Acc205 Principles of Accounting I:  Week 4 Assignment (E8-15, E8-16, P8-32A)

Acc205 Principles of Accounting I: Week 4 Assignment (E8-15, E8-16, P8-32A)

Acc205 Principles of Accounting I
Week 4 Assignments:
E8-15 GPS Technology
E8-16 Windy Mountain Flagpoles
P8-32A Lakeland Cosmetics

E8-15 Accounting for uncollectible accounts using the allowance method and reporting receivables on the balance sheet.
At December 31, 2012, the Accounts receivable balance of GPS Technology is $190,000. The Allowance for doubtful accounts has an $8,600 credit balance. GPS Technology prepares the following aging schedule for its accounts receivable:
Age of Accounts
1-30 Days 31-60 Days 61-90 Days Over 90 Days
Accounts Receivable 190,000 80,000 60,000 40,000 10,000
Estimated percent uncollectible 0.4% 5.0% 6.0% 50.0%

Requirements
1. Journalize the year-end adjusting entry for doubtful accounts on the basis of the aging schedule, Show the T-account for the Allowance for uncollectible accounts at December 31, 2012.
2. Show how GPS Technology will report its net Accounts receivable on its December 31, 2012 balance sheet.

E8-16 Accounting for uncollectible accounts using the allowance method and reporting receivables on the balance sheet
At September 30, 2011, Windy Mountain Flagpoles had Accounts receivable of $34,000 and Allowance for uncollectible accounts had a credit balance of $3,000. During October 2012, Windy Mountain Flagpoles recorded the following:
o Sales of $189,000 ($165,000 on account; $24,000 for cash).
o Collections on account, $133,000.
o Uncollectible account expense, estimated as 1% of credit sales.
o Write-offs of uncollectible receivables, $2,800.

Requirements
1. Journalize sales, collections, uncollectible account expense using the allowance method (percent-of-sales method), and write-offs of uncollectibles during October 2012.
2. Prepare T-accounts to show the ending balances in Accounts receivable and Allowance for uncollectible accounts. Compute net accounts receivable at October 31. How much does Windy Mountain expect to collect?
3. Show how Windy Mountain Flagpoles will report net Accounts receivable on its October 31, 2012 balance sheet.

P8-32A Using ratio data to evaluate a company's financial position [20-30 min]
The comparative financial statements of Lakeland Cosmetic Supply for 2012, 2011, and 2010 include the data shown here:
2012 2011 2010 2012 2011 2010
Balance sheet-partial
Current assets:
Cash 90,000 70,000 30,000
Short-term investments 145,000 175,000 125,000
Receivables, net 290,000 260,000 250,000
Inventories 370,000 335,000 325,000
Prepaid expenses 60,000 15,000 50,000
Total current assets .... 955,000 855,000 780,000
Total current liabilities 560,000 600,000 690,000

Income statement-partial
Sales revenue (all on account) 5,860,000 5,140,000 4,200,000

Requirements:
1. Compute these ratios for 2012 and 2011:
a. Acid-test ratio
b. Days' sales in receivables
c. Accounts receivable turnover
2. Considering each ratio individually, which ratios improved from 2011 to 2012 and which ratios deteriorated? Is the trend favorable or unfavorable for the company?
Acc205 Principles of Accounting I: Week 4 Assignment (E8-15, E8-16, P8-32A)
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