ACCOUNTING

forDoubtfulDebtsbeforeadjustment.Theentityusestheageingofaccountsreceivablebasisforestimatinguncollectableaccounts.GarciaPtyLtd’sestimatesofbaddebtsareasfollows:

Ageofaccounts

Question1     LO1,2

 

Internalcontrolisconcernedonlywithenhancingtheaccuracyoftheaccountingrecords.Doyouagree?Explain.

Question8    LO6

 

SooEngcannotunderstandwhytherecoverableamountofaccountsreceivabledoesnotdecreasewhenanuncollectableaccountiswrittenoffundertheallowancemethod.ClarifythispointforSooEng.

Question9    LO7

 

SellitLtd’soperationcycleis1year.Howwouldthefollowingreceivableszbeclassifiedonthestatementoffinancialposition?

 

(a)     Tradedebtoraccountof$1million,ofwhich90%isduewithin1monthwiththebalanceduein18months.

 

(b)    A90-daypromissorynote.

BE7.1               LO1

 

SeveraloftheinternalcontrolproceduresofMarionLtdarelistedbelow.Identifytheprinciplesofinternalcontrolthatarebeingfollowedineachcase.

 

(a)     Employeeswhohavephysicalcustodyofassetsdonothaveaccesstoaccountingrecords.

 

(b)   Eachmonththeassetsonhandarecomparedwiththeaccountingrecordsbyaninternalauditor.

 

(c)    Aprenumbereddeliverydocketispreparedforeachshipmentofgoodstocustomers.

BE7.2               LO1

 

AaronTsoisthemerchandisingmanagerforFranklinOfficeSuppliesLtd.DuringthemonthofAprilwhentheFranklin’saccountspayablemanagerwasonholiday,Aaronwasresponsibleforreceivingthegoodsthatheorderedaswellasapprovingpaymentsforthepurchase.Evaluatetheinternalcontrolsinthissituation.

E7.6                 LO6

 

GarciaPtyLtdhasaccountsreceivableof$92500at31March2012.Ananalysisoftheaccountsshowstheseamounts:

 

  Balance,31March
Monthofsale 2012 2011
March $65000 $75000
February 12600 8000
DecemberandJanuary 8500 2400
NovemberandOctober 6400 1100
  $92500 $86500
Estimatedpercentageuncollectable
Current 2.0%
1-30dayspastdue 5.0
31-90dayspastdue 30.0
Over90days 50.0

Required

 

 

(a)    Determinethetotalestimateduncollectables.

 

(b)   Preparetheadjustingentryat31March2012torecordbaddebtsexpense.

 

(c)    Discusstheimplicationsofthechangeintheageingschedulefrom2011and2012.

E7.8                 LO8

 

Thefollowinginformationwastakenfromthe2012financialstatementsofHoneyFactoryLtd:

 

(inmillions) 2012 2011 2010
Accountsreceivable $146.6 $104.3 $126.0
Allowancefordoubtfuldebt 6.3 5.7 8.2
Sales 1113.0 899.3 756.9
Totalcurrentassets 367.2 285.8 258.7

Required

 

Answereachofthefollowingquestions:

 

(a)   Calculatethereceivablesturnoverandaveragecollectionperiodfor2012and2011fortheentity,assumingallsalesareoncredit.

 

(b)   Calculatethecreditriskratiofortheentityfor2012and2011.

 

(c)    Commentontheentity’screditandcollectionpolicies.

E7.3(optional)                       LO3

 

ShoeCityPtyLtd’sbankreconciliationclerkisunabletoreconcilethebankbalanceat31January.ThebalanceoftheCashatBankaccount,beforeanyentriesfortransactionsinitiated by thebank,was $4770.20inthecompany records. Theclerk’sattemptat thebankreconciliationstatementisasfollows:

 

Cashbalanceasperbankstatement $4392.20      Cr
Add:Dishonouredcheque 516.00
Less:Bankcharges 30.00
Less:Outstandingdeposits 708.00
Add:Unpresentedcheques 876.00

Cash     balance      as     per     companyrecords

$5046.20

 

Required

 

(a)    Prepareacorrectbankreconciliation.

 

(b)   Journalisetheentriesrequiredbythereconciliation.

 

Order now and get 10% discount on all orders above $50 now!!The professional are ready and willing handle your assignment.

ORDER NOW »»