Problem 1

Preparing a bank reconciliation and journal entries

The December cash records of Dunlap Insurance follow:

Cash Receipts                                                                            Cash Payments

Date            Cash Debits                                               Check No.       Cash Credit

Dec. 4          $4,170                                                            1416              $ 860

        9               510                                                            1417                 130

      14               5 30                                                           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 $16,740 at December 31. On December 31, Dunlap Insurance received the following bank statement:

Bank Statement for December

Beginning Balance                                                                                       $13,600

Deposits and other Credits

          Dec. 1                                                              EFT      $  300

5                                                                                                                                                        4,170         

10                                                                                                                                                              510

15                                                                                                                                                              530

18                                                                                                                                                        2,180

                22                                                                   BC    1,400                9,090

Checks and other Debits

           Dec  8                                                            NSF      $1,000

           Dec 11 (Check 1416)                                                      860

           Dec 19                                                           EFT           700

           Dec 22 (Check 1417)                                                      130

           Dec 29 (Check 1418)                                                      650

           Dec 31 (Check 1419)                                                   1,940

           Dec 31                                                              SC            60               (5,340 )        

Ending balance                                                                                             $ 17,350  

Explanations: BC = bank collection; EFT = electronic funds transfer;

NSF = nonsufficient funds checks; SC = service charge

a.       The EFT credit was a receipt of rent. The EFT debit was an insurance payment.

b.      The NSF check was received from a customer

c.       The $1400 bank collection was a note receivable.

d.      The correct amount of check 1419 for rent is $1940. Dunlap’s controller mistakenly recorded the check for $1490

Assignment

1. Prepare the bank reconciliation of Dunlap Insurance at December 31, 2012
2. Journalize any required entries from the bank reconciliation

Problem 2

Accounting for uncollectible accounts using the allowance and direct write-off methods, and reporting receivables on the balance sheet

On August 31, 2012, Daisy Floral Supply had a $155,000 debit balance in Accounts receivable and a $6,200 credit balance in Allowance for uncollectible accounts.

During September, Daisy made:

  * sales on account, $590,000.

  * collections on account $62,700

  * write-offs of uncollectible receivables, $7,000

Assignment

1. Journalize all September entries using the allowance method. Uncollectible account expense was estimated at 3% of credit sales. Show all September activities in Accounts receivable, Allowance for uncollectible accounts, and Uncollectible account expense (post to these T- accounts)
2. Using the same facts, Journalize the entries using the direct write-off method. Post to Accounts receivable and Uncollectible account expense and show their balances at September 30, 2012.
3. What amount of uncollectible account expense would Daisy report on its September income statement under each of the two method? Which amount better matches expense with revenue? Give your reason
4. What amount of net accounts receivable would Daisy report on its September 30, 2012 balance sheet under each two methods? Which amount is more realistic? Give your reason.

Problem 3

Accounting for uncollectible accounts using allowance method, and reporting receivables on the balance sheet

At September 30, 2012, the accounts of Mountain Terrace Medical Center (MTMC) include the following:

Accounts receivable…………………………………………….$145,000

Allowance for uncollectible accounts (credit balance)……………..3,500

During the last quarter of 2012, MTMC completed the following selected transactions

Dec 28   Wrote off accounts receivable as uncollectible: Regan, Co., $1,300;

Owen Mac, $900; and Rain, Inc., $700……………………………………….

Dec 31 Recorded uncollectible account expense based on the aging of accounts

Receivable, as follows………………………………………………………

Age of Accounts                                                                                                                                           

                                                          1-30                      31-60               61-90          over 90

Accounts Receivable                          Days                     Days                 Days           Days

$165,000……………                       $97,000               $37,000             $14,000      $17,000

estimated percent

    uncollectible                                      0.3%                      3%                   30%            35%

Assignment

1.                                                                                            Journalize the transactions

2.                  Open the allowance for uncollectible accounts T-account, and post entries   affecting the account. Keep a running Balance

3.                  Show how MTMC should report net accounts receivable on its December 31, 2012 balance sheet. Use the three line reporting format.