Apply It: Chapter 7 Internal Control and Cash

Apply It: Chapter 7 Internal Control and Cash

Directions: Be sure to read the following requirements for this assignment and address each of the stated criteria. There are five (5) questions total.

Riverside Fertilizer Co. owns the following items:

Cash in bank savings account $ 8,000

Cash on hand 850

Cash refund due from the Canada Revenue Agency 1,000

Chequing account balance 14,000

Postdated cheques 500

What amount should Riverside report as cash? (3 points)

49530033021Answer:

Answer:

On September 12, five customers use debit cards to purchase merchandise totaling $500 from the Triomedia Company. The bank charges Triomedia Company $0.70 per debit card transaction. Prepare the entry to record the transactions by the Triomedia Company. (11 points)

Date Account Debit Credit Amount Explanation

On March 2, Pugh Company established a petty cash fund of $100. On March 27, the fund was replenished when it had $18 in cash and receipts for supplies $20, postage for $27, and repairs expense $35. (22 points)

a. Prepare the journal entries to establish the petty cash fund on March 2.

Date Account Debit Credit Amount Explanation

b. Prepare the journal entry to replenish the petty cash fund on March 27.

Date Account Debit Credit Amount Explanation

AP Jayden Randolph owns Randolph Electric and indicates on December 31 the unadjusted balance per his books is $8,758 and the unadjusted balance on his bank statement is $6,653. Prepare a bank reconciliation given the following:

a. Outstanding cheques of $1,200

b. Deposits in transit of $5,250

c. Debit memorandum for bank service charge of $25

d. EFT of $1,970 from a customer for goods received.

(8 points)

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Jepsen Music prepares a bank reconciliation and notes the following reconciling items on the book side:

service charge for printing Jepsen Music cheques $35,

interest earned on the account balance of $40,

collection of an EFT from a customer for goods received of $500.

Prepare the adjusting entries. (21 points)

(a) Account Debit Credit Amount Explanation

(b) Account Debit Credit Amount Explanation

(c) Account Debit Credit Amount Explanation

Apply It: Chapter 8 Accounting for Receivables

Directions: Be sure to read the following requirements for this assignment and address each of the stated criteria. There are five (5) questions total.

Six transactions follow. For each transaction, indicate if the transaction increases, decreases, or has no effect on (a) accounts receivable, (b) notes receivable, (c) total assets, (d) total liabilities, and

(e) owners equity.

Use the following format, in which the first transaction is given as an example. (25 points)

Transaction (a)

Accounts

Receivable (b)

Notes

Receivable (c)

Total

Assets (d)

Total

Liabilities (e)

Owners

Equity

1 Performed services on account for a customer. Increase No effect Increase No effect Increase

2 A customer paid cash for services to be provided next month.

3 Performed services for a customer in exchange for a note.

4 Collected cash from the customer in transaction 1. above.

5 Extended a customers account for three months by accepting a note in exchange for it.

6 Performed services for a customer who had paid in advance.

At the end of 2020, Perry Co. has an allowance for doubtful accounts of $28,000. On January 31, 2021, when it has accounts receivable of $575,000, Perry Co. learns that its $5,500 receivable from Tokarik Inc. is not collectible. Management authorizes a write-off. (13 points)

Record the write-off.

What is the carrying amount of the accounts receivable (1) before the write off, and (2) after the write off?

(a) Date Account Debit Credit Amount Explanation

Jan. 31

(b) Before After

Write Off Write Off

Accounts Receivable

Less Allowance for doubtful accounts

Carrying amount

Yamada Co. has three outstanding notes receivable at its December 31, 2021, fiscal year end. For each note, calculate (a) total interest revenue, (b) interest revenue to be recorded in 2021, and (c) interest revenue to be recorded in 2022. (9 points)

Issue Date Term Principal Interest Rate

1. August 31, 2021 9 months $15,000 6%

2. November 1, 2021 6 months 44,000 8%

3. October 1, 2021 15 months 30,000 7%

Note Total Interest Interest 2021 (c) Interest 2022

1

2

3

The following ratios are available for Western Roofing:

2021 2020 2019

Current ratio 1.6 to1 2.0 to 1 1.9 to 1

Acid-test ratio 0.8 to 1 1.3 to 1 1.2 to 1

Receivables turnover 10.6 times 8.9 times 9.0 times

Inventory turnover 7.3 times 7.6 times 7.5 times

Calculate the collection period, days sales in inventory, and operating cycle in days for each year. (9 points)

2021 2020 2019

Collection period

Days sales in inventory

Operating cycle

5) Diamonds International has three outstanding notes receivable at its December 31, 2021, fiscal year end. For each note, calculate (a) total interest revenue, (b) interest revenue to be recorded in 2021, and (c) interest revenue to be recorded in 2022. (9 points)

Issue Date Term Principal Interest Rate

1. August 31, 2021 9 months $12,000 5%

2. November 1, 2021 6 months 35,000 9%

3. October 1, 2021 15 months 20,000 6%

Note a. Total Interest b. Interest 2021 c. Interest 2022

1.

2.

3.