet financing arrangements. Indicate how to present and analyze long-term debt. Describe the accounting for debt restructuring....

Words: 22251 - Pages: 90

Intermediate Accounting Chap 1,2,3 Hw

...Intermediate Accounting I 3/2/2012 CA1-1.) 1. True 2. False, must comply with all standards and interpretations including disclosure requirements 3. True 4. False, FASB must operate in full view of public through a “due process” system that gives interested parties ample opportunity to make their views known CA1-3.) 1. D 2. A 3. D 4. B 5. A 6. B 7. A 8. B E2-5.) Assets- F Liabilities- B Equity- I Investment by owners- C Distribution to owners- D, K Comprehensive Income- L, G, E, C Revenue- J, H Expenses- H Gains- A Losses- A E2-7.) a. Fair value changes are not recognized in the accounting records. HISTORICAL COST PRINCIPLE b. Financial information is presented so that investors will not be misled. FULL DISCLOSURE PRINCIPLE c. Intangible assets are capitalized and amortized over periods benefited. MATCHING PRINCIPLE d. Repair tools are expensed when purchased. MATERIALITY e. Agricultural companies use market value for purposes of valuing crops. INDUSTRY PRACTICES f. Each enterprise is kept as a unit distinct from its owner or owners. ECONOMIC ENTITY ASSUMPTION g. All significant post-balance sheet events are reported. FULL DISCOSURE PRINCIPLE h. Revenue is recorded at point of sale. REVENUE RECOGNITION PRINCIPLE i. All important aspects of bond indentures are presented in financial statements. FULL DISCLOSURE PRINCPLE j. Rationale for accrual......

Words: 795 - Pages: 4

Chap Exercise 9

...Exercise 9.9 The write down of Impaired Assets LO4 LO7 For several years, a number of Food Lion, Inc., grocery stores were unprofitable. The company closed, and continues to close, some of these locations. It is apparent that the company will not be able to recover the cost of the assets associated with the closed stores. Thus, the current value of the impaired assets must be written down (see the Case in Point on page 381). A recent Food Lion income statement reports a $9.5 million charge against income pertaining to the write-down of impaired assets. a. Explain why Food Lion must write down the current carrying value of its unprofitable stores. Food Lion must write down the current carrying value of its unprofitable stores because the stores are an asset that has depreciable value. The Food Lion stores are impaired plant assets in which Food Lion cannot reasonably expect to recover the costs associated with the stores. According to Williams, Haka, and Bettner if the cost of an asset cannot be recovered through future use or sale the asset should be written down to its net realizable value to a loss account. The depreciable assets must be removed from the asset account and the accumulated depreciation is removed from the related contra-asset account, as Food Lion can no longer generate any income from these stores. b. Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense. The $9.5 million charge to write......

Words: 356 - Pages: 2