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Preparing journal entries

1. The Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31, Year 1, and December 31, Year 2, appear below:

12/31/Year 1 12/31/Year 2
Net Credit Sales $400,000 $500,000
Accounts Receivable 75,000 100,000
Allowance for Doubtful Accounts 5,000 ?

(a) Record the following events in Year 2.
Aug. 10 Determined that the account of Ann Koch for $1,000 is uncollected
Sept. 12 Determined that the account of Joe Yates for $4,000 is uncollected
Oct. 10 Received a check for $550 as payment on account from Ann Koch, whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.
Nov. 15 Received a check for $450 from Ann Koch as payment on her account.

(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, Year2.

(c) What is the balance of Allowance for Doubtful Accounts at December 31, Year 2?

Debit & Credit Accounts Debit Credit
E.g. Dr. Cash 200
Cr. Accounts Receivable 200
(a)
Aug 10

Sep 12

Oct 10

Nov 15

(b)

(c)

2. Corporation "A" issued $3 million, 10-year, 6% bonds on January 1, Year 1.

Prepare the entry to record the sale of these bonds, assuming they were issued at
(a) 98.
(b) 103.

Debit & Credit Accounts Debit Credit
E.g. Dr. Cash 200
Cr. Accounts Receivable 200
(a)

(b)

3. Corporation A's stockholders' equity section at December 31, Year 1 appears below:

Stockholders' equity
Paid-in capital
Common stock, $10 par, 60,000 outstanding $600,000
Paid-in capital in excess of par 150,000
Total paid-in capital $750,000
Retained earnings 150,000
Total stockholders' equity $900,000

On June 30, Year 2, the board of directors of Corporation A declared a 15% stock dividend, payable on July 31, Year 2, to stockholders of record on July 15, Year 2. The fair market value of Corporation A's stock on June 30, Year 2, was $15.

On December1, Year 2, the board of directors declared a 2 for 1 stock split effective December 15, Year 2. Corporation A's stock was selling for $20 on December 1, Year 2, before the stock split was declared. Par value of the stock was adjusted. Net income for Year 2 was $190,000 and there were no cash dividends declared.

(a) Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split.

Debit & Credit Accounts Debit Credit
E.g. Dr. Cash 200
Cr. Accounts Receivable 200
(a)
6/30

7/15

7/31

12/1

12/5

(b) Fill in the amount that would appear in the stockholders' equity section for Corporation A at December 31, Year 2, for the following items:

1. Common stock $__________________
2. Number of shares outstanding ____________________
3. Per value per share $_______________________
4. Paid-in capital in excess of par $_______________________
5. Retained earnings $_______________________
6. Total stockholders' equity $_______________________

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Solution Summary

The solution explains the journal entries relating to receivables and equity accounts

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