Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 12E
Exercise 2-12 Effect of an error on financial statements
On April 1, 2018, Maine Corporation paid $18,000 cash in advance for a one-year lease on an office building. Assume that Maine records the prepaid rent as an asset and that the books are closed on December 31.
Required
a. Show the payment for the one-year lease and the related
b. Assume that Maine Corporation failed to record the adjusting entry to reflect using the office building. How would the error affect the company’s 2018 income statement and balance sheet?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Problem 6-6 (AICPA Adapted)
On January 1, 2021, Remarkable Company had the following
account balances:
Note receivable from sale of an idle building
Note receivable from an officer
7,500,000
2,000,000
The P7,500,000 note receivable is dated May 1, 2020, bears
interest at 9% and represents the balance of the consideration
received from the sale of an idle building to Solid Company.
Principal payments of P2,500,000 plus interest are due
annually beginning May 1, 2021. Solid Company made the
first principal and interest payment on May 1, 2021.
The P2,000,000 note receivable is dated December 31, 2018,
bears interest at 8% and is due on December 31, 2023.
The note is due from the president of Remarkable Company.
Interest is payable annually on December 31 and all interest
payments were made through December 31, 2021.
On July 1, 2021, Remarkable Company sold a parcel of land
to Boom Company for P4,000,000 under an installment sale
contract.
Boom Company made a P1,200,000 cash down payment…
Problem 6-6 (AICPA Adapted)
On January 1, 2021, Remarkable Company had the following
account balances:
Note receivable from sale of an idle building
Note receivable from an officer
7,500,000
2,000,000
The P7,500,000 note receivable is dated May 1, 2020, bears
interest at 9% and represents the balance of the consideration
received from the sale of an idle building to Solid Company.
Principal payments of P2,500,000 plus interest are due
annually beginning May 1, 2021. Solid Company made the
first principal and interest payment on May 1, 2021.
The P2,000,000 note receivable is dated December 31, 2018,
bears interest at 8% and is due on December 31, 2023.
The note is due from the president of Remarkable Company.
Interest is payable annually on December 31 and all interest
payments were made through December 31, 2021.
On July 1, 2021, Remarkable Company sold a parcel of land
to Boom Company for P4,000,000 under an installment sale
contract.
Boom Company made a P1,200,000 cash down payment…
Question
Part A
Albert Trading Limited used the statement of financial position approach to estimate the
impairment loss of receivable. An aging of account receivable at 31 December 2019 revealed
that S68,000 of the S835,000 outstanding accounts receivable will prove uncollectible. The
Allowance for Impairment has a debit balance of $6,200 prior to adjustment.
Required:
(Explanation of the Journal Entry is not required)
Prepare an adjusting entry on 31 December 2019 to recognize the impairment loss of receivable.
Part B
On 12 January 2020, Peter Lee, a major customer, declared bankruptey, and Albert Trading,
determined that a receivable from Peter Lee in the amount of $3,400 was worthless.
Required:
(Explanation of the Journal Entry is not required)
Prepare the joumal entry required by Albert Trading in this situation.
Chapter 2 Solutions
Survey Of Accounting
Ch. 2 - 1. What does accrual accounting attempt to...Ch. 2 - 2. Define recognition. How is it independent of...Ch. 2 - 3. What does the term deferral mean?Ch. 2 - 4. If cash is collected in advance of performing...Ch. 2 - Prob. 5QCh. 2 - 6. What effect does the issue of common stock have...Ch. 2 - 7. How does the recognition of revenue on account...Ch. 2 - 8. Give an example of an asset source transaction....Ch. 2 - 9. When is revenue recognized under accrual...Ch. 2 - 10. Give an example of an asset exchange...
Ch. 2 - 11. What is the effect on the right side of the...Ch. 2 - Prob. 12QCh. 2 - Prob. 13QCh. 2 - Prob. 14QCh. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - 17. Why may net cash flow from operating...Ch. 2 - Prob. 18QCh. 2 - Prob. 19QCh. 2 - 20. What is the difference between a cost and an...Ch. 2 - Prob. 21QCh. 2 - Prob. 22QCh. 2 - 23. What does the term expense mean?Ch. 2 - Prob. 24QCh. 2 - 25. What is the purpose of the statement of...Ch. 2 - Prob. 26QCh. 2 - 27. Why is the balance sheet dated as of a...Ch. 2 - 28. In what order are assets listed on the balance...Ch. 2 - Prob. 29QCh. 2 - Prob. 30QCh. 2 - 31. What types of accounts are closed at the end...Ch. 2 - 32. Give several examples of period costs.Ch. 2 - 33. Give an example of a cost that can be directly...Ch. 2 - Prob. 34QCh. 2 - Prob. 1ECh. 2 - Exercise 2-2 Effect of accrued expenses on the...Ch. 2 - Prob. 3ECh. 2 - Prob. 4ECh. 2 - Prob. 5ECh. 2 - Prob. 6ECh. 2 - Prob. 7ECh. 2 - Prob. 8ECh. 2 - Exercise 2-9 Supplies on financial statements Yard...Ch. 2 - Prob. 10ECh. 2 - Exercise 2-11 Prepaid items on financial...Ch. 2 - Exercise 2-12 Effect of an error on financial...Ch. 2 - Exercise 2-13 Unearned items on financial...Ch. 2 - Prob. 14ECh. 2 - Prob. 15ECh. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - Prob. 18ECh. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Exercise 2-21 Adjusting the accounts Norell Inc....Ch. 2 - Prob. 22ECh. 2 - Prob. 23ECh. 2 - Prob. 24ECh. 2 - Prob. 25ECh. 2 - Prob. 26ECh. 2 - Exercise 2-27 Identifying transaction type and...Ch. 2 - Exercise 2-27A Effect of accounting events on the...Ch. 2 - Prob. 29ECh. 2 - Exercise 2-29A Identifying source, use, and...Ch. 2 - Prob. 31ECh. 2 - Problem 2-32 Recording events in a horizontal...Ch. 2 - Problem 2-37A Effect of adjusting entries on the...Ch. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Problem 2-36 Identifying and arranging elements on...Ch. 2 - Problem 2-37 Missing information in financial...Ch. 2 - Problem 2-38 Events for two complete accounting...Ch. 2 - Prob. 1ATCCh. 2 - ATC 2-3 Research Assignment Identifying accruals...Ch. 2 - ATC 2-4 Writing Assignment Revenue Recognition and...
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
- Brief Exercise 8-03 a-b At the end of 2021, Larkspur Co. has accounts receivable of $675,100 and an allowance for doubtful accounts of $24,370. On January 24, 2022, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,127.(a)Prepare the journal entry to record the write-off. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount (b)What is the cash realizable value of the accounts receivable before the write-off and after the write-off? Before Write-Off After Write-Off Cash realizable value $Enter a dollar amount $Enter a dollar amountarrow_forwardQuestion 4 of 18 Which of the following is not an acceptable balance sheet presentation of receivables? Select the correct response O trade notes receivable are combined with trade accounts receivable cash advances to officers which are due after one year but within the entity's 18-month operating cycle, are reported as current assets the allowance for bad debts is not offset against the related receivables but rather shown in a parenthetical notation as deduction to receivables unearned finance charges included in the face amount of receivables are presented as deduction from the related receivables ( Previousarrow_forwardQuestion 6 On 30 June, the end of its financial year, Aarav Ltd completed an age analysis of its accounts receivable and determined that an allowance for doubtful debts of $12 320 was needed in order to report accounts receivable at their estimated collectable amount in the Balance Sheet. Required (a) Prepare the general journal entry to record bad debts expense assuming that the Allowance for Doubtful Debts account currently has a $1940 credit balance (narration not required). (b) Prepare an entry to write off an account receivable from V. Vijay for $781 (narration not required). (C) From the following information, determine the amount of cash received from customers during 2019-20: Accounts receivable (30-Jun-2019) $81 000 Accounts receivable (30-Jun-2020) $76 000 Sales (Credit) $350 000 (d) From the following information, determine the amount of purchases for the year: Beginning inventory $60 000 Ending inventory Cost of sales 90 000 130 000arrow_forward
- Problem 6-4: The Northrock Corporation The Northrock Corporation produced the following summary of its historical experience of write offs of Accounts Receivable (A/R) on October 31, 2021: Year A/R at Year end Uncollectible and written off in subsequent years 2018 14000 700 2019 10000 1000 2020 12000 600 2021 4000 200 Required 1. Calculate the percentage loss on Accounts Receivable for the period 2018 to 2021 by calculating total write offs over the period as a % of total A/R. Round your calculation to two decimal places. 2. Compute the balance for the Allowance for Doubtful accounts (rounded to the nearest $) on October 31, 2021 if Accounts Receivable on that date were 16000. Apply the % ending A/R method using the percentage calculated in part 1. 3. Scenario A: On October 31, 2021 the unadjusted Allowance for Doubtful Accounts was 160 credit. Prepare an adjusting entry to obtain the amount that you calculated in part 2. 4. Scenario B: On October 31, 2021 the unadjusted Allowance for…arrow_forwardQUESTION 9 As at 30 March 2020 , the accounts receivable balance is $10,000. The allowance for doubtful account balance is $200(credit balance). The management determined to write off an accounts receivable of $400 and accounting entries (following IFRS) were recorded on 30 March 2020. At 31 March 2020. The management estimated that 8% of the outstanding accounts receivable balance is uncollectible. The adjusting entries for bad debt expense to be prepared on 31 March 2020 is $____________. (Assumption: the company prepares the financial statements on an annual basis)arrow_forward4 Assume that the accountant of Diamond Furniture on March 1, 2018, authorizes a write-off of the RO 1000 balance owed by Mr Abdul Salam. But on July 1, Mr Abdul Salam pays the RO 1000 amount that Diamond Furniture had written off on March 1. From the following given options, identify which of the following two journal entries can be pass in the books of Diamond Furniture for the recovery of uncollectable accounts receivables under allowance method ? i)Dr Accounts receivables A/C OMR 1000 and Cr Allowance for bad debt A/C OMR1000 ii) Dr Allowance for bad debt A/C OMR1000 and Cr Accounts receivables A/C OMR1000 iii) Dr Cash A/C OMR 1000 and Cr Accounts receivables A/C OMR 1000 iv) Dr Accounts receivables A/C OMR 1000 and Cr Cash A/C OMR 1000 a. i) & iv) b. i) & iii) c. i) & ii) d. ii) & iii) Clear my choicearrow_forward
- 11 The following summarizes the aging of accounts receivable for Johnston Supplies, Incorporated as of July 31, 2022 Total Accounts Receivable $ 126,800 89,500 53,900 32,100 Number of Days Unpaid Not yet due 1 to 30 days past due 31 to 60 days past duel Over 60 days past due Required: a. The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies, Incorporated is a credit balance in the amount of $29,037 on July 31, 2022. Prepare the required adjusting entry to record Bad Debt Expense for the year. b. Johnston Supplies, Incorporated writes off $3,111 of uncollectible accounts on August 15, 2022. Prepare the required adjusting en to record the write-off c. Use a T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15, 2022 Complete this question by entering your answers in the tabs below. Historical Uncollectible View transaction list Required A Required B Required C The unadjusted balance of the Allowance for Doubtful…arrow_forwardThe Accounts Receivable balance for River Corporation is $429,000 as of January 31, 2020. Before calculating and recording January 2020 Bad Debt Expense, the Allowance for Doubtful Accounts has a credit balance of $2,000. Credit sales for January 2020 are $3,900,000, and over the past several years, 1% of credit sales have proven uncollectible. An aging of River Corporation's Accounts Receivable results in a $39,050 estimate for the Allowance for Doubtful Accounts as of January 31, 2020.arrow_forwardRead the following information to answer questions 2.1 - 2.2. LA Fashion has credit sales of $6,400,000 for the financial year ending June 30, 2021, and estimates at the end of the financial year that five per cent of accounts receivable will not be received. Accounts receivable total $3,100,000. The corporation uses the allowance method to account for bad debts, based on the percentage of receivables approach.arrow_forward
- 48 Assume that Oman Oil Marketing Company has credit sales of OMR 100,000 in 2019, of which OMR30,000 remains uncollected at December 31. The credit manager estimates that OMR 15,000 of these sales will prove uncollectible. From the following given options, identify the journal entry to be recorded in the books of Oman Oil Marketing company for writing of uncollectable accounts receivables under Allowance method. a. Dr Allowance for doubtful accounts OMR 30000 and Cr Bad debt expenses A/C OMR 30000 b. Dr Bad debt expenses A/C OMR 15000 and Cr Accounts receivables OMR 15000 c. Dr Bad debt expenses A/c OMR 15000 and Cr Allowance for doubtful accounts OMR 15000 d. Dr Bad debt expenses A/cOMR 30000 and Cr Allowance for doubtful accounts OMR 30000 Clear my choice Assume that Oman Oil Marketing Company has credit sales of OMR 100,000 in 2019, of which OMR30,000 remains uncollected at December 31. The credit manager estimates that OMR 15,000 of these sales will prove…arrow_forwardProblem 10-22 (AICPA Adapted) Black Company reported accounta payable on December 1 2021 at P4,600,000 before any necessary yoar-end adjustment rolating to the following transactions: On December 27, 2021, Black Company wrote and recorded checks to creditors totaling P2,000,000 causing an overdrat of P500,000 in Black Company's bank account on December 31, 2021. The checks were mniled out on January 10, 2022 On December 28, 2021, Black Company purchaied and received goods for P750,000 terms 2/10, n /30. Black Company, records purchases and accounts payable at net amount. The invoice was recorded and paid January 5, 2022 Goods shipped FOB destination, 5/10, n/30 on December 20, 2021 from a vendor to Black Company were received January 15, 2022. The invoice cost was P325,000. On December 31, 2021, what amount should be reported as accounts payable? a. 7,575,000 b. 7,250,000 c. 7.235,000 d. 7,553,500arrow_forwardProblem 7 From inception of operations in 2017, Summit carried no allowance for uncollectible accounts. Uncollectible receivables were expensed as written off, and recoveries were credited to income as collected. On March 1, 2021, after the 2020 financial statements were issued, management recognized that Summit's accounting policy with respect to uncollectible accounts was not correct, and determined that an allowance for uncollectible accounts was necessary. A policy was established to maintain an allowance for uncollectible accounts, based on Summit's historical bad debt loss percentage applied to yearend accounts receivable. The historical bad debts loss percentage is to be recomputed based on the relationship of net writeoffs to credit sales for all available past years up to a maximum of 5 years. Information from Summit's records for 5 years is as follows: Year Credit Sales Accounts Written Off Recoveries 2017 1,500,000 15,000 2018 2,250,000 38,000 2,700 2019 2,950,000 52,000…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
The accounting cycle; Author: Alanis Business academy;https://www.youtube.com/watch?v=XTspj8CtzPk;License: Standard YouTube License, CC-BY