【正文】 0,000 180。 7/12)………………. 10,500Total……………………………………………….$210,500(10 min.) CP 51220X5a.Aug. 31Note Receivable — L. Holland……………1,000 Cash………………………………….…….1,000To lend money.20X6b.June 30Interest Receivable ($1,000 180。 .09)……………………….18,00020X9($200,000 180。 .06 180。Chapter 5ShortTerm Investments and ReceivablesCheck Points(5 min.) CP 511. Trading investments are reported at their current market value.2. A trading investment is always a current asset because the investor intends to sell the trading investment in the very near future — days, weeks, or only a few months. A current asset is to be sold within one year or within the pany’s operating cycle if longer than a year.(10 min.) CP 52BALANCE SHEET Current assets: Shortterm trading investments, at market value..$74,000INCOME STATEMENT Other revenue and gains (losses): Unrealized loss on investment……………………...$ (6,000)(10 min.) CP 531.Paid $100,0002.Unrealized Loss on Investment ($100,000 – $98,000)…2,000 ShortTerm Investment……………………………….. 2,000Adjusted investment to market value.BALANCE SHEET Current assets: Shortterm trading investment, at market value……….$98,000INCOME STATEMENT Other revenue (loss): Unrealized loss on investment……………………………$ (2,000)(5 min.) CP 54Jennings, the accountant, should not handle the pany’s cash. With cashhandling duties, the accountant can steal cash and hide the theft by writing off a customer’s account receivable as uncollectible.(5 min.) CP 551.UncollectibleAccount Expense ($900,000 180。 6/12)………3,000(10 min.) CP 5111. Interest for:20X7($200,000 180。 .09 180。 .09 180。 $60)….600,000 Cash……………………………………….600,000Purchased investment.Dec. 31ShortTerm Investment [(10,000 180。 .02)……………………………..2,000 Allowance for Uncollectible Accounts2,000Req. 2Accounts ReceivableAllowance forUncollectible Accounts28,00094,0001,600100,0001,7001,7002,00032,3001,900Net accounts receivable = $30,400 ($32,300 – $1,900)The store expects to collect an amount approximating the net receivable.Req. 3BALANCE SHEETCurrent assets: Accounts receivable, net of allowance for uncollectible accounts of $1,900…………………$30,400(1015 min.) E 57Req. 1JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDITOct.UncollectibleAccount Expense…..1,700 Accounts Receivable……………..1,700Req. 2Net accounts receivable is $32,300, the balance in Accounts Receivable, puted as follows:Accounts ReceivableBeg. bal.28,000Cr. sales100,000Collections94,000Writeoffs1,700End. bal.32,300The store does not expect to collect the full $32,300 because some credit customers are likely not to pay their accounts.(1530 min.) E 58Req. 1The credit balance at December 31 in Allowance for Doubtful Accounts should be $13,400. ($106,000 180。 .50) = $13,400. The current balance is $7,400. Thus, the balance of the allowance account is too low. Req. 2JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDITDoubtfulAccount Expense……………..6,000 Allowance for Doubtful Accounts….6,000Allowance for Doubtful Accounts 7,4006,00013,400Req. 3BALANCE SHEETCurrent assets: Cash…………………………………………..$ XX Shortterm investments…………………...XX Accounts receivable, net of allowance for doubtful accounts of $13,400……..255,600*_____ *Another way to report accounts receivable is Accounts receivable……………………….$269,000 Less Allowance for doubtful accounts… (13,400)255,600(1520 min.) E 59Req. 12% is reasonable because for each year’s sales and for the entire threeyear period, the ratio of total writeoffs to sales is very close to 2%.(Dollars in thousands)20X420X520X6TotalWrite offs=$139$138$144$421Sales$6,800$7,000$7,100$20,900= .0204= .0197= .0203= .0201Req. 2 Thousands20X6Accounts Receivable……………………7,100 Sales Revenue………………………...7,100Recorded sales on account.20X6BadDebt Expense ($7,100 180。 .12 180。 .08 180。 .06 180。 = $231,000 ***$440,000 – $200,000 = $240,000 180。 .20) – $3,200 = $6,600] 5.$210,200 ($220,000 – $9,800) 6.a ($1,000,000 180。 .07 180。 $)………………..25,500Purchased investment.21Cash (2,000 180。 .01) + ($34,000 180。 .03)……….…$12,000 Uncollectibleaccount expense by the direct writeoff method………… 7,000 (5,000)Net ine, corrected…………………….$48,000Req. 4KPMG’s suggestions make Bzensky look much less successful, decreasing the current ratio, the acidtest ratio, and net ine.(2030 min.) P 56AReq. 1JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDIT20X4Nov.30Note Receivable — Kelly Moore Paint Co…..60,000 Sales Revenue………………………………..60,000Dec.31Interest Receivable ($60,000 180。 2/12)…..1,000(continued) P 56AJournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDIT20X5Nov. 11Note Receivable — Consolidated, Inc...50,000 Cash……………………………………...50,000Dec. 31Interest Receivable……………………….616 Interest Revenue ($50,000 180。 $.32 = $1,600 +$46,250 – (5,000 180。 $)].…………..9,250Adjusted investment to market value.Req. 3BALANCE SHEETCurrent assets: Shortterm investment, at market value (5,000 180