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## ACC305 Wk 3 P7-10 (Page 388) and P7-14 (Page 389)

by: kimwood Notetaker

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# ACC305 Wk 3 P7-10 (Page 388) and P7-14 (Page 389)

Marketplace > ACC305 Wk 3 P7 10 Page 388 and P7 14 Page 389
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ACC305 Wk 3 P7-10 (Page 388) and P7-14 (Page 389)
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Date Created: 11/13/15
P7-10 (Page 388) - Evergreen Company Evergreen Company sells lawn and garden products to wholesalers. The company’s fiscal year-end is December 31. During 2011, the following transactions related to receivables occurred: Required: 1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold (round all calculations to the nearest dollar). 2. Prepare any necessary adjusting entries at December 31, 2011. Adjusting entries are only recorded at year- end (round all calculations to the nearest dollar). 3. Prepare a schedule showing the effect of the journal entries in requirements 1 and 2 on 2011 income before taxes. See Below for answers: Problem 7­10 Requirement 1 February 28, 2011 Note receivable................................................10,000......... Sales revenue..........................................................10,000 March 31, 2011 Note receivable  (face amount)..................................8,000.... Discount  (\$8,000 x 10%) ............................................... 800 Sales revenue  (differenc............................................. 7,200 April 3, 2011 Accounts receivable..............................................7,000..... Sales revenue...........................................................7,000 April 11, 2011 Cash  (98% x \$7,000) ..........................................\$6,860.......... Sales discounts  (2% x \$7,000) ....................................140.... Accounts receivable.................................................... 7,000 April 17, 2011 Sales returns....................................................5,000........... Accounts receivable.................................................... 5,000 Inventory.........................................................3,200........... Cost of goods sold...................................................... 3,200 April 30, 2011 Cash (99% x \$50,000) ...........................................49,500........ Loss on sale of receivables  (1% x \$50,000).......................500 Accounts receivable.................................................... 50,000 To accrue interest on note receivable for four months. June 30, 2011 Interest receivable.................................................333....... Interest revenue (\$10,000 x 10% x  / ) .......................... 333 12 To record discounting of note receivable. June 30, 2011 Cash  (proceeds determined below) ...............................10,266.. Loss on sale of note receivable  (to balance...................... 67 Interest receivable  (from adjusting entry........................ 333 Note receivable  (face amount)....................................... 10,000 \$10,000 Face amount 7 583 Interest to maturity (\$10,000 x 10% x / )12 10,583 Maturity value 3 (317) Discount (\$10,583 x 12% x / ) 12 \$10,266 Cash proceeds August 31, 2011 — NO ENTRY REQUIRED Requirement 2 To accrue nine months' interest on the Maddox Co. note receivable. Discount ..........................................600............................ Interest reven(\$8,000 x 10%12 ...........................600 Requirement 3 Income Date increase (decrease) February 28 \$10,000 March 31 7,200 April 3 7,000 April 11 (140) April 17 (5,000) April 17 3,200 April 30 (500) June 30 333 June 30 (67) December 31 600 Total effect \$22,626 P7-14 (Page 389) -El Gato Painting Company (also see included excel file) El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2011, reconciliation of the bank balance is as follows: Required: 1. Prepare a bank reconciliation for the El Gato checking account at December 31, 2011. 2. Prepare any necessary adjusting journal entries indicated. See Below for Answers: Also see Attached excel file Problem 7­14 Requirement 1   Step 1: Bank Balance to Corrected Balance Balance per bank statement \$3,851 Add: Deposits outstanding   2,150 (1) Deduct: Bank error ­ deposit incorrectly   credited to company account  (1,300) Outstanding checks     (831) (2) Corrected cash balance \$3,870   Step 2: Book Balance to Corrected Balance Balance per books \$4,422 Deduct: Error in recording check #411       (90) Service charges       (22) NSF checks     (440) Corrected book balance  \$3,870   (1)  Receipts \$42,650         Less: December receipts deposited: Bank deposits \$43,000 Less: Deposit error   (1,300) Less: Prior month's   deposits outstanding    (1,2 )   40,500        Deposits outstanding, Dec. 31 \$  2,150   (2)  Dec. disbursements \$41,853         Error in recording check #411          90 Less: December checks cleared: Total checks cleared \$41,918 Prior month's checks: #363 \$123 #380  56 #381  86 #382   340      (605) (41,313)                  December checks outstanding      630      Add: check # 365        201 Total checks outstanding, Dec. 31 \$     831 Problem 7­14 (concluded) Requirement 2 To record credits to cash revealed by the bank reconciliation. Advertising expense..................................90....... Miscellaneous expense (bank service charges).. 22 Accounts receivable (NSF checks)...................440 Cash........................................................552.....

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