44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) Questions Complex Moderate How many questions that you did answer? List the question that you are not able to answer Simple 10/10 Brief Exercises Complex Moderate How many brief exercises that you did answer? List the brief exercises that you are not able to answer Simple 19/19 Exercises Complex Moderate How many exercises that you did answer? List the exercises that you are not able to answer Simple 10_/11 E7-10 c Problems & Critical Thinking Complex Moderate How many _8/9 © 2019 by Dr Nguyen Huu Cuong Simple “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) problems that you did answer? List the problems that you are not able to answer P7-10A Student Information Full Name Ngô Thị Lan Dung Class 44k06.1 Phone 0372532471 Email Landungngo.2000@gmail.com Self-evaluation (Out of ten) © 2019 by Dr Nguyen Huu Cuong 9/10 “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) QUESTIONS Financial Accounting: Tools for Decision-Making, 7th Canadian Edition (Kimmel P.D et al., 2017) Chapter "Internal Control and Cash" Q5: How documentation procedures contribute to good internal control? Documents provide evidence that transactions and events have occurred at specified times and at specified amounts Documentation procedures helps prevent unauthorized or fraudulent use of documents so that invoices cannot be misused Q15: Who should be responsible for preparing a bank reconciliation? Why The person who prepares a bank reconciliation should have no other cash duties Because everyday, an independent employee can then compare the amount of cash deposited per the deposit slip with the amount of cash receipts recorded that day to ensure that funds deposited were also recorded If duties are segregated, no one would be able to steal cheques and also be able to record their receipt to cover up the theft Q17: Paul Pascal is confused about the lack of agreement between the cash balance per books and the balance per bank Explain the possible causes for the lack of agreement to Paul, and give an example of each cause There are two reasons that the bank and company records differ: Timing differences and Errors For example, if an item is on the book but has not appeared on the bank statement ( outstanding cheques and deposits in transit), the items are entered as an adjustment to balance per bank statement If an item is on the bank statement but has not been entered on the books, ), the items are entered as an adjustment to balance per books ( bank service charges, electronic deductions, deposit ) Chapter "Reporting and Analysing Receivables" Q2: Distinguish between trade receivables and nontrade receivables Trade Receivable are amounts owed by customers for goods and services sold in the course of a firm’s ordinary business activities © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) Nontrade Receivable are the total claims resulting from transactions or events that are not a firm’s ordinary business activity, Q7: (a) What is the purpose of the account Allowance for Doubtful Accounts? The Allowance for Doubtful Accounts is used when Bad Debt Expense is recorded prior to knowing the specific accounts receivable that will be un collectible The expense is matched more closely with the revenues—the goal of accounting's matching principle (b) Although the normal balance of this account is a credit balance, it can sometimes have a debit balance Explain how and when this can happen Normal balance of the Allowance for Doubtful Account is credit balance, it can sometimes have a debit balance when the Allowance for Doubtful Account decrease more than when the Allowance for Doubtful Account increase Q9: Why is the bad debts expense that is reported on the income statement usually not the same amount as the allowance for doubtful accounts amount reported in the statement of financial position? Bad debt expense is expense and the income statement Bad debt expense make decease net income Bad debt expense is reported in income statement Allowance for Doubtful Account is current asset The Statement of Financial Position included current asset and non current asset Allowance for Doubtful Account is reported The Statement of Financial Position Q10: Mohamed cannot understand why the carrying amount of accounts receivable does not change when an uncollectible account is written off under the allowance method Clarify this for Mohamed When written off under the allowance method Allowance for Doubtful Account XX Account Receivable XX In beginning, Account Receivable XX Allowance for Doubtful Account XX Q18: Indicate how accounts receivable and allowance for doubtful accounts should be presented on the statement of financial position Allowance for Doubtful Account XX Account Receivable XX The Statement of Financial Position Current asset © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) Account receivable Less Allowance for doubtful account Carrying amount X1 X2 X1-X2 Q19: Saucier Ltd has accounts receivable, notes receivable due in three months, notes receivable due in two years, an allowance for doubtful accounts, an allowance for doubtful notes, sales tax recoverable, and income tax receivable How should the receivables be reported on the statement of financial position? Current asset Account receivable X1 Less Allowance for doubtful account X2 Carrying amount X1 – X2 Note receivale (3 months) X3 Sales tax recoverable X4 Income tax receivable X5 Total Non current asset Note receivable X6 Less Allowance for doubtful account notes X7 Carrying amount X6 – X7 Q20: (a) Identify three income statement accounts that are related to receivables Sale revenue, sale discount and allowance for doubtful account (b) Indicate where each account would be reported on the income statement Sale revenue : revenue Sale discount : contra revenue Allowance for doubtful account : receivable © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) BRIEF EXERCISES Financial Accounting: Tools for Decision-Making, 7th Canadian Edition (Kimmel P.D et al., 2017) Chapter "Internal Control and Cash" BE7-2: (a) (c) (e) (b) (d) (f) BE7-5: Book - Book + Book + Book - Bank - Book - Bank - 10 Bank + NA 11 Book - Bank + 12 Bank - BE7-6: January February At the beginning: At the beginning: 1000 Deposits recorded in books: 5000 Deposits recorded in books: 5600 Deposits recorded on bank statement: 4000 Deposits recorded on bank statement: 4600 At the end: At the end: © 2019 by Dr Nguyen Huu Cuong 1000 “Innovation, Passion, and Diligence” 2000 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) BE7-7: November December Outstanding cheques at the beginning: Cheques recorded in books: Outstanding cheques at the beginning:1 200 27 100 Cheques recorded in books: 23 200 Cheques recorded on bank statement: 25 900 Cheques recorded on bank statement: 19 700 Outstanding cheques at the end: Outstanding cheques at the end: 200 BE7-8: a) Kashechewan Inc corrects by reducing the cash $90 The bank adds back to the bank balance $415 b) Debit payable 90 Credit cash 90 BE7-9: On 30th june, cash balance: 18 920 Cash receipts: 21 700 Cash payments: 24 300 On 31st July, cash balance: 16 320 © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 700 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) BE7-10: Balance per bank statement: 19,260 Add: deposits in transit 1,450 Deduct: outstanding cheques 3,630 Adjusted cash balance per bank: 17,080 Balance per books : 16,320 Add: EFT collections 2,170 Deduct: NSF cheque 1,270 NSF fee 50 bank services charges 90 Adjusted cash balance per books: 17,080 BE7-11: Debit account cash 2,170 Credit account receivable 2,170 © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) Debit account expense 90 Credit account cash 90 Debit account receivable 1,320 Credit account cash 1,320 Chapter "Reporting and Analysing Receivables" BE8-2 July July Debit account Receivable $58000 Debit cash $50568 Credit sale Revenue $58000 Debit sale discount $1032 Debit cost of goods sold $32000 Credit account receivable $51600 Credit inventory $32000 Aug July Debit note Receivable $51600 Debit sale return $6400 Credit account receivable $51600 Credit account Receivable $6400 Debit inventory $4320 Sep Credit cost of goods sold $4320 Debit cash $52632 Credit note receivable $51600 Credit interest receivable $1032 © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) BE8-3 April 28 Debit account Receivable Credit sale Revenue Debit cost of goods sold Credit Inventory $26000 $26000 $18000 $18000 May Debit account Receivable Credit sale Revenue Debit cost of goods sold Credit inventory $35000 $35000 $24000 $24000 May Debit sale return Credit account Receivable Debit inventory Credit cost of goods sold $1200 $1200 $850 $850 May Debit cash Debit sale discount Credit account receivabe $24304 $496 $24800 June Debit note Receivable Credit account receivable $35000 $35000 July Debit cash Credit note receivable Credit interest receivable $35525 $35000 $525 BE8-4 Chiu Corp Account receivable Debit Credit © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 10 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) (b) adjusted = 33 240 – 800 = 24 440 Debit bad debt expense 24440 Credit allowance for doubtful account 24440 (c) Carrying amount = 336 760 E8-5 (a) Debit bad debt expense $18800 Credit allowance for doubtful account $18800 Debit allowance for doubtful account Credit account receivable $1900 $1900 Debit cash $1900 Credit account receivable $1900 Debit account receivable $1900 Credit allowance for doubtful account $1900 (b) account receivable Debit 300 000 300 000 account allowance for doubtful Debit credit 000 18 800 16 800 credit Carrying amount = 283 200 account receivable Debit 300 000 298 100 account allowance for doubtful Debit credit 000 900 900 credit 900 Carrying amount = 302 000 © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 23 44K06 Financial Accounting – ACC2001 CHAPTER ASSIGNMENT (Chapter 2) account receivable Debit 300 000 900 298 100 account allowance for doubtful Debit credit 000 18 800 1900 900 16 800 credit 900 900 Carrying amount = 281 300 © 2019 by Dr Nguyen Huu Cuong “Innovation, Passion, and Diligence” 24 E8-7 Debit note receivable Credit cash Debit note Receivable Credit sale revenue $116000 $116000 $22600 $22600 Debit cost of goods sold Credit inventory $13200 Debit note receivable Credit account receivable $24000 $13200 $24000 Debit cash $24226 Credit note receivable $24000 Credit interest receivable $226 Debit interest receivable $116000 x 9% x 4/12 = $3480 $24000 x 6% x 2.5/12 = $300 Credit interest revenue $3780 Debit bad debt expense $18200 Credit allowance for doubtful account $18200 E8-10 statement of financial position Current asset Account receivable Less Allowance for doubtful accounts Carrying amount Notes receivable (current) Less Allowance for doubtful notes (current) Carrying amount Sales tax recoverable Prepaid insurance Inventory Cash Advances to employees Non asset Notes receivable (non-current) $18200 $ 1300 $16900 $ 25000 $5000 $20000 $ 3150 $1500 $26400 $7500 $2900 $75000 Allowance for doubtful notes (current) Liabilities Account payable $5000 $22600 Income statement Sale revenue Sale Sale discount Net sale $370000 $12000 $358000 Gross profit $358000 Operating epense Bad debt expense income from operations other revenue and expense $2000 $356000 Interest expense $2400 Interest revenue $ 6000 Net income $359600 Intermediate Financial Accounting - Volume (Version 2019 - Revision A) by (Glenn Arnold & Suzanne Kyle): 6-6 allowance = 4% x 225,000 + 2,340 = 11,340 Debit account 642 11,340 Credit account 229 11,340 1,410 1,605 840 2,800 Total = 6,655 Debit account 642 Credit account 229 8,995 8,995 Allowance = 2% x 225,000 – 2,340 = 2,160 Debit account 642 2,160 Credit account 229 2,160 6-7 a bad debt expense = 1% x (16 000 000 x 75% ) = 120 000 account 229 debit credit 575 000 40 000 120 000 X 500 000 X = 155 000 Debit account 229 155 000 Credit account 642 155 000 b net account receivable = 50 950 000 – 500 000 = 50 450 000 Introduction to Financial Accounting (Version 2019 - Revision A) by (Henry Dauderis & David Annand) 7-4 a i uncollectible = 2% x 750,000 = 15,000 Debit account 642 15,000 Credit account 229 15,000 ii account 229 Debit Credit 3, 000 15,000 18, 000 b i uncollectible = (10% x 147,000) – 3,000 = 11, 700 Debit account 642 11, 700 Credit account 229 11, 700 ii account 229 Debit Credit 3, 000 11, 700 14, 700 7-5 a account 229 Debit Credit 8, 000 2, 400 X 9, 000 bad debt expense = X = 3, 400 b Debit account 642 Credit account 229 3, 400 3,400 c account 229 Debit Credit 9, 000 1, 000 300 X 10, 000 bad debt expense = X = 1, 700 d Debit account 642 Credit account 229 1, 700 1, 700 PROBLEMS Financial Accounting: Tools for Decision-Making, 7th Canadian Edition (Kimmel P.D et al., 2017) Chapter "Internal Control and Cash" P7-2A: (a) Fred can approve any invoice for payment He also is responsible for preparing the monthly bank reconciliations and making any necessary journal entries (b) They should Segregation of Duties, Documentation P7-5A: Balance per bank statement: 21,722 Add: Deduct: outstanding cheques 576 Error 3,100 Adjusted cash balance per bank: 18,046 Balance per books : 12,934 Add: EFT 5,230 Deduct: Service charges and credit card fees 118 Adjusted cash balance per books: 18,046 Debit account cash 5,230 Credit account receivable 5,230 Debit account expense 118 Credit account cash 118 P7-9A: (a) Cash: Cash on hand, cash in bank Cash equivalents: investments, bond, shares, investments held (b) Amounts due from employees, NSF cheques, long-term loan P7-10A: (a) Cash equivalents include bank accounts and marketable securities, which are debt securities with maturities of less than 90 days Since cash equivalents are closely related to cash, the true meaning of the cash account is not distorted on the balance sheet (b) Restricted cash may be classified as a current or non-current asset depending on how long it's expected to remain restricted If the cash in question is expected to be used within one year of the balance sheet date, the cash should be classified as a current asset However, if it is anticipated that the cash will remain unavailable for use for more than a year, then it should be classified as a non-current asset Chapter "Reporting and Analysing Receivables" P8-1A: a) Debit account receivable Credit sale revenue Debit cost of goods sold Credit inventory $5400000 $5400000 $2970000 $2970000 Debit sale return and allowance Credit account receivable $80000 $80000 Debit inventory $44000 Credit cost of goods sold $44000 Debit sash $5400000 Credit account receivable $5400000 Debit interest receivable Credit interest revenue $400000 $400000 Debit allowance for doubtful account $160000 Credit account receivable $160000 Debit cash $72000 Credit account receivablle $72000 Debit account receivable $72000 Credit allowance for doubtful account $72000 Debit bad debt expense $192000 Credit allowance for doubtful account $192000 b) account receivable Debit $1 760 000 $5 400 000 $72 000 credit $80 000 $5 400 000 $160 000 $72 000 $1 520 000 Allowance for doubtful account Debit credit $160 000 $118 000 $72 000 $192 000 $222 000 c) Carrying amount = $1 520 000 - $222 000 = $1 298 000 d) Current asset Accounts receivable Less Allowance for doubtful account Carrying amount Cash Inventory(credit) Interest receivable e) Sale revenue Sale Less Sale return and allowance Net sale Cost of godds sold Gross profit Operating expense Bad debt expense Income from operating expense $1520000 $222000 $1298000 $5472000 $2926000 $400000 $5400000 $80000 $5320000 $2926000 $2394000 $192000 $2202000 Other revenue and expense Interest revenue Net Income $400000 $2602000 P8-4A: a) Number of Days Outstanding Total Estimated Uncollectible Accounts 0–30 days $15600 31–60 days $20400 61–90 days $13800 Over 90 days $16720 Total $66520 b) Debit bad debt expense $54160 Credit allowance for doubtful account $54160 Debit bad debt expense $78880 Credit allowance for doubtful account $78880 c) Debit allowance for doubtful account Credit receivable account $45730 $45730 d) Debit cash $8850 Credit account receivable $8850 Debit account receivable $8850 Credit allowance for doubtful account $8850 P8-6A: Feb Debit account receivable Credit sale revenue Debit Cost of goods sold Credit inventory Feb $8000 $8000 $6000 $6000 Debit note receivable $13400 Credit sale revenue $13400 Debit cost of goods sold $8800 Credit inventory $8800 Feb 26 Debit account receivable Credit sale revenue Debit cost of goods sold Credit inventory $12000 $12000 $7600 $7600 Mar Debit Account receivable $4000 Credit sale revenue $4000 Debit cost of goods sold $3000 Credit inventory $3000 Mar 27 Debit note receivable $140 Credit account receivable $140 Apr Debit cash $13400 Credit note Receivable $13400 May 27 Debit account receivable $12280 Credit note receivable $12000 Credit interest receivable $280 May 31 Debit interest receivable $8000 * 2% * = $480 Credit interest revenue $480 P8-7A: a) Debit note Receivable $60,000 Credit account Receivable $60,000 Debit interest receivable Credit interest revenue $450 $450 Debit cash $61350 Credit note receivable $60,000 Credit interest receivable $450 Credit interest revenue $900 b) Debit note Payable $60,000 Credit account payable $60,000 Debit interest payable Credit interest expense $450 Debit note payable Debit interest expense Debit interest payable Credit cash $60,000 $900 $450 $61350 $450 c) Debit account receivable Credit note receivable Credit Interest receivable $61,350 $60,000 $1350 P8-9A: Current asset Accounts receivable, gross Less Allowance for doubtful accounts Carrying amount Accumulated depreciation—buildings Accumulated depreciation—equipment Carrying amount after PPE Buildings Cash Equipment Held for trading investments Income tax receivable Inventory Notes receivable (current) Supplies Non-current Notes receivable (non-current) 1,630 32 1,598 ( 960) (488) 150 2,734 592 737 196 99 1,902 2,481 85 101 Introduction to Financial Accounting (Version 2019 - Revision A) by (Henry Dauderis & David Annand) 7-4 a) Debit account 229 25,000 Credit account 131 b) Debit account 111 Credit account 711 25,000 15,000 15,000 Debit 25 000 Credit 15 000 15 000 000 (a) Bad debts = 3% x 70% x 000 000 = 21 000 Debit account 642 21 000 Credit account 229 21 000 (b) uncollectible accounts = 5% x 250 000 = 12 500 12 500 – 000 = 500 Debit account 642 500 Credit account 229 500 (c) 000 000 250 000 500 uncollectible = 18 750 Bad debt = 18 750 – 000 = 13 750 Debit account 642 13 750 Credit account 229 13 750 (a) 21 000 + 000 = 26 000 (b) 500 + 000 = 12 500 (c) 13 750 + 000 = 18 750 7-5 Debit account 642 Credit account 229 5,000 5,000 Debit account 229 Credit account 131 700 Debit account 229 Credit account 131 3,000 3,000 Debit account 642 Credit account 229 4,000 4,000 Debit account 131 Credit account 229 200 Debit account 229 Credit account 131 4,000 4,000 Debit account 642 Credit account 229 4,500 4,500 700 200 7-6 Debit account 229 1,000 Credit account 131 1,000 bad debts = (750,000 − 22,000) × 2% =14,560 Debit account 642 14,560 Credit account 229 14,560 bad debts = 4% x (100,000 – 1,000) = 3,960 adjusted = 1,800 – 1,000 + 3,960 = 6,760 Debit account 642 6,760 Credit account 229 6,760 (2) Accounts receivable 99,000 Allowance for doubtful accounts (11,760) (3) Accounts receivable 99,000 Allowance for doubtful accounts (3,960) CRITICAL THINKING Financial Accounting: Tools for Decision-Making, 7th Canadian Edition (Kimmel P.D et al., 2017) Chapter "Internal Control and Cash" CT7-5 (a) The customers and the investors of the bank (b) (1) Largest to smallest: bounced checks x $35 = $175 (2) Smallest to largest: bounced check x $35 = $35 (3) In order of check number: bounced checks x $35 = $70 (c) Whether this is ethical is subject to debate On the one hand, it can be argued that customers have a responsibility to maintain an adequate balance in their accounts Some customers are frequently overdrawn; only severe penalties will persuade them to maintain an adequate balance (d) The bank must consider its relationship with the customer Chapter "Reporting and Analysing Receivables" CT8-5 (a) Sam Wong and Suzanne Chen are stakeholder (b) the bank expects the company to maintain a current ratio of 2:1 Present estimated uncollectible so they need to adjusted Bad debt expense XX Allowance for doubtful account XX (c) The president’s request pose an ethical dilemma for the controller ... expense $1 520 000 $22 2000 $ 129 8000 $54 720 00 $29 26000 $400000 $5400000 $80000 $5 320 000 $29 26000 $23 94000 $1 920 00 $22 020 00 Other revenue and expense Interest revenue Net Income $400000 $26 020 00 P 8-4 A:... account 6 42 Credit account 22 9 8,995 8,995 Allowance = 2% x 22 5,000 – 2, 340 = 2, 160 Debit account 6 42 2,160 Credit account 22 9 2, 160 6-7 a bad debt expense = 1% x (16 000 000 x 75% ) = 120 000 account... P.D et al., 20 17) Chapter "Internal Control and Cash" BE7 -2 : (a) (c) (e) (b) (d) (f) BE 7-5 : Book - Book + Book + Book - Bank - Book - Bank - 10 Bank + NA 11 Book - Bank + 12 Bank - BE 7-6 : January