Financial Accounting

I. Brief Exercise 7-1 Accounting for Bad Debts, p. 363

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

$500,000x2%= $10,000 in uncollectible debt.

The accounts that will be affected include the Allowance for doubtful Accounts and the Bad Debts Expense. Both will increase by $10,000.

The statements that will be affected include the Balance sheet and the Income sheet.

Balance Sheet

Assets | + | Liabilities | = | S.H. Equity |

A.D.A($10,000) | | | | ($10,000) |

Income Statement

Revenues | - | Expenses | = | Net Income |

| | B.D.$10,000 | | ($10,000) |

So accounts receivable minus doubtful accounts gives us the Net Accounts receivable.

II. Brief Exercise 7-3 Accounting for Notes Receivable, p. 363

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

$50,000 x .06 x 90/360= $750, which is due on maturity

Notes receivable and Sales revenue are both affected, with an increase in each of $50,000.

The Balance Sheet and Income statement are have reflections

Balance Sheet

Assets | + | Liabilities | = | S.H. Equity |

Notes Receivable $50,000 | | | | $50,000 |

Income Statement

Revenues | - | Expenses | = | Net Income |

Sales rev $50,000 | | | | $50,000 |

$50,000 x .06 x 60/360= $500 Interest owed on Dec, 31

Interest Receivable and Interest Revenue both increase by $500, and will be reflected on the Balance sheet and Income statement.

Assets | + | Liabilities | = | S.H. Equity |

Interest Receivable $500 | | | | $500 |

Income Statement

Revenues | - | Expenses | = | Net Income |

Interest rev $500 | | | | $500 |

III. Exercise 9-2 Current Liabilities, p. 469

Liabilities on a Firms Balance Sheet

a. An amount of money owed to a...