Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains throughout the Midwest. At the end of the year, the company's accounting manager provides Willie with the following information, before any adjustment. $ 1,070,000 Accounts receivable Estimated percentage uncollectible Allowance for uncollectible accounts Operating income 9% $ 37,000 (credit) $ 257,000 Willie's compensation contract states that if the company generates operating income of at least $207,000, he will get a salary bonus early next year. Required: 1. Record the adjusting entry for uncollectible accounts using the accountant's estimate of 9% of accounts receivable. 2-a. After the adjusting entry is recorded in requirement 1, what is the revised amount of operating income? 2-b. Will Willie get his salary bonus? 3. Willie instructs the accountant to record the adjusting entry for uncollectible accounts using 6% rather than 9% of accounts receivable. Now will Willie get his salary bonus? 4. By how much would total assets and operating income be misstated using the 6% amount?

Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains throughout the Midwest. At the end of the year, the company's accounting manager provides Willie with the following information, before any adjustment. $ 1,070,000 Accounts receivable Estimated percentage uncollectible Allowance for uncollectible accounts Operating income 9% $ 37,000 (credit) $ 257,000 Willie's compensation contract states that if the company generates operating income of at least $207,000, he will get a salary bonus early next year. Required: 1. Record the adjusting entry for uncollectible accounts using the accountant's estimate of 9% of accounts receivable. 2-a. After the adjusting entry is recorded in requirement 1, what is the revised amount of operating income? 2-b. Will Willie get his salary bonus? 3. Willie instructs the accountant to record the adjusting entry for uncollectible accounts using 6% rather than 9% of accounts receivable. Now will Willie get his salary bonus? 4. By how much would total assets and operating income be misstated using the 6% amount?

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

Chapter11: Work Sheet And Adjusting Entries

Section: Chapter Questions

Problem 2PA: The balances of the ledger accounts of Beldren Home Center as of December 31, the end of its fiscal...

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Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains throughout the Midwest. At the end of the year, the company’s accounting manager provides Willie with the following information, before any adjustment.Accounts receivable $1,100,000 Estimated percentage uncollectible 9% Allowance for uncollectible accounts $40,000 (credit) Operating income $260,000Willie’s compensation contract states that if the company generates operating income of at least $210,000, he will get a salary bonus early next year. Required: 1. Record the adjustment for uncollectible accounts using the accountant’s estimate of 9% of accounts receivable. 2. After the adjustment is recorded in requirement 1, what is the revised amount of operating income? Will Willie get his salary bonus? 3. Willie instructs the accountant to record the adjustment for uncollectible accounts using 6% rather than 9% of accounts receivable. Now will Willie get his salary bonus? Explain. 4. By how much…
Wanda B. Rich is the CEO of Outlet Flooring, a discount provider of carpet, tile, wood, and laminate flooring. At the end of the year, the company’s accountant provides Wanda with the following information, before any adjustment. Accounts receivable $10,800,000 Estimated percentage uncollectible 2% Allowance for uncollectible accounts $108,000 (credit) Operating income $2,800,000   Wanda has significant stock ownership in the company and, therefore, would like to keep the stock price high. Analysts on Wall Street expect the company to have operating income of $2,120,000. The fact that actual operating income is well above this amount will make investors happy and help maintain a high stock price. Meeting analysts’ expectations will also help Wanda keep her job. Required: 1. Record the adjustment for uncollectible accounts using the accountant’s estimate of 2% of accounts receivable. (If no entry is required for a particular transaction/event, select "No Journal Entry…
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Wanda B. Rich is the CEO of Outlet Flooring, a discount provider of carpet, tile, wood, and laminate flooring. At the end of the year, the company’s accountant provides Wanda with the following information, before any adjustment. Accounts receivable $ 10,800,000 Estimated percentage uncollectible 2 % Allowance for uncollectible accounts $ 108,000 (credit) Operating income $ 2,800,000   Wanda has significant stock ownership in the company and, therefore, would like to keep the stock price high. Analysts on Wall Street expect the company to have operating income of $2,120,000. The fact that actual operating income is well above this amount will make investors happy and help maintain a high stock price. Meeting analysts’ expectations will also help Wanda keep her job. 3. Wanda instructs the accountant to instead record $680,000 as bad debt expense so that operating income will exactly meet analysts’ expectations. By how much would total assets and…