Ba220 Financial Accounting

Week 6 Assignment

“Week 6 Problem Sets”

Financial Accounting

PART 1

1. What is meant by the net realizable value for accounts receivable?

Net realizable value of accounts received is the Total Accounts Receivable – Allowance for bad debt expense. It is the amount in the accounts receivable that can turn into cash.

2. What is aging of accounts receivable and how is it used to account for uncollectible accounts?

Aging of accounts receivable is when classifying each account receivable by the number of days it has been outstanding. Also it develops a more accurate estimate of uncollectible accounts.

3. How is the accounts receivable turnover computed? What information does this ratio provide?

Receivable turnover is computed by using: Accounts Receivable Turnover = Net Credit Sales/ Average Accounts Receivable. This shows how the businesses collect debts.

4. Describe what is meant by the term “goodwill”.

Goodwill is an intangible asset. The goodwill is the cost of the purchase of the company, less the fair value of net identifiable assets.

PART 2

Exercise 7-13a on page 395

a.

ASSETS = | LIAB. + | EQUILTY | REV. - | EXP. = | NET INCOME | CASH FLOW |

Cash + | Accts. Rec | | | | | |

$6,000 | NA | $6,000 | $12,000 | $6,000 | $6000 | NA |

Exercise 8-34a on page 460

a. The amount is $1,300,000.

Exercise 8-9a on page 451

a. Depreciation Expense = ($36,000+$1,200)-$4,000/5 = $6,640 per year.

b. JOURNAL ENTRY

Depreciation Expense Debit $6,640

Accumulated Depreciation Credit $6,640

c. JOURNAL ENTRY

Cash Debit $22,000

Accumulated Depreciation Debit

Profit on Sales Credit

Taxi Credit $37,200