Uses of Accounting Information

Question 1

P9-27A At September 30, the accounts of Aguilar Outsourcing Solutions include the following:

Accounts Receivable……………………………………………………………………$65,000

Allowance for Uncollectible Accounts (credit balance) ………………………………. 1,000

During the last quarter of 2009, Aguilar completed the following selected transactions:

Dec. 22 Wrote off accounts receivable as uncollectible:

Trasnet, $300; Webvan, $100; and Alpha Group, $600

Dec 31 Recorded uncollectible-account expense based on the aging of receivables, as follows:

Age of Accounts

___________________________________

1-30 31-60 61-90 Over 90

Accounts Receivable Days Days Days Days

$55,000……………………………………… $30,000 $10,000 $10,000 $5,000

Estimated percent

Uncollectible………………………………. 0.5% 1.0% 4% 50%

Requirements

1.Record the transactions in the journal.

2.Open the Allowance for Uncollectible Account, and post entries affecting that account. Keep a running balance.

3.Show how Aguilar should report accounts receivable on its December 31, 2009, balance sheet.

Question 2

P9-29A Kelly Realty loaned money and received the following notes during 2008.

Note Date Principal Amount Interest Rate Term

(1) Aug.1 $12,000 9% 1 year

(2) Oct. 31 11,000 12% 3 months

(3) Dec. 19 15,000 10% 30 days

Requirements

For each note, compute interest using a 360-day year. Explanations are not required.

1.Determine the due date and maturity value of each note.

2.Journalize a single adjusting entry at December 31, 2008, to record accrued interest revenue on all three notes.

3.For note (1) journalize the collection of principal and interest at maturity.

Question 3

P9-30A Record the following transactions in the general journal of Dvorak Interiors. Round all amounts to the nearest dollar. Explanations are not required.

2007

Dec.21 Received a $4,400, 30-day, 95 note on account from Monica Lee.

Dec 31 Made an adjusting entry to accrue interest on the Lee note.

Dec 31 Made a closing entry for interest revenue.

2008

Jan. 20 Collected the maturity value of the Lee note.

Sept.14 Loaned $6,000 cash to Bullseye Investors, receiving a three-month 13% note.

Sept.30 Received a $1,600, 60-day, 16% note for a sale to Chuck Powers. Ignore cost of goods sold.

Nov. 29 Chuck Powers dishonored his note at maturity; wrote off the note as uncollectible, debiting Allowance for Uncollectible Notes.

Dec. 14 Collected the maturity value of the Bullseye Investors note.

Question 4

The comparative financial statements of the 4th Gear Website Design for 2008, 2007, and 2006 include the data shown here:

Balance sheet 2008 2007 2006 (In thousands)

Current assets:

Cash…………………….…….. … $20 $20 $10

Short-term investments… 70 100 60

Receivable, net……………… 190 150 120

Inventories…………………….. 420 380 340

Prepaid expenses…………… 30 30 20

Total current assets……….. $730 $680 $550

Total current liabilities……….. $480 $410 $380

Income Statement

Sales revenue $2,600 $2,500 $1,900

Requirements

1. Compute these ratios for 2008 and 2007:

a. Current ratio

b. Acid-test ratio

c. Days’ sales in receivables

2. Write a memo explaining to Les Arnold, the company owner, which ratios improved from 2007 to 2008 and which ratios deteriorated. Discuss whether this trend is favorable or unfavorable for the company.

Attachments
ACCT Questions.docx
Question 1 P9-27A.xlsx
Question 2 P9-29A.xlsx
Question 3 P9-30A.xlsx
Question 4 P9-32A.xlsx