Chapter 13, Problem 1QAP

On September 5, Wanda, a widow who occasionally teaches piano and organ in her home, purchased an electric organ from Murphy’s music store for $4,800, trading in her old organ for $1,200 and promising in writing to pay the balance at $120 per month and granting to Murphy a security interest in the property in terms consistent with and incorporating provisions of the Uniform Commercial Code. A financing statement covering the transaction was also properly filled out and signed, and Murphy properly filed it. After Wanda failed to make the December or January payments, Murphy went to her home to collect the payments or take the organ. Finding no one home and the door unlocked, he went in and took the organ. Two hours later, Tia, a third party and the present occupant of the house, who had purchased the organ for her own use, stormed into Murphy’s store, demanding the return of the organ. She showed Murphy a bill of sale from Wanda to her, dated December 15, that listed the organ and other…

The former bookkeeper of White Electric Supply is serving time in prison for embezzlingnearly $416,000 in less than five years. She describes herself as “an ordinary mother of three kidsand a proud grandmother of four.” Like so many other “ordinary” employees, she started out bytaking only small amounts. By the time she was caught, she was stealing lump sums of $5,000and $10,000.Her method was crude and simple. She would write a check for the correct amount payable to asupplier for, say, $15,000. However, she would record in the company’s check register an amountsignificantly greater, say, $20,000. She would then write a check payable to herself for the $5,000 difference. In the check register, next to the number of each check she had deposited in her per-sonal bank account, she would write the word “void,” making it appear as though the check had been destroyed. This process went undetected for nearly five years.a. What controls must have been lacking at White Electric Supply to…

Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician whoinstalls wiring in new homes. Because the company’s financial statements are prepared only for taxpurposes, Jon uses the direct write-off method. During 2015, its first year of operations, TrevorsonElectronics sold $30,000 of services on account. The company collected $26,000 of these receivables during the year, and Jon believed that the remaining $4,000 was fully collectible. In 2016,Jon discovered that none of the $4,000 would be collected, so he wrote off the entire amount. Tomake matters worse, Jon sold only $5,000 of services during the year.Required:1. Prepare journal entries to record the transactions in 2015 and 2016.2. Using only the information provided (ignore other operating expenses), prepare comparativeincome statements for 2015 and 2016. Was 2015 really as profitable as indicated by its incomestatement? Was 2016 quite as bad as indicated by its income statement? What should Jon…