Question

The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the...

The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the closing entries were posted: Account Title Debit Credit Cash $ 165,000 Accounts Receivable 136,000 Allowance for Doubtful Accounts $ 23,500 Inventory 447,000 Accounts Payable 106,000 Common Stock 505,000 Retained Earnings 113,500 Totals $ 748,000 $ 748,000 Tile, Etc. had the following transactions in 2017: 1. Purchased merchandise on account for $635,000. 2. Sold merchandise that cost $475,000 for $1,000,000 on account. 3. Sold for $300,000 cash merchandise that had cost $182,000. 4. Sold merchandise for $245,000 to credit card customers. The merchandise had cost $118,000. The credit card company charges a 3 percent fee. 5. Collected $730,000 cash from accounts receivable. 6. Paid $665,000 cash on accounts payable. 7. Paid $156,000 cash for selling and administrative expenses. 8. Collected cash for the full amount due from the credit card company (see item 4). 9. Loaned $61,000 to J. Parks. The note had an 6 percent interest rate and a one-year term to maturity. 10. Wrote off $8,600 of accounts as uncollectible. 11. Made the following adjusting entries: (a) Recorded uncollectible accounts expense estimated at 1 percent of sales on account. (b) Recorded seven months of accrued interest on the note at December 31, 2017 (see item 9). Required a. Prepare general journal entries for these transactions; post the entries to T-accounts; and prepare an income statement, a statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows for 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Statement of Cash Flows, and Balance Sheet only: Items to be deducted must be indicated with a minus sign.) b. Compute the net realizable value of accounts receivable at December 31, 2017. c. If Tile, Etc. used the direct write-off method, what amount of uncollectible accounts expense would it report on the income statement? The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the closing entries were posted: Account Title Debit Credit Cash $ 165,000 Accounts Receivable 136,000 Allowance for Doubtful Accounts $ 23,500 Inventory 447,000 Accounts Payable 106,000 Common Stock 505,000 Retained Earnings 113,500 Totals $ 748,000 $ 748,000 Tile, Etc. had the following transactions in 2017: 1. Purchased merchandise on account for $635,000. 2. Sold merchandise that cost $475,000 for $1,000,000 on account. 3. Sold for $300,000 cash merchandise that had cost $182,000. 4. Sold merchandise for $245,000 to credit card customers. The merchandise had cost $118,000. The credit card company charges a 3 percent fee. 5. Collected $730,000 cash from accounts receivable. 6. Paid $665,000 cash on accounts payable. 7. Paid $156,000 cash for selling and administrative expenses. 8. Collected cash for the full amount due from the credit card company (see item 4). 9. Loaned $61,000 to J. Parks. The note had an 6 percent interest rate and a one-year term to maturity. 10. Wrote off $8,600 of accounts as uncollectible. 11. Made the following adjusting entries: (a) Recorded uncollectible accounts expense estimated at 1 percent of sales on account. (b) Recorded seven months of accrued interest on the note at December 31, 2017 (see item 9). Required a. Prepare general journal entries for these transactions; post the entries to T-accounts; and prepare an income statement, a statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows for 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Statement of Cash Flows, and Balance Sheet only: Items to be deducted must be indicated with a minus sign.) b. Compute the net realizable value of accounts receivable at December 31, 2017. c. If Tile, Etc. used the direct write-off method, what amount of uncollectible accounts expense would it report on the income statement?

Homework Answers

Answer #1
TILE ETC., INC.
General Journal for the year ended December 31, 2017
Ref Account Title Debit Credit
1 Inventory 635000
Accounts Payables 635000
2a Accounts Receivable 1000000
Sales 1000000
2b Cost of goods sold 475000
Inventory 475000
3a Cash 300000
Sales 300000
3b Cost of goods sold 182000
Inventory 182000
4a Accounts Receivable - Credit card 237650
Card Charges 7350
Sales 245000
4b Cost of goods sold 118000
Inventory 118000
5 Cash 730000
Accounts Receivable 730000
6 Accounts Payables 665000
Cash 665000
7 Selling and administrative Expenses 156000
Cash 156000
8 Cash 237650
Accounts Receivable - Credit card 237650
9 Note Receivable 61000
Cash 61000
10 Allowance for doubtful accounts 8600
Accounts Receivable 8600
11a Bad Debt Expense 10000
Allowance for doubtful accounts 10000
11b Interest Receivable 2135
Interest Revenue 2135

t-accounts

Cash Accounts Receivable
Ref Debit Credit Ref Ref Debit Credit Ref
Beg.Bal. 165000 665000 6 Beg.Bal. 136000 730000 5
3a 300000 156000 7 2a 1000000 8600 10
5 730000 61000 9 1136000 738600
8 237650 End.Bal. 397400
1432650 882000
End.Bal. 550650 Accounts Receivable - Credit card
Ref Debit Credit Ref
4a 237650 237650 8
Allowance for Doubtful accounts Inventory
Ref Debit Credit Ref Ref Debit Credit Ref
10 8600 23500 Beg.Bal. Beg.Bal. 447000 475000 2b
10000 11a 1 635000 182000 3b
118000 4b
8600 33500 1082000 775000
24900 End.Bal. End.Bal. 307000
Accounts Payable Common Stock
Ref Debit Credit Ref Ref Debit Credit Ref
6 665000 106000 Beg.Bal. 505000 Beg.Bal.
635000 1
665000 741000 0 505000
76000 End.Bal. 505000 End.Bal.
Retained Earnings Sales
Ref Debit Credit Ref Ref Debit Credit Ref
113500 Beg.Bal. 1000000 2a
1 300000 3a
0 113500 245000 4a
113500 End.Bal. 0 1545000
1545000 End.Bal.
Cost of goods sold Card expenses
Ref Debit Credit Ref Ref Debit Credit Ref
2b 475000 4a 7350
3b 182000
4b 118000
775000 0 7350 0
End.Bal. 775000 End.Bal. 7350
Selling And Admn.expenses Note Receivable
Ref Debit Credit Ref Ref Debit Credit Ref
7 156000 9 61000
End.Bal. 156000
61000 0
End.Bal. 61000
Bad Debt Expense
Ref Debit Credit Ref Interest Receivable
11a 10000 Ref Debit Credit Ref
End.Bal. 10000 11b 2135
End.Bal. 2135
Interest Revenue
Ref Debit Credit Ref
2135 11b
TILE ETC., INC.
Income Statement
for the year ended December 31, 2017
Sales Revenue 1545000
Interest Revenue 2135
Total Revenue 1547135
Cost of goods sold 775000
Gross profit 772135
Expenses:
Seling and administrative expenses 156000
Card expenses 7350
Bad Debt Expense 10000
Total Expenses 173350
Net income 598785
TILE ETC., INC.
Balance Sheet
as at December 31, 2017
Assets
Cash 550650
Accounts Receivable 397400
Allowance for doubtful accounts 24900 372500
Inventory 307000
Interest Receivable 2135
Note Receivable 61000
Total Assets 1293285
Liabilities and stockholders' equity
Accounts Payable 76000
Common stock 505000
Retained Earnings
Balance as at Jan.1 113500
Net income for the year 598785
Balance as at Dec.31 712285
Total liabilities and stockholders equity 1293285

b. Net realizable value of accounts Receivable = $372,500

Accounts receivable as at Dec.31 397400
Allowance for doubtful ccounts 24900
Net realizable value 372500
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