Financial Accounting Questions and Answers

Journalize the following transactions in the accounts of Cecena Medical Co., a medical equipment company that uses the direct write-off method of accounting for uncollectible receivables: Feb. 13. Sold merchandise on account to Dr. Ben Katz, $120,000. The cost of the merchandise sold was $72,000. May 4. Received $90,000 from Dr. Ben Katz and wrote off the remainder owed on the sale of February 13 as uncollectible. Nov. 19. Reinstated the account of Dr. Ben Katz that had been written off on May 4 and received $30,000 cash in full payment. Answer: Feb. 13 Accounts Receivable—Dr. Ben Katz.................. 120,000                                           Sales................................................................  120,000   13 Cost of Merchandise Sold .................................. 72,000                     ...

Financial statement data for years ending December 31 for Sherick Company are shown below.                                                       2012                                    2011 Net sales                                 $4,514,000                          $4,200,000 Accounts receivable:  Beginning of year                    280,000                                320,000  End of year                           ...

Boeing is one of the world’s major aerospace firms, with operations involving commercial aircraft, military aircraft, missiles, satellite systems, and information and battle management systems. As of December 31, 2009, Boeing had $3,090 million of receivables involving U.S. government contracts and $1,206 million of receivables involving commercial aircraft customers, such as Delta Air Lines and United Airlines. Should Boeing report these receivables separately in the financial statements, or combine them into one overall accounts receivable amount? Explain Answer: Accounts receivable from the U.S. government are significantly different from  receivables from commercial aircraft carriers such as Delta and United. Thus, Boeing should report each type of receivable separately. In the December 31, 2009, filing with the Securities and Exchange Commission, Boeing reports the receivables together on the balance sheet, but discloses each receivable separately in a note to the financial st...

The MGM Mirage owns and operates casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of December 31, 2009, The MGM Mirage reported accounts and notes receivable of $465,580,000 and allowance for doubtful accounts of $97,106,000. Johnson & Johnson manufactures and sells a wide range of health care products including Band-Aids and Tylenol. As of December 31, 2009, Johnson & Johnson reported accounts receivable of $9,979,000,000 and allowance for doubtful accounts of $333,000,000. a. Compute the percentage of the allowance for doubtful accounts to the accounts and notes receivable as of December 31, 2009, for The MGM Mirage. Round to one decimal place. b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable as of December 31, 2009, for Johnson & Johnson. Round to one decimal place. c. Discuss possible reasons for the difference in the two ratios computed in (a) and (b). Answer: a. The MGM Mirage: 20.9% ($97,106,000 ÷ $4...

Financial statement data for years ending December 31 for Blum Company are shown below.                                                2012                           2011 Net sales                         $2,430,000                  $1,920,000 Accounts receivable:  Beginning of year            180,000                        120,000  End of year                      225,000                        180,000 a. Determine the accounts receivable turnover for 2012 and 2011. b. Determine the number ...

Gorilla Supply Company received a 120-day, 5% note for $150,000, dated March 27 from a customer on account. a. Determine the due date of the note. b. Determine the maturity value of the note. c. Journalize the entry to record the receipt of the payment of the note at maturity. Answer: a.  The due date for the note is July 25, determined as follows:   March................................................................ 4 days (31 – 27) April.................................................................. 30 days   May ................................................................... 31 days   June.................................................................. 30 days   July...................................................................   25 days       Total.............................................................. 120 days b.  $152,500 [$150,000 + ($150,000 × 5% × 120/360)] c. July 25 Cash.....................................

Vista Supply Company received a 30-day, 4% note for $90,000, dated September 8 from a customer on account. a. Determine the due date of the note. b. Determine the maturity value of the note. c. Journalize the entry to record the receipt of the payment of the note at maturity Answer: a. The due date for the note is October 8, determined as follows:   September........................................................ 22 days (30 – 8)   October............................................................. 8 days     Total.............................................................. 30 days b.  $90,300 [$90,000 + ($90,000 × 4% × 30/360)] c. Oct. 8 Cash................................................................. 90,300                            Notes Receivable.......................................  90,000                       ...