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Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 7RE: McKinney Co. estimates its uncollectible accounts as a percentage of credit sales. McKinney made...

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please answer all parts please do not say about your guidelines in detail with explanation computation formulas thanks

2. For each transaction below, write the net effect on Current Assets (CA), Current Liabilities (CL), Gross Profit (GP), Net Income Before Taxes (NIBT), and Cash flows from operating activities (CFO). - Ignore income tax effects - Write only the effect for the current period. - Assume the companyis a merchandising firm. - Assume warranty expenses are recognized in COGS and bad debt expenses are recognized in SG\&A. - If the net effect is negative, include a negative sign. - If no effect, write 0 . - Note that this is not a balance sheet equation(A=L+E)table, so you should not expect amounts to balance.

Transaction
Ex Pay $25 of rent payable covering last quarter's electrical bill -25 -25 0
A Recognize bad debt expense of $85
Write off $22 of Accounts Receivable
C Recognize warranty expense of $35
B
Pay $15 to satisfy warranties previously accrued
E Pay $200 for the next 4 months' rent (not this month)
D
Recognize $50 inventory impairment (expense in COGS)
G Purchase $99 of inventory on account
Collect $72 of Accounts receivable
F
CA CL GP NI (pretax) CFO
0
-25
H

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