Sam and Robert are identical twins. They opened identical businesses and experienced identical transactions. However, they decided to estimate uncollectible accounts in different ways. Sam elected to use the percentage of sales method, and Robert elected to use the percentage of receivables method. Listed below are the beginning balances of Cash, Accounts Receivable, and Allowance for Doubtful Accounts [items (a)–(c)], and summary transactions that occurred during the year [items (d)–(g)] for both businesses. Remember, both businesses experienced the same events: credit sales, collections of receivables, and write-offs. The only difference between the businesses is the method of estimating uncollectible accounts. Robert (a) Balance of Cash, January 1, 20-- $300,000 (b) Balance of Accounts Receivable, January 1 50,000 (c) Balance of Allowance for Doubtful Accounts, January 1 5,000 (d) Sales on account during 20-- 550,000 (e) Collections on account during 20-- 530,000 (f) Uncollectible accounts written off during 20-- 4,500 (g) Collections made on accounts written off during 20-- 500 Approach this problem from Robert’s point of view. Required: 6. Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Robert. 7. Post the entries to a general ledger for Robert, using the same accounts and numbers as were used for Sam. 8. Robert bases the estimate of uncollectible accounts on an aging schedule of accounts receivable. Using the following information, compute the estimated uncollectible amounts and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--. Customers Invoice Dates and Amounts for Unpaid Invoices Beets, D. 10/7 $2,300 11/15 $1,200 12/18 $8,500 Cook, L. 6/1 1,200 8/15 2,500 Hylton, D. 9/23 4,300 10/22 2,500 12/23 2,800 Martin, D. 10/15 5,400 11/12 3,200 12/15 1,500 Stokes, D. 9/9 200 12/15 9,500 Taylor, T. 11/20 400 12/10 1,400 Thomas, O. 12/2 5,500 Tower, R. 12/15 2,300 Williams, G. 11/18 2,800 12/8 8,000 All sales are billed n/30. The following aging chart is used to estimate the uncollectibles using the percentage of receivables method: Estimated Percent Age Interval Uncollectible Not yet due 2% 1–30 days 5 31–60 days 10 61–90 days 25 91–120 days 50 Over 120 days 80 9. Compute the net realizable value of Robert’s accounts receivable on December 31, 20--.

Sam and Robert are identical twins. They opened identical businesses and experienced identical transactions. However, they decided to estimate uncollectible accounts in different ways. Sam elected to use the percentage of sales method, and Robert elected to use the percentage of receivables method. Listed below are the beginning balances of Cash, Accounts Receivable, and Allowance for Doubtful Accounts [items (a)–(c)], and summary transactions that occurred during the year [items (d)–(g)] for both businesses. Remember, both businesses experienced the same events: credit sales, collections of receivables, and write-offs. The only difference between the businesses is the method of estimating uncollectible accounts. Robert (a) Balance of Cash, January 1, 20-- $300,000 (b) Balance of Accounts Receivable, January 1 50,000 (c) Balance of Allowance for Doubtful Accounts, January 1 5,000 (d) Sales on account during 20-- 550,000 (e) Collections on account during 20-- 530,000 (f) Uncollectible accounts written off during 20-- 4,500 (g) Collections made on accounts written off during 20-- 500 Approach this problem from Robert’s point of view. Required: 6. Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Robert. 7. Post the entries to a general ledger for Robert, using the same accounts and numbers as were used for Sam. 8. Robert bases the estimate of uncollectible accounts on an aging schedule of accounts receivable. Using the following information, compute the estimated uncollectible amounts and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--. Customers Invoice Dates and Amounts for Unpaid Invoices Beets, D. 10/7 $2,300 11/15 $1,200 12/18 $8,500 Cook, L. 6/1 1,200 8/15 2,500 Hylton, D. 9/23 4,300 10/22 2,500 12/23 2,800 Martin, D. 10/15 5,400 11/12 3,200 12/15 1,500 Stokes, D. 9/9 200 12/15 9,500 Taylor, T. 11/20 400 12/10 1,400 Thomas, O. 12/2 5,500 Tower, R. 12/15 2,300 Williams, G. 11/18 2,800 12/8 8,000 All sales are billed n/30. The following aging chart is used to estimate the uncollectibles using the percentage of receivables method: Estimated Percent Age Interval Uncollectible Not yet due 2% 1–30 days 5 31–60 days 10 61–90 days 25 91–120 days 50 Over 120 days 80 9. Compute the net realizable value of Robert’s accounts receivable on December 31, 20--.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash And Marketable Securities

Section: Chapter Questions

Problem 33MCQ

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Question

	Robert
(a) Balance of Cash, January 1, 20--	$300,000
(b) Balance of Accounts Receivable, January 1	50,000
(c) Balance of Allowance for Doubtful Accounts, January 1	5,000
(d) Sales on account during 20--	550,000
(e) Collections on account during 20--	530,000
(f) Uncollectible accounts written off during 20--	4,500
(g) Collections made on accounts written off during 20--	500

Approach this problem from Robert’s point of view.

Required:

6.	Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Robert.
7.	Post the entries to a general ledger for Robert, using the same accounts and numbers as were used for Sam.
8.	Robert bases the estimate of uncollectible accounts on an aging schedule of accounts receivable. Using the following information, compute the estimated uncollectible amounts and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--.

Customers	Invoice Dates and Amounts for Unpaid Invoices
Beets, D.	10/7	$2,300	11/15	$1,200	12/18	$8,500
Cook, L.	6/1	1,200	8/15	2,500
Hylton, D.	9/23	4,300	10/22	2,500	12/23	2,800
Martin, D.	10/15	5,400	11/12	3,200	12/15	1,500
Stokes, D.	9/9	200	12/15	9,500
Taylor, T.	11/20	400	12/10	1,400
Thomas, O.	12/2	5,500
Tower, R.	12/15	2,300
Williams, G.	11/18	2,800	12/8	8,000

All sales are billed n/30. The following aging chart is used to estimate the uncollectibles using the percentage of receivables method:

	Estimated Percent
Age Interval	Uncollectible
Not yet due	2%
1–30 days	5
31–60 days	10
61–90 days	25
91–120 days	50
Over 120 days	80

9.	Compute the net realizable value of Robert’s accounts receivable on December 31, 20--.

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