Solution manual accounting 21e by warreni ch 08

CHAPTER 8
RECEIVABLES
CLASS DISCUSSION QUESTIONS
1. Receivables are normally classified as (1)
accounts receivable, (2) notes receivable,
or (3) other receivables.
2. Transactions in which merchandise is sold
or services are provided on credit generate
accounts receivable.
3. a. Current assets
b. Investments
4. Examples of other receivables include
interest receivable, taxes receivable, and
receivables from officers or employees.
5. The principle of separation of operations
and accounting is violated. (Note to
Instructors: This weakness in internal
control may permit embezzlement. For
example, the accounts receivable clerk may
misappropriate cash receipts and cover the
misappropriation by a process called
lapping. In lapping, the cash receipts from
one account are taken and the cash
received on a subsequent account is used
to cover the shortage. The receipts on
another account are then used to cover the
shortage in this latter customer’s account,
etc. This lapping generally continues until
the records are falsified to correct for the
shortage, the cash is returned by the clerk,
or the embezzlement is discovered.)

6. The allowance method
7. Contra asset, credit balance
8. The accounts receivable and allowance for
doubtful accounts may be reported at a net
amount
of
$759,900
($883,150
–
$123,250) in the Current Assets section of
the balance sheet. In this case, the amount
of the allowance for doubtful accounts
should be shown separately in a note to the
financial statements or in parentheses on
the balance sheet. Alternatively, the
accounts receivable may be shown at the
gross amount of

$883,150 less the amount of the allowance for
doubtful accounts of $123,250, thus
yielding net accounts receivable of
$759,900.
9. 1. The percentage rate used is excessive
in relationship to the volume of
accounts written off as uncollectible;
hence, the balance in the allowance is
excessive.
2. A
substantial
volume

of
old
uncollectible accounts is still being
carried in the accounts receivable
account.
10. An estimate based on analysis of
receivables provides the most accurate
estimate of the current net realizable value.
11. The advantages of a claim evidenced by a
note are (1) the debt is acknowledged, (2)
the payment terms are specified, (3) it is a
stronger claim in the event of court action,
and (4) it is usually more readily
transferable to a creditor in settlement of a
debt or to a bank for cash.
12. a. Ellsworth Company
b. Notes Receivable
13. The interest will amount to $6,300 only if
the note is payable one year from the date
it was created. The usual practice is to
state the interest rate in terms of an annual
rate, rather than in terms of the period
covered by the note.
14. Debit Accounts Receivable
Credit Notes Receivable
Credit Interest Revenue
15. Cash............................... 20,806
Accounts Receivable
20,600
Interest Revenue......

206
($20,600 × 30/360 × 12% = $206)
16. Current assets

145


EXERCISES
Ex. 8–1
a. Inappropriate. Since Fridley has a large number of credit sales supported by
promissory notes, a notes receivable ledger should be maintained. Failure to
maintain a subsidiary ledger when there are a significant number of notes
receivable transactions violates the internal control procedure that mandates
proofs and security. Maintaining a notes receivable ledger will allow Fridley to
operate more efficiently and will increase the chance that Fridley will detect
accounting errors related to the notes receivable. (The total of the accounts in
the notes receivable ledger must match the balance of notes receivable in the
general ledger.)
b. Inappropriate. The procedure of proper separation of duties is violated. The
accounts receivable clerk is responsible for too many related operations. The
clerk also has both custody of assets (cash receipts) and accounting
responsibilities for those assets.
c. Appropriate. The functions of maintaining the accounts receivable account in
the general ledger should be performed by someone other than the accounts
receivable clerk.
d. Appropriate. Salespersons should not be responsible for approving credit.
e. Appropriate. A promissory note is a formal credit instrument that is frequently
used for credit periods over 45 days.

Ex. 8–2
a. Hotel accounts and notes receivable:
$3,256,000 ÷ $75,796,000 = 4.3%
b. Casino accounts receivable:
$6,654,000 ÷ $26,334,000 = 25.3%
c. Casino operations experience greater bad debt risk than do hotel operations,
since it is difficult to control the creditworthiness of customers entering the
casino. In addition, individuals who may have adequate creditworthiness may
overextend themselves and lose more than they can afford if they get caught
up in the excitement of gambling.

Ex. 8–3
Account
Bear Creek Body Shop
First Auto
Kaiser Repair
Master’s Auto Repair
Richter Auto
Sabol’s
Uptown Auto
Westside Repair & Tow

Due Date
June 8
July 3
March 20
May 15
June 18
April 12
May 8

May 31

Number of Days Past Due
53 (22 + 31)
28
133 (11 + 30 + 31 + 30 + 31)
77 (16 + 30 + 31)
43 (12 + 31)
110 (18 + 31 + 30 + 31)
84 (23 + 30 + 31)
61 (30 + 31)


Ex. 8–4
a.
Customer
Janzen Industries
Kuehn Company
Mauer Inc.
Pollack Company
Simrill Company

Due Date
Number of Days Past Due
August 29
93 days (2 + 30 + 31 + 30)
September 388 days (27 + 31 + 30)
October 21
40 days (10 + 30)
November 23

7 days
December 3
Not past due

b.

Customer
Aaker Brothers Inc.
Aitken Company

Aging of Accounts Receivable
November 30
Days Past Due
Not Past
Balance
Due
1–30
31–60
61–90
2,000
1,500

Over
90

2,000
1,500

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Zollo Company

Subtotals
Janzen Industries
Keuhn Company
Mauer Inc.
Pollack Company
Simrill Company
Totals

5,000
972,500
40,000
8,500
18,000
6,500
7,500
1,053,000

640,000 180,000

5,000
78,500

42,300

31,700
40,000

8,500
18,000
6,500

7,500
647,500 186,500

96,500

50,800

71,700


Ex. 8–5
Days Past Due
Balance
Total receivables
Percentage
Uncollectible
Allowances for
Doubtful Accounts

Not Past
Due

1–30

31–60

61–90

Over
90

$1,053,000 $647,500 $186,500 $96,500 $50,800 $71,700
1%
$60,495

$6,475

4%
$7,460

8%

20%

40%

$7,720 $10,160 $28,680

Ex. 8–6
Nov. 30

Uncollectible Accounts Expense.......................
Allowances for Doubtful Accounts.............

53,315*
53,315

*$60,495 – $7,180 = $53,315

Ex. 8–7

Estimated Uncollectible Accounts
Age Interval

Balance

Percent

Amount

Not past due...............................
1–30 days past due....................
31–60 days past due..................
61–90 days past due..................
91–180 days past due................
Over 180 days past due.............
Total.......................................

$450,000
110,000
51,000
12,500
7,500
5,500
$636,500

2%
4
6
20
60

80

$ 9,000
4,400
3,060
2,500
4,500
4,400
$27,860

Ex. 8–8
2006
Dec. 31 Uncollectible Accounts Expense.......................
Allowance for Doubtful Accounts.................
*$27,860 + $1,575 = $29,435

29,435*
29,435


Ex. 8–9
a. $17,875
b. $13,600

c. $35,750
d. $41,450

Ex. 8–10
a.

Allowance for Doubtful Accounts................................
Accounts Receivable...............................................

7,130

b. Uncollectible Accounts Expense..................................
Accounts Receivable...............................................

7,130

7,130
7,130

Ex. 8–11
Feb. 20
20
May 30
30
Aug. 3
3

Accounts Receivable—Darlene Brogan............
Sales..............................................................

12,100

Cost of Merchandise Sold..................................
Merchandise Inventory.................................

7,260

Cash.....................................................................
Accounts Receivable—Darlene Brogan......

6,000

Allowance for Doubtful Accounts......................
Accounts Receivable—Darlene Brogan......

6,100

Accounts Receivable—Darlene Brogan............
Allowance for Doubtful Accounts...............

6,100

Cash.....................................................................
Accounts Receivable—Darlene Brogan......

6,100

12,100
7,260
6,000
6,100
6,100
6,100


Ex. 8–12

July

6
6

Sept. 12
12
Dec. 20
20

Accounts Receivable—Dr. Jerry Jagers............
Sales..............................................................

18,500

Cost of Merchandise Sold..................................
Merchandise Inventory.................................

11,100

Cash.....................................................................
Accounts Receivable—Dr. Jerry Jagers.....

9,000

Uncollectible Accounts Expense.......................
Accounts Receivable—Dr. Jerry Jagers.....

9,500

Accounts Receivable—Dr. Jerry Jagers............
Uncollectible Accounts Expense................

9,500

Cash.....................................................................
Accounts Receivable—Dr. Jerry Jagers.....

9,500

Ex. 8–13
$223,900 [$212,800 + $112,350 – ($4,050,000 × 2 1/2%)]

Ex. 8–14
a. $257,100 [$262,300 + $114,800 – ($4,800,000 × 2 1/2%)]
b. $5,900 Dr. [($101,250 – $112,350) + ($120,000 – $114,800)]

18,500
11,100
9,000
9,500
9,500
9,500


Ex. 8–15

a.
b.
c.

d.
e.

Due Date
Aug. 31
Dec. 28
Nov. 30
May 5
July 19

Interest
$120
480
250
150
100

Ex. 8–16
a. August 8
b. $24,480
c. (1) Notes Receivable......................................................
Accounts Rec.—Magpie Interior Decorators.....
(2) Cash..........................................................................
Notes Receivable................................................
Interest Revenue.................................................

24,000
24,000
24,480
24,000

480

Ex. 8–17
1.
2.
3.
4.
5.
6.

Sale on account.
Cost of merchandise sold for the sale on account.
A sales return or allowance.
Cost of merchandise returned.
Note received from customer on account.
Note dishonored and charged maturity value of note to customer’s account
receivable.
7. Payment received from customer for dishonored note plus interest earned
after due date.


Ex. 8–18
2005
Dec. 13
31
31
2006
Apr. 12

Notes Receivable................................................

Accounts Receivable—Visage Co...............

25,000
25,000

Interest Receivable.............................................
Interest Revenue..........................................

75*

Interest Revenue.................................................
Income Summary..........................................

75

Cash.....................................................................
Notes Receivable..........................................
Interest Receivable.......................................
Interest Revenue..........................................

25,500

75
75

25,000
75
425

*$25,000 × 0.06 × 18/360 = $75

Ex. 8–19
July
Oct.

Nov.

8
6

5

Notes Receivable................................................
Accounts Receivable—Pennington Co.......

30,000.00

Accounts Receivable—Pennington Co.............
Notes Receivable..........................................
Interest Revenue..........................................

30,600.00

Cash.....................................................................
Accounts Receivable—Pennington Co.......
Interest Revenue..........................................

30,855.00

*$30,600 × 0.10 × 30/360 = $255.00

30,000.00
30,000.00
600.00
30,600.00
255.00*


Ex. 8–20
Mar.

1
18

Apr. 30

June 16

July 11

Notes Receivable................................................
Accounts Receivable—Absaroka Co..........

15,000

Notes Receivable................................................
Accounts Receivable—Sturgis Co..............

12,000

Accounts Receivable—Absaroka Co.................
Notes Receivable..........................................
Interest Revenue..........................................

15,125

Accounts Receivable—Sturgis Co.....................
Notes Receivable..........................................
Interest Revenue..........................................

12,270

Cash.....................................................................
Accounts Receivable—Absaroka Co..........
Interest Revenue..........................................

15,367

15,000
12,000
15,000
125
12,000
270
15,125
242*

*$15,125 × 0.08 × 72/360 = $242
Oct. 12

Allowance for Doubtful Accounts......................
Accounts Receivable—Sturgis Co..............

12,270
12,270


Ex. 8–21
1. The interest receivable should be reported separately as a current asset. It
should not be deducted from notes receivable.
2. The allowance for doubtful accounts should be deducted from accounts
receivable.
A corrected partial balance sheet would be as follows:
PEMBROKE COMPANY
Balance Sheet
July 31, 2006
Assets
Current assets:
Cash.............................................................................
Notes receivable.........................................................
Accounts receivable...................................................
Less allowance for doubtful accounts..............
Interest receivable......................................................

$ 43,750
300,000
$576,180
71,200

504,980

18,000

Ex. 8–22
a. 2003:
2002:

53.0 {$9,953,530 ÷ [($216,200 + $159,477) ÷ 2]}
44.8 {$9,518,231 ÷ [($159,477 + $265,515) ÷ 2]}

b. The accounts receivable turnover indicates an increase in the efficiency of
collecting accounts receivable by increasing from 44.8 to 53.0, a favorable
trend. Before reaching a more definitive conclusion, the ratios should be
compared with industry averages and similar firms.


Ex. 8–23
a. 2003:
2002:

7.9 days [$216,200 ÷ ($9,953,530 ÷ 365)]
6.1 days [$159,477 ÷ ($9,518,231 ÷ 365)]

b. The number of days’ sales in receivables indicates a decrease in the efficiency
of collecting accounts receivable by increasing from 6.1 days to 7.9 days, an
unfavorable trend. Before reaching a more definitive conclusion, the ratios
should be compared with industry averages and similar firms.

Ex. 8–24
a. 2002:
2001:

108.2 {$9,363,000 ÷ [($79,000 + $94,000) ÷ 2]}
99.6 {$10,105,000 ÷ [($94,000 + $109,000) ÷ 2]}

b. 2002:
2001:

3.1 days [$79,000 ÷ ($9,363,000 ÷ 365)]
3.4 days [$94,000 ÷ ($10,105,000 ÷ 365)]

c. The accounts receivable turnover indicates a slight increase in the efficiency
of collecting accounts receivable by increasing from 99.6 to 108.2, a favorable
trend. The number of days’ sales in receivables decreased from 3.4 days to 3.1
days, also indicating a favorable trend in collections of receivables. Before
reaching a more definitive conclusion, both ratios should be compared with
those of past years, industry averages, and similar firms.
Note to Instructors: The high accounts receivable turnover and low number of
days’ sales in receivables suggests that most of The Limited’s sales are cash
sales, such as those from MasterCard and VISA.


Appendix Ex. 8–25
a. $20,300
b. 60 days
c. $271 ($20,300 × 0.08 × 60/360)
d. $20,029 ($20,300 – $271)
e.

Cash................................................................................
Interest Revenue......................................................

Notes Receivable......................................................

20,029
29
20,000

Appendix Ex. 8–26
June 1
July

1

Notes Receivable................................................
Accounts Receivable—Rhodes Co.............

60,000

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

60,344*

60,000
60,000
344

*$60,800 – ($60,800 × 0.09 × 30/360) = $60,344
31
Aug. 30

Accounts Receivable—Rhodes Co....................
Cash..............................................................

61,000

Cash.....................................................................
Accounts Receivable—Rhodes Co.............
Interest Revenue .........................................

61,610*

*$61,000 + ($61,000 × 0.12 × 30/360) = $61,610

61,000
61,000
610


PROBLEMS
Prob. 8–1A
2.
2006
Mar. 15
15
Apr. 16
16
July 20
Oct. 31
31

Dec. 31

31
31

Cash.....................................................................
Accounts Receivable—Bimba Co................

11,100

Allowance for Doubtful Accounts......................
Accounts Receivable—Bimba Co................

7,400

Accounts Receivable—Tom Miner.....................
Allowance for Doubtful Accounts...............

5,782

Cash.....................................................................
Accounts Receivable—Tom Miner..............

5,782

Allowance for Doubtful Accounts......................
Accounts Receivable—Martz Co.................

5,500

Accounts Receivable—Two Bit Saloon Co........
Allowance for Doubtful Accounts...............

6,100

Cash.....................................................................
Accounts Receivable—Two Bit Saloon Co.

6,100

Allowance for Doubtful Accounts......................
Accounts Receivable—Asche Co................
Dorsch Co..............
Krebs Distributors.
J. J. Levi.................

9,250

Uncollectible Accounts Expense.......................
Allowance for Doubtful Accounts...............

11,918

Income Summary................................................
Uncollectible Accounts Expense................

11,918

11,100
7,400

5,782
5,782
5,500
6,100
6,100
950
4,600
2,500
1,200
11,918
11,918


Prob. 8–1A Concluded
1. and 2.
Allowance for Doubtful Accounts
Date

2006
Jan.
Mar.
Apr.
July
Oct.
Dec.

1
15
16
20

31
31
31

Item

Balance....................
.................................
.................................
.................................
.................................
.................................
.................................

115
Balance
Cr.

Dr.

Cr.

Dr.

.............
7,400
.............
5,500
.............
9,250

.............

.............
.............
5,782
.............
6,100
.............
11,918

.............
.............
.............
.............
.............
.............
.............

Income Summary
2006
Dec. 31

.................................

313
11,918

.............

11,918

Uncollectible Accounts Expense
2006
Dec. 31
31

.................................
.................................

3. $522,050 ($535,750 – $13,700)
4. a. $15,500 ($3,100,000 × 0.005)
b. $17,282 ($15,500 + $1,782)
c. $518,468 ($535,750 – $17,282)

12,050
4,650
10,432
4,932
11,032
1,782
13,700

.............
718

11,918
.............

.............
11,918

11,918
—

.............
—


Prob. 8–2A
1.
Customer
Able Sports & Flies
Red Tag Sporting Goods
Highlite Flies
Midge Co.
Snake River Outfitters
Pheasant Tail Sports
Big Sky Sports
Ross Sports
Sawyer’s Pheasant Tail
Tent Caddis Outfitters
Wulff Company
Zug Bug Sports

Due Date
June 15, 2006
July 28, 2006
Sept. 11, 2006
Sept. 30, 2006
Oct. 7, 2006

Oct. 27, 2006
Oct. 30, 2006
Nov. 18, 2006
Nov. 26, 2006
Nov. 29, 2006
Dec. 10, 2006
Jan. 6, 2007

Number of Days Past Due
199 days (15 + 31 + 31 + 30 + 31 + 30 + 31)
156 days (3 + 31 + 30 + 31 + 30 + 31)
111 days (19 + 31 + 30 + 31)
92 days (31 + 30 + 31)
85 days (24 + 30 + 31)
65 days (4 + 30 + 31)
62 days (1 + 30 + 31)
43 days (12 + 31)
35 days (4 + 31)
32 days
21 days
Not past due


Prob. 8–2A Concluded
2. and 3.
Aging of Accounts Receivable
December 31, 2006
Days Past Due
Customer
Alpha Fishery

Brown Trout Sports

Not Past
Balance
Due
5,000
5,000
6,400

1–30

31–60

61–90

91–120

Over
120

6,400

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Zinger Sports
2,900
Subtotals
580,000
Able Sports & Flies
3,500
Red Tag Sporting Goods 4,000

Highlite Flies
2,500
Midge Co.
3,100
Snake River Outfitters
4,500
Pheasant Tail Sports
1,600
Big Sky Sports
2,000
Ross Sports
500
Sawyer’s Pheasant Tail
2,800
Tent Caddis Outfitters
3,500
Wulff Company
1,000
Zug Bug Sports
6,200
Totals
615,200
Percentage Uncollectible
Estimate of Doubtful
Accounts
65,212

248,600

2,900

147,250

98,750

29,950

22,150
3,500
4,000

2,500
3,100
4,500
1,600
2,000
500
2,800
3,500
1,000
6,200
254,800
1%
2,548

148,250 105,550 41,400 35,550
4%
8%
25%
40%
5,930

8,444

4. Uncollectible Accounts Expense...................................
Allowance for Doubtful Accounts............................
*$65,212 + $2,800

33,300

10,350 14,220

29,650
80%
23,720

68,012*
68,012


Prob. 8–3A
1.

Year
1st
2nd
3rd
4th

Uncollectible Accounts Expense
Increase

Expense
Expense
(Decrease)
Actually
Based on
in Amount
Reported
Estimate
of Expense
$3,500
3,250
6,300
8,400

$ 6,375
7,200
9,000
13,500

$2,875
3,950
2,700
5,100

Balance of
Allowance
Account,
End of Year
$ 2,875
6,825

9,525
14,625

2. Yes. The actual write-offs of accounts originating in the first two years are
reasonably close to the expense that would have been charged to those years
on the basis of 3/4% of sales. The total write-off of receivables originating in
the first year amounted to $6,200 ($3,500 + $1,900 + $800), as compared with
uncollectible accounts expense, based on the percentage of sales, of $6,375.
For the second year, the comparable amounts were $7,650 ($1,350 + $4,500 +
$1,800) and $7,200.


Prob. 8–4A
1.
Note

(a)
Due Date

(1)
(2)
(3)
(4)
(5)
(6)

May 6
July 18
Dec. 28
Dec. 30

Jan. 18
Jan. 22

2.
Dec. 28

3.
Dec. 31

4.
Jan. 18

22

(b)
Interest Due at Maturity
$240
126
204
405
120
120

Accounts Receivable..........................................
Notes Receivable..........................................
Interest Revenue..........................................

10,404

Interest Receivable.............................................

Interest Revenue..........................................
$12,000 × 0.06 × 42/360 = $ 84
$16,000 × 0.09 × 8/360 =
32
Total
$116

116

Cash.....................................................................
Notes Receivable..........................................
Interest Receivable.......................................
Interest Revenue..........................................

12,120

Cash.....................................................................
Notes Receivable..........................................
Interest Receivable.......................................
Interest Revenue..........................................

16,120

10,200
204

116

12,000
84

36
16,000
32
88


Prob. 8–5A
June 4
July 15
Aug. 3

Sept. 1
Oct. 31

Nov.

5
12

30
Dec.

5

30

Notes Receivable................................................
Accounts Receivable...................................

18,800

Notes Receivable................................................
Accounts Receivable...................................

27,000

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

19,082

Notes Receivable................................................
Accounts Receivable...................................

24,000

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

24,360

Notes Receivable................................................
Accounts Receivable...................................

9,600

Cash.....................................................................
Notes Receivable..........................................

Interest Revenue..........................................

27,900

Notes Receivable................................................
Accounts Receivable...................................

15,000

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

9,656

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

15,125

18,800
27,000
18,800
282
24,000
24,000
360
9,600
27,000

900
15,000
9,600
56
15,000
125


Prob. 8–6A
Jan. 10
Feb.

4
4
12
12

Mar.

6
14

Apr. 10

May

5

13

June 12

July

9

Notes Receivable................................................
Cash..............................................................

12,000

Accounts Receivable—Emerson and Son.........
Sales..............................................................

24,000

Cost of Merchandise Sold..................................
Merchandise Inventory.................................

14,400

Accounts Receivable—Gwyn Co.......................
Sales..............................................................

25,000

Cost of Merchandise Sold..................................
Merchandise Inventory.................................

15,000

Notes Receivable................................................
Accounts Receivable—Emerson and Son. .

24,000

Notes Receivable................................................
Accounts Receivable—Gwyn Co.................

25,000

Notes Receivable................................................
Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

12,000
240

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

24,240

Accounts Receivable—Gwyn Co.......................
Notes Receivable..........................................
Interest Revenue..........................................

25,500

Cash.....................................................................
Accounts Receivable—Gwyn Co.................
Interest Revenue..........................................
($25,500 × 0.12 × 30/360 = $255)

25,755

Cash.....................................................................
Notes Receivable..........................................
Interest Revenue..........................................

12,270

12,000
24,000
14,400
25,000
15,000
24,000
25,000

12,000
240
24,000
240
25,000
500
25,500
255

12,000
270


Prob. 8–6A Continued
Aug. 24
24
Sept. 3

Accounts Receivable—Haggerty Co.................
Sales..............................................................

10,200

Cost of Merchandise Sold..................................
Merchandise Inventory.................................

6,000

Cash.....................................................................
Sales Discounts..................................................
Accounts Receivable—Haggerty Co...........

10,098
102

10,200
6,000

10,200


Prob. 8–6A Continued
This solution is applicable only if the P.A.S.S. Software that accompanies the text
is used.
RIMROCK CO.
Income Statement
For the Year Ended December 31, 20—
Operating revenue:
Sales...............................................................
Less: Sales returns and allowance.............
Sales discounts.................................
Net sales...............................................................
Cost of merchandise sold....................................
Gross profit...........................................................
Operating expenses:
Sales salaries expense..................................
Advertising expense.....................................
Miscellaneous selling expense....................
Office salaries expense.................................
Rent expense.................................................
Miscellaneous administrative expense........
Total operating expenses......................
Net income from operations................................
Other revenue:
Interest revenue.............................................
Net income............................................................

$219,200

(10,000)
(1,302)
$207,898
84,413
$123,485

105.44
(4.81)
(0.63)
100.00
40.60
59.40

77,950
$ 45,535

19.48
3.85
0.24
7.94
5.89
0.10
37.49
21.90

1,505
$ 47,040

0.72
22.63

$ 40,500
8,000
500
16,500
12,250
200


Prob. 8–6A Concluded
This solution is applicable only if the P.A.S.S. Software that accompanies the text
is used.
RIMROCK CO.
Statement of Owner’s Equity
For the Year Ended December 31, 20—
Sophia Dubra, capital (beg. of year).................................
Net income for the year.....................................................
Less: Withdrawals.............................................................
Increase in capital..............................................................
Sophia Dubra, capital (end of year)..................................

$100,000
$47,040
30,000
17,040
$117,040

RIMROCK CO.
Balance Sheet
December 31, 20—

Assets
Cash.....................................................................................................
Accounts receivable...........................................................................
Merchandise inventory.......................................................................
Total assets....................................................................................

$ 98,940
24,500
28,600
$152,040

Liabilities
Accounts payable...............................................................................

$ 35,000

Owner's Equity
Sophia Dubra, capital..........................................................................
Total liabilities and owner’s equity...............................................

117,040
$152,040


Prob. 8–1B
2.
2006
Feb. 24
24
Mar. 29

July 10
10
Sept. 8
8
Dec. 31

31
31

Accounts Receivable—Dina Ibis........................
Allowance for Doubtful Accounts...............

1,025

Cash.....................................................................
Accounts Receivable—Dina Ibis.................

1,025

Allowance for Doubtful Accounts......................
Accounts Receivable—Hoxsey Co..............

7,500

Cash.....................................................................
Accounts Receivable—Foust Co................

4,800

Allowance for Doubtful Accounts......................

Accounts Receivable—Foust Co................

7,200

Accounts Receivable—Louis Sabo....................
Allowance for Doubtful Accounts...............

1,200

Cash.....................................................................
Accounts Receivable—Louis Sabo.............

1,200

Allowance for Doubtful Accounts......................
Accounts Receivable—Emery Co...............
Darigold Co............
Zheng Furniture.....
Carey Wenzel.........

20,905

Uncollectible Accounts Expense.......................
Allowance for Doubtful Accounts...............

35,380

Income Summary................................................
Uncollectible Accounts Expense................

35,380

1,025
1,025
7,500
4,800
7,200
1,200
1,200
8,050
6,260
3,775
2,820
35,380
35,380