Acct 502
Horngren’s Financial and Managerial Accounting bookmark Acct 502 Horngren’s Accounting, The Financial ChaptersRead chapters 8 and 9. spreadsheet grand canyon university accounting for notes recievable
SModule 4 Assignment Details:
Complete the following exercises and problems in Excel:
P8-22A
P8-25A
P9-28A
P9-31A
Save the file using the filename “LastnameFirstinitial.ACC502.M#” where the # is the module number. For example, John Doe’s homework for module 1 would be saved as DoeJ.ACC502.M1.
Module 4 Assignment I LoudCloud Sy… Grand Canyon University – Digital Res… horngrens_accounting_the_financi…
P8-22a
iL Correcting internal control weakness
Each of the following situations has an internal control weakness.
a. Upside-Down Applications develops custom programs to customer’s specifica¬tions. Recently, development of a new program stopped while the programmers redesigned Upside-Down’s accounting system. Upside-Down’s accountants could have performed this task.
b. Norma Rottler has been your trusted employee for 24 years. She performs all cash-handling and accounting duties. Ms. Rottler just purchased a new Lexus and a new home in an expensive suburb. As owner of the company, you wonder how she can afford these luxuries because you pay her only $30,000 a year and she has no source of outside income.
c. Izzie Hardwoods, a private company, falsified sales and inventory figures in order to get an important loan. The loan went through, but Izzie later went bankrupt and could not repay the bank
d. The office supply company where Pet Grooming Goods purchases sales receipts recently notified Pet Grooming Goods that its documents were not pre-numbered. Howard Mustro, the owner, replied that he never uses receipt numbers.
e. Discount stores such as Cusco make most of their sales in cash, with the remainder in credit card sales. To reduce expenses, one store manager ceases purchasing fidelity bonds on the cashier.
f. Cornelius’ Corndogs keeps all cash receipts in an empty box for a week because he likes to go to the bank on Tuesdays when Joann is working.
Requirements
1. Identify the missing internal control characteristics in each situation.
2. Identify the possible problem caused by each control weakness.
P8-22a
Propose a solution to each internal control problem.
explanation.
113-25A Preparing a bank reconciliation and journal entries
The December cash records of Dunlap Insurance follow:
Cash Receipts Cash Payments
Date Cash Debit Check No. Cash Credit
Dec. 4 $ 4,170 1416 $ 860
9 510 1417 130
14 530 1418 650
17 2,180 1419 1,490
31 1,850 1420 1,440
1421 900
1422 630
Dunlap’s Cash account shows a balance of $16,240 at December 31. On
December 31, Dunlap Insurance received the following bank statement:
Beginning Balance Deposits and other Credits: S 14E._ .
Dec. 1 EFT $ 300
Dec. 5 4,170
Dec. 10 510
Dec. 15 530
Dec. 18 2,180
Dec. 22 BC 14130 9.090
Checks and other Debits:
Dec. 8 NSF 1,0D0
Dec. 11 (check no 6) 860
Dec. 19 EFT 200
Dec. 22 (check no 7) 130
Dec. 29 (check no. 8) 650
Dec. 31 (check to 1419) 1940
Dec. 31 SC 60 (5.340)
Ending Balance 517,350
Explanations: BC-bank collection; EFT-electronic funds trauier, NSF-nonsufficient funds checks; SC-service charge
Additional data for the bank reconciliation follows:
a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment.
b. The NSF check was received horn a customer.
c. The $1,400 bank collection was for a note receivable.
d. The correct amount of check 1419, for rent expense, is $1,940. Dunlap’s controller mistakenly recorded the check for $1,490.
Requirements
1. Prepare the bank reconciliation of Dunlap Insurance at December 31, 2015.
2. Journalize any required entries from the bank reconciliation.
P9-28A Accounting for mcollectible accounts using the allowance method (aging-of-receivables), and reporting receivables on the balance sheet At September 30, 2014, the accounts of Mountain Terrace Medical Center
(M MC) include the following:
Account Receivable 1 145,000
Allowance for Bad Debt (credit balance) 3,500
During the last quarter of 2014, MTMC completed the following selected transactions:
Dec. 28 Wrote off account receivable as uncollectible: Regan,
Co., 11,300; Owen Mac, $900, and Rain, Inc, $700
31 Reconled bad debts expense based on the aging
of account receivable, as follows:
Age of Accounts
Account Receivable 1-30 Days 31-60 Days 61-90 Days Over 90 Days
1165,000
Estimated percent uncollectible $97,000
0.3% $37,000
3% $14,000
30% $17,000
35%
Requirements
1. Journalize the transactions.
2. Open the Allowance for Bad Deb. T-account, and post entries affecting that account. Keep a running balance.
3. Show how Mountain Terrace Medical Center should report net accounts receivable on its December 31, 2014, balance sheet.
P9-28A Accounting for uncollectible accounts using the allowance method
(aging-of-receivables), and reporting receivables on the balance sheet At September 30, 2014, the accounts of Mountain Terrace Medical Center (MTMC) include the following:
Account Receivable 1 145,000
Allowance for Bad Debt (credit balance) 3,500
During the last quarter of 2014, MTMC completed the following selected transactions:
Dec. 28 Wrote off account receivable as uncollectible: Regan,
Co., $1,300, Owen Mac, $900; and Rain, Inc., $700
31 Recorded bad debts expense based on the aging
of accounts receivable, as follows:
Age of Accounts
Account Receivable 1-30 Days 31-60 Days 61-90 Days Over 90 Days
1165,000
Estimated percent uncollectible $97,000
0.3% $37,000
3% $14,000
30% $17,000
35%
Requirements
1. Journalize the transactions.
2. Open the Allowance for Bad Deb. T-account, and post entries affecting that account. Keep a running balance.
3. Show how Mountain Terrace Medical Center should repon net accounts receivable on its December 31, 2014, balance sheet
P8-22a
iL Correcting internal control weakness
Each of the following situations has an internal control weakness.
a. Upside-Down Applications develops custom programs to customer’s specifica¬tions. Recently, development of a new program stopped while the programmers redesigned Upside-Down’s accounting system. Upside-Down’s accountants could have performed this task.
b. Norma Rottler has been your trusted employee for 24 years. She performs all cash-handling and accounting duties. Ms. Rottler just purchased a new Lexus and a new home in an expensive suburb. As owner of the company, you wonder how she can afford these luxuries because you pay her only $30,000 a year and she has no source of outside income.
c. Izzie Hardwoods, a private company, falsified sales and inventory figures in order to get an important loan. The loan went through, but Izzie later went bankrupt and could not repay the bank
d. The office supply company where Pet Grooming Goods purchases sales receipts recently notified Pet Grooming Goods that its documents were not pre-numbered. Howard Mustro, the owner, replied that he never uses receipt numbers.
e. Discount stores such as Cusco make most of their sales in cash, with the remainder in credit card sales. To reduce expenses, one store manager ceases purchasing fidelity bonds on the cashier.
f. Cornelius’ Corndogs keeps all cash receipts in an empty box for a week because he likes to go to the bank on Tuesdays when Joann is working.
Requirements
1. Identify the missing internal control characteristics in each situation.
2. Identify the possible problem caused by each control weakness.
Propose a solution to each internal control problem
Dunlap’s Cash account shows a balance of $16,240 at December 31. On
December 31, Dunlap Insurance received the following bank statement:
Beginning Balance Deposits and other Credits: S 14E._ .
Dec. 1 EFT $ 300
Dec. 5 4,170
Dec. 10 510
Dec. 15 530
Dec. 18 2,180
Dec. 22 BC 14130 9.090
Checks and other Debits:
Dec. 8 NSF 1,0D0
Dec. 11 (check no 6) 860
Dec. 19 EFT 200
Dec. 22 (check no 7) 130
Dec. 29 (check no. 8) 650
Dec. 31 (check to 1419) 1940
Dec. 31 SC 60 (5.340)
Ending Balance 517,350
Additional data for the bank reconciliation follows:
a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment.
b. The NSF check was received horn a customer.
c. The $1,400 bank collection was for a note receivable.
d. The correct amount of check 1419, for rent expense, is $1,940. Dunlap’s controller mistakenly recorded the check for $1,490.
Requirements
1. Prepare the bank reconciliation of Dunlap Insurance at December 31, 2015.
2. Journalize any required entries from the bank reconciliation.
P9-31a
Dec. 5 Collected in full on account from Ambiance, Corp.
31 Accrued the interest on the Creed, Inc. note. P9-31a
Record the transactions in the journal of Relaxing Recliner Chairs. Explanations
are not required. (For notes stated in days, use a 360-day year. Round to the nearest dollar.)
Accounting for notes receivable and accruing interest Learning Objective 4
Kelly Realty loaned money and received the following notes during 2014.
1. Note 3—Jan. 18, 2015
Note Date Principal Amount Interest Rate Term
(1) Aug.1 $ 24,000 17% 1 year
(2) Nov. 30 18,000 6% 6 months
(3) Dec. 19 12,000 12% 30 days
Requirements
1. Determine the maturity date and maturity value of each note.
2. Journalize the entry to record the inception of each of the three notes and also journalize a single adjusting entry at December 31, 2014, the fiscal year-end, to record accrued interest revenue on all three notes. Explanations are not required.
3. Journalize the collection of principal and interest at maturity of all three notes. Explanations are not required.
Homgren’s Accounting, The Financial Chapters, Tenth Edition, by Tracie Nobles, Brenda Mattison, and Ella Mae Matsumura. Published by Prentice Hall.
