Accounting Exercises

Brief Exercise 7-1 Accounting for Bad Debts

Badger recorded $500,000 of net sales for the year of which 2% is estimated to be uncollectible. Identify and analyze the adjustment required at the end of the year to record bad debts.

500,000*.02=10,000

Assets = Liabilities + Stockholder’s Equity

Allowance for Doubtful Accounts (10,000) = X + (10,000)

Revenues – Expenses = Net Income

X – Bad Debts 10,000 = (10,000)

Accounts Receivable $500,000

Less: Allowance for doubtful accounts (10,000)

Net accounts receivable $490,000

Brief Exercise 7-3 Accounting for Notes Receivable

On November 1, 2012, Gopher received a $50,000, 6%, 90-day promissory note. Identify and analyze the adjustment required on December 31, the end of the company’s fiscal year.

50,000*0.06*(90/360)=750.

Over 3 months is $250 a month.

November & December $500 (60 days of interest)

Assets = Liabilities + Stockholder’s Equity

Interest Receivable 500 = X + 500

Revenues – Expenses = Net Income

Interest Revenue 500 – X = 500

Exercise 9-2 Current Liabilities

a) Current liability, accounts payable. (no note) discount if paid early.

b) Current liability, notes payable. Less than 1 year and/or operating cycle.

c) Long-term debt/liability. Greater than 1 year and/or operating cycle.

d) Current liability, wages/salaries payable, P437 example 9-4

e) Current liability, notes payable less than 1 year and/or operating cycle

f) The annual installment owed, current liability, the rest of the debt long term debt/liability p435

g) Current liability, will be paid within the year.

A) Accounts payable

B) Notes payable

C) Long-term debt

D) Other Accrued Expenses

E) Notes payable

F) Current Maturities of long-term debt then the rest under long term debt/liabilities

G) Accrued Income Taxes