Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-01 SWATHMORE CLOTHING CORPORATION General Journal Account Requirement 1:

Monthly bad debt expense accrual summary.

Debit

Credit

Bad Debt Expense Allowance for uncollectible accounts

To record year 2011 accounts receivable write-offs.

78,600 78,600
- Correct!

Allowance for uncollectible accounts Accounts receivable

68,000 68,000
- Correct!

Requirement 2: Account Bad debt expense Allowance for uncollectible accounts

Debit 4,300

Credit 4,300
- Correct!

Summary Age Group 0-60 days 61-90 days 91-120 days Over 120 days Totals Percent Estimated Amount Uncollectible Allowance $ 430,000 4% $ 17,200 98,000 15% 14,700 60,000 25% 15,000 55,000 40% 22,000 $ 643,000 $ 68,900
Correct! Correct!

Allowance for uncollectible accounts analysis: Beginning balance Add: Monthly bad debt accruals Deduct: Write-offs Balance before adjustments Required allowance Required year-end increase in allowance Requirement 3: Bad debt expense for 2011: Monthly accruals Year-end adjustment Total

54,000 78,600 (68,000) 64,600 68,900 4,300

Correct!

$ $

78,600 4,300 82,900

Correct!

SWATHMORE CLOTHING CORPORATION Balance Sheet Current Assets: Accounts Receivable, net of allowance for uncollectible accounts

574,100
Correct!

Given Data P07-01: SWATHMORE CLOTHING CORPORATION Accounts Receivable, 12/31/10 Allowance for uncollectibles, 12/31/10 Credit sales, year 2011 Collections, year 2011 Write-offs, year 2011 Ending A/R balance at 12/31/11 A/R aging at 12/31/2009: Percentage Amount Uncollectible 430,000 4% 98,000 15% 60,000 25% 55,000 40% 643,000 3% $ 574,000 54,000 2,620,000 (2,483,000) (68,000) $ 643,000

Age Group 0-60 days 61-91 days 91-120 days Over 120 days Total Bad debt estimate (percentage of credit sales)

$ $ $ $ $

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-04 RAINTREE COSMETIC COMPANY General Journal Account Requirement 1: Allowance for uncollectible accounts Accounts receivable Debit Credit

To record accounts receivable written off during the year 2011:

35,000 35,000
- Correct!

To record collection of account receivable previously written off:

Accounts receivable Allowance for uncollectible accounts Cash Accounts receivable

3,000 3,000 3,000 3,000

- Correct! - Correct!

Requirement 2(a): Account Bad debt expense Allowance for uncollectible accounts

Debit 52,500

Credit 52,500
- Correct!

Requirement 2(b): Accounts receivable analysis: Beginning balance Add: Credit sales Less: Write-offs Less: Cash collections Ending balance Required allowance for uncollectible accounts Allowance for uncollectible accounts analysis: Beginning balance Add: Collection of receivable previously written off Less: Write-offs Balance before adjustments Required allowance Bad debt expense adjustment

462,000 1,750,000 (35,000) (1,830,000) $ 347,000 $ 34,700

Correct!

30,000 3,000 (35,000) (2,000) 34,700 36,700

Correct!

Account Bad debt expense Allowance for uncollectible accounts

Debit 36,700

Credit 36,700
- Correct!

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-04

Requirement 2(c): RAINTREE COSMETIC COMPANY Required Allowance % of Year-end Percent Estimated Receivables Amount Uncollectible Allowance 65% $ 225,550 4% $ 9,022 20% 69,400 15% 10,410 10% 34,700 25% 8,675 5% 17,350 40% 6,940 $ 347,000 $ 35,047
Correct! Correct!

Age Group 0-60 days 61-90 days 91-120 days Over 120 days Totals

Allowance for uncollectible accounts analysis: Beginning balance Add: Collection of receivable previously written off Less: Write-offs Balance before adjustments Required allowance Bad debt expense adjustment

30,000 3,000 (35,000) (2,000) 35,047 37,047

Correct!

Account Bad debt expense Allowance for uncollectible accounts

Debit 37,047

Credit 37,047
- Correct!

Requirement 3: RAINTREE COSMETIC COMPANY Net Amount of Accounts Receivable Accounts Receivable $ 347,000 $ 347,000 $ 347,000 Year-end Allowance $ 50,500 $ 34,700 $ 35,047 Net Amount $ 296,500 $ 312,300 $ 311,953

(a) (b) (c)

- Correct! - Correct! - Correct!

Given Data P07-04: RAINTREE COSMETIC COMPANY Receivables, net of allowance for uncollectible accounts, 12/31/10 Allowance for uncollectibles, 12/31/10 Credit sales, year 2011 Cash collections, year 2011 A/R write-offs, year 2011 Cash collected in 2011 from prior year write off. A/R aging at 12/31/2011 Receivables in Group 65% 20% 10% 5% % of Year-End Percent Uncollectible 4% 15% 25% 40% 3% 10% $ 432,000 30,000 1,750,000 1,830,000 35,000 3,000

Age Group 0-60 days 61-91 days 91-120 days Over 120 days Bad debt estimate (percentage of credit sales) Estimate of allowance for uncollectible accounts

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-11 PROCEEDS RECEIVED Note Face Value $ 50,000 50,000 50,000 80,000 80,000 80,000 $ 50,000 3,000 53,000 (2,650) 50,350 50,000 3,000 53,000 (1,325) 51,675 50,000 3,000 53,000 (1,590) 51,410 80,000 2,400 82,400 (1,373) 81,027 80,000 2,400 82,400 (1,648) 80,752 80,000 2,400 82,400 (687) 81,713 Date of Note 3/31/2011 3/31/2011 3/31/2011 6/30/2011 6/30/2011 6/30/2011 Face amount Interest to maturity Maturity value Discount Cash proceeds Face amount Interest to maturity Maturity value Discount Cash proceeds Face amount Interest to maturity Maturity value Discount Cash proceeds Face amount Interest to maturity Maturity value Discount Cash proceeds Face amount Interest to maturity Maturity value Discount Cash proceeds Face amount Interest to maturity Maturity value Discount Cash proceeds Interest Rate 8% 8% 8% 6% 6% 6% Date Discounted 6/30/2011 9/30/2011 9/30/2011 10/31/2011 10/31/2011 11/30/2011 Discount Rate 10% 10% 12% 10% 12% 10% Proceeds Received $ 50,350 51,675 51,410 81,027 80,752 81,713

Note 1 2 3 4 5 6 Note 1

- Correct! - Correct! - Correct! - Correct! - Correct! - Correct!

$ Note 2 $

$ Note 3 $

$ Note 4 $

$ Note 5 $

$ Note 6 $

Given P07-11: PROCEEDS RECEIVED Note Face Value $ 50,000 50,000 50,000 80,000 80,000 80,000 Date of Note 3/31/2011 3/31/2011 3/31/2011 6/30/2011 6/30/2011 6/30/2011 Interest Rate 8% 8% 8% 6% 6% 6% Date Discounted 6/30/2011 9/30/2011 9/30/2011 10/31/2011 10/31/2011 11/30/2011 Discount Rate 10% 10% 12% 10% 12% 10%

Note 1 2 3 4 5 6

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-14 Requirement 1: EL GATO PAINTING COMPANY Reconciliation Step 1: Bank Balance to Corrected Balance Balance per bank statement Add: Deposits outstanding (1) Deduct: Bank error - deposit incorrectly credited to company account Outstanding checks (2) Corrected cash balance Step 2: Book Balance to Corrected Balance Balance per books Deduct: Error in recording check #411. Service charges NSF checks Corrected book balance (1) Receipts Less: December receipts deposited: Bank deposits Less: Deposit errors Less: Prior months deposits outstanding Deposits outstanding, December 31 (2) December disbursements Error in recording check #411. Less: December checks cleared: Total checks cleared Prior months checks: #363 #380 #381 #382 December checks outstanding Add: check #365 Total checks outstanding, December 31 $ 4,422 (90) (22) (440) 3,870 42,650 $ 3,851 2,150 (1,300) (831) 3,870

- Correct!

$ $ $ 43,000 (1,300) (1,200) $ $

- Correct!

40,500 2,150 41,853 90

- Correct!

$ $ 123 56 86 340

41,918

605 $ $

(41,313) 630 201 831

- Correct!

Requirement 2:
To record credits to cash revealed by the bank reconciliation

Advertising expense Miscellaneous expense (bank svc. charges) Accounts receivable (NSF checks) Cash

90 22 440 552
- Correct!

Given Data P07-14: EL GATO PAINTING COMPANY Balance per bank, November 30 Add: Deposits outstanding Less: Checks outstanding #363 #365 #380 #381 #382 Adjusted balance per bank, November 30 General ledger account: Balance, December 1 Receipts Disbursements Balance, December 31 December bank statement: Balance, December 1 Deposits Checks processed Service charges NSF checks Balance, December 31 Additional information: Check #411: Correct amount Amount recorded in books Deposit not recorded in books $ 3,231 1,200

123 201 56 86 340 $

(806) 3,625

3,625 42,650 (41,853) 4,422

3,231 43,000 (41,918) (22) (440) 3,851

$ $ $

320 230 1,300

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-15 ROTHSCHILD CHAIR COMPANY, INC. General Journal Account Requirement 1: Land Loss on debt restructuring Note receivable Accrued interest receivable Debit 16 6
Correct!- Correct!-

Credit
- Correct! - Correct!

20 2

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-15 Requirement 2: ROTHSCHILD CHAIR COMPANY, INC. Analysis Previous Value: Accrued 2010 interest Principal Carrying amount of the receivable New Value: Interest Principal Present value of the receivable Loss:

$ 2,000,000 20,000,000 $ 22,000,000

$ 3,169,870 10,245,150 (13,415,020) $ 8,584,980

Correct!

Amortization Schedule Cash Interest (by agreement) 1,000,000 1,000,000 1,000,000 1,000,000 4,000,000
Correct!

Effective Interest 10% 1,341,502 1,375,652 1,413,217 1,454,609 5,584,980

Correct!

Increase in Balance Outstanding (Disc. Reduction) Balance 13,415,020 341,502 13,756,522 375,652 14,132,174 413,217 14,545,391 454,609 15,000,000 1,584,980 Correct!
Correct!

ROTHSCHILD CHAIR COMPANY, INC. General Journal Account January 1, 2011 Loss on troubled debt restructuring Accrued interest receivable Note receivable December 31, 2011 Cash Note receivable Interest revenue December 31, 2012 Cash Note receivable Interest revenue December 31, 2013 Cash Note receivable Interest revenue December 31, 2014 Cash Note receivable Interest revenue Cash Note receivable Debit 8,584,980 Credit
- Correct!

2,000,000 6,584,980 1,000,000 341,502 1,341,502 1,000,000 375,652 1,375,652 1,000,000 413,217 1,413,217 1,000,000 454,609 1,454,609 15,000,000 15,000,000
- Correct! - Correct! - Correct! - Correct! - Correct!

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-15

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 07-15

Requirement 3: ROTHSCHILD CHAIR COMPANY, INC. Analysis Previous Value: Accrued interest Principal Carrying amount of the receivable New Value: Interest Loss:

$ 2,000,000 20,000,000 $ 22,000,000

(18,970,603) $ 3,029,397
Correct!

Amortization Schedule Cash Interest (by agreement) Correct!

Effective Increase in Interest Balance Outstanding 10% (Discount Reduction) Balance 18,970,603 1,897,060 1,897,060 20,867,663 2,086,766 2,086,766 22,954,429 2,295,443 2,295,443 25,249,872 2,525,128 2,525,128 27,775,000 8,804,397 8,804,397 Correct!
Correct! Correct!

ROTHSCHILD CHAIR COMPANY, INC. General Journal Account January 1, 2011 Loss on troubled debt restructuring Accrued interest receivable Note receivable December 31, 2011 Note receivable Interest revenue December 31, 2012 Note receivable Interest revenue December 31, 2013 Note receivable Interest revenue December 31, 2014 Note receivable Interest revenue Cash Note receivable Debit 3,029,397 2,000,000 1,029,397 1,897,060 1,897,060 2,086,766 2,086,766 2,295,443 2,295,443 2,525,128 2,525,128 27,775,000 27,775,000
- Correct! - Correct! - Correct! - Correct! - Correct! - Correct!

Credit

Given Data P07-15: ROTHSCHILD CHAIR COMPANY, INC. Bank note Bank note interest Fair market value of land Book value of land Remaining 4 interest payments Principal reduced to Settlement of debt at maturity date $ 20,000,000 10% $ 16,000,000 13,000,000 1,000,000 15,000,000 27,775,000