EBK AUDITING+ASSURANCE SERVICES
17th Edition
ISBN: 9780135171219
Author: ARENS
Publisher: PEARSON CO
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 22, Problem 23DQP
(a).
To determine
Determine the emphasis that should be given in the verification of notes payable in the situation.
(b).
To determine
Determine the purpose of the
(c).
To determine
Determine other audit procedures for audit of notes payable in the same circumstances.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Dynatech Supply Corp. has the following selected transactions for notes receivable.
Nov.
1
Lent $141,100 cash to A. Bouchard on a one-year, 9% note.
Sold goods to Wright Inc., receiving a two-month, 6%, $31,000 note. Interest is due at maturity. The goods cost
$19,344.
1
Dec.
Received a six-month, 6%, $34,080 note in exchange for an account from Aquilina Corporation. Interest is due at
maturity.
15
Feb.
1
Collected the amount owing on the Wright note.
28
Accrued interest on all notes receivable at year end. Assume that interest is calculated to the nearest half month.
28
Analyzed each note and estimated that uncollectible notes at year end totalled $25,544.
Record the above transactions for Dynatech Supply Corp. (List all debit entries before credit entries. Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter O for the amounts. Round answers to the nearest whole…
During its first year of operations, Fertig Company had credit sales of $3,000,000, of which $400,000 remained uncollected at year-
end. The credit manager estimates that $18,000 of these receivables will become uncollectible.
The accounts receivable turnover is 10 times and average collection period is 36.5 days. Assume that average net accounts receivable
were $300.000. Explain what these measures tell us.
BI V T, TI E LE
E
H
I
99
H
E
à ला 11 A
A
OWord(s)
Wilcox Mills is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $30 million. At the end of year 1, accounts receivable were presented in the company's balance sheet as follows.
Accounts receivable from clients
$
3,100,000
Less: Allowance for doubtful accounts
80,000
During year 2, $180,000 of specific accounts receivable were written off as uncollectible. Of these accounts written off, receivables totaling $18,000 were subsequently collected. At the end of year 2, an aging of accounts receivable indicated a need for a $242,000 allowance to cover possible failure to collect the accounts currently outstanding.
Wilcox Mills makes adjusting entries for uncollectible accounts only at year-end.
What is the The adjusting entry required at December 31, year 2, to increase the Allowance for Doubtful Accounts to $242,000.? Debit Uncollectale account expense Credit Allowance for doubtlful account by how much?…
Chapter 22 Solutions
EBK AUDITING+ASSURANCE SERVICES
Ch. 22 - List four examples of interest-bearing liability...Ch. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - Prob. 5RQCh. 22 - Distinguish between (a) tests of controls and...Ch. 22 - Prob. 7RQCh. 22 - Prob. 8RQCh. 22 - Prob. 9RQCh. 22 - Prob. 10RQ
Ch. 22 - Prob. 11RQCh. 22 - Prob. 12RQCh. 22 - Prob. 13RQCh. 22 - Prob. 14RQCh. 22 - Prob. 15RQCh. 22 - Explain the relationship between the audit of...Ch. 22 - Prob. 17.1MCQCh. 22 - Prob. 17.2MCQCh. 22 - Prob. 17.3MCQCh. 22 - Prob. 18.1MCQCh. 22 - Prob. 18.2MCQCh. 22 - Prob. 18.3MCQCh. 22 - Prob. 19.1MCQCh. 22 - Prob. 19.2MCQCh. 22 - Prob. 19.3MCQCh. 22 - Prob. 20DQPCh. 22 - Prob. 21DQPCh. 22 - Prob. 22DQPCh. 22 - Prob. 23DQPCh. 22 - Prob. 24DQPCh. 22 - Prob. 25DQPCh. 22 - Prob. 26DQPCh. 22 - Prob. 27DQPCh. 22 - Prob. 28DQPCh. 22 - Prob. 29DQPCh. 22 - Prob. 30DQP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The following note transactions occurred during the year for Towell Company:On Nov. 25, Towell issued a 90-day, 9%, note payable for $40,000 to Hyatt Company for merchandise.On Dec. 7, Towell signed a 120-day, $60,000 note with the bank at 10%.On Dec 22, Towell gave Barr, Inc. a $12,000, 10%, 60-day note in payment of its account.Calculate the amount of the necessary interest accrual for each note payable at December 31.(Round to nearest whole dollar.) Lender Interest accrual Hyatt Company note Bank note Barr, Inc. notearrow_forwardAccounts receivable in the amount of $658,000 were assigned to the Fast Finance Company by Sunland, Inc., as security for a loan of $564,000. The finance company assessed a 4% finance charge on the face amount of the loan, and the note bears interest at 8% per year.During the first month, Sunland collected $366,600 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note.Make all the entries for Sunland Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit (To record the transfer of the accounts receivable.) (To record the loan amount…arrow_forwardOn the first day of Year Two, the Richmond Corporation holds accounts receivable of $400,000 and an allowance for doubtful accounts of $23,000 for a net realizable value of $377,000. During the year, credit sales were $450,000 and cash collections amounted to $380,000. In addition, $25,000 in receivables were written off as uncollectible. If 4 percent of ending accounts receivable is estimated as uncollectible, what bad debt expense is reported for Year Two on Richmond’s income statement? Responses $19,800 $20,800 $15,200 $21,800arrow_forward
- Wilcox Mills is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $30 million. At the end of year 1, accounts receivable were presented in the company's balance sheet as follows. Accounts receivable from clients Less: Allowance for doubtful accounts $3,100,000 80,000 During year 2, $190,000 of specific accounts receivable were written off as uncollectible. Of these accounts written off, receivables totaling $14,000 were subsequently collected. At the end of year 2, an aging of accounts receivable indicated a need for a $256,000 allowance to cover possible failure to collect the accounts currently outstanding. Wilcox Mills makes adjusting entries for uncollectible accounts only at year-end. Required: a. Prepare the following general journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1. One entry to summarize all accounts written off against the Allowance for Doubtful…arrow_forwardTri State Bank was the payee of a $60,000 note dated August 16. The note was made for 120 days and was discounted a 10%. On November 14, the note was rediscounted at New Hope Bank at 9%. a. How much did Tri State Bank loan to the maker of the note? b. How much had Tri State receive when it rediscounted the note? c. How much did Tri State make on the transaction? d. How much less interest was this than Tri State would have earned had it kept with note to maturity?arrow_forwardAssume that part of accounts and other receivables on Thompson Toys' February 2, 2010, balance sheet is comprised of $43,225,000 of notes receivable. Two notes make up the amount. The first note has a face value of $30,000,000 and bears interest at 7 percent for 90 days. The second note has a face value of $13,225,000 and bears interest at 9 percent for 120 days. Record the journal entry for the collection of the 7 percent note on May 3 and the dishonor of the 9 percent note on June 2. (Omit explanations; assume no interest had been accrued; amounts rounded to nearest dollar.)arrow_forward
- A company’s accounts receivable balance after posting net collections from customers is $150,000. Management has determined the following: $100,000 of the accounts that are 1 to 30 days past due are 2% uncollectible; and $50,000 of the accounts that are 31 to 60 days past due are 10% uncollectible. What is the net realizable value of the accounts receivable? $150,000 $148,000 $145,000 $143,000arrow_forwardChang Co. issued a $59,741, 120-day, discounted note to Guarantee Bank. The discount rate is 8%. Assuming a 360-day year, the cash proceeds to Chang Co. are:arrow_forwardOn September 1, QUEROL COMPANY assigns specific receivables totaling P750,000 to Davao Bank as collateral on a P625,000, 12% note. QUEROL COMPANY will continue to collect the assigned accounts receivable. Davao Bank also assesses a 2% service charge on the total accounts receivable assigned. QUEROL COMPANY is to make monthly payments to Davao Bank with cash collected on assigned accounts receivable. Collections of assigned accounts during September totaled P260,000 less cash discounts of P3,500. 23. What were the proceeds from the assignment of QUEROL COMPANYs’ accounts receivable on September 1? 24. What amount is owed to Davao Bank by QUEROL COMPANY for September collections plus accrued interest on the note to September 30?arrow_forward
- During your review of the records of X factor corporation for the year 20A, you noticed that X factor sold a machine with a carrying amount of 640,000 (cost is 1,600,000) on June 30,20A. X Factor received an 800,000 non-interest bearing note due in 3 years. There is no established market value for the machine. The yield rate for this type of note is 12%. X factor recorded the transaction by debiting Note Receivable for 800,000 and crediting machinery for 640,000 and gain on sale for the difference. The transaction has resulted to a gain or loss on sale of (indicate gain or loss in your answer after the amount)arrow_forwardDuring the fiscal year ended December 31, Swanson Corporation engaged in the following transac-tions involving notes payable: Aug. 6 Borrowed $12,000 from Maple Grove Bank, signing a 45-day, 12 percent note payable.Sept. 16 Purchased office equipment from Seawald Equipment. The invoice amount was$18,000, and Seawald agreed to accept, as full payment, a 10 percent, three-monthnote for the invoice amount.Sept. 20 Paid Maple Grove Bank the note plus accrued interest. Nov. 1 Borrowed $250,000 from Mike Swanson, a major corporate stockholder. The corpora-tion issued Swanson a $250,000, 15 percent, 90-day note payable. Dec. 1 Purchased merchandise inventory in the amount of $5,000 from Gathman Corporation.Gathman accepted a 90-day, 14 percent note as full settlement of the purchase.Swanson Corporation uses a perpetual inventory system.Dec. 16 The $18,000 note payable to Seawald Equipment matured today. Swanson paid theaccrued interest on this note and issued a new 30-day, 16 percent note…arrow_forwardThe beginning Accounts Receivable and Allowance for Doubtful Accounts balances of Justin Corporation are 500,000 and 50,000. Net credit sales totaled 4,500,000 during the year while collections amounted to 4,400,000. Bad debt expense for the year is 30,000. Included in the collections was a 10,000 account that was written off in the prior year and was recovered during the current year. What is the net realizable value of the Accounts Receivable as of the end of the year?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education