Accounting and Financial Management Assignment: Problems and Solutions

This document presents a comprehensive solution to an Accounting and Financial Management assignment. It includes a cash flow statement prepared using the indirect method, detailing the process of calculating net cash flow from operating activities. The assignment also addresses depreciation, specifically using the straight-line method, calculating the useful life of a truck, and providing journal entries for depreciation and asset disposal due to an accident, including the impact of insurance claims. Additionally, the solution covers bad debt, providing journal entries related to writing off bad debts, recording bad debt expenses, and adjusting provisions for doubtful accounts, along with a summary of journal entries and missing dollar amounts for different years. References are provided for further information.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial Management
Name of the Student
Name of the University
Author Note:

1ACCOUNTING AND FINANCIAL MANAGEMENT
Table of Contents
Q) E12-18...................................................................................................................................2
Q) E8-18.....................................................................................................................................3
Q) AP6-2....................................................................................................................................5
Reference....................................................................................................................................7

2ACCOUNTING AND FINANCIAL MANAGEMENT
Q) E12-18
The cash flow statement has been prepared using indirect method. The indirect
method shows the cash flow statement that begins with the net income or loss, and all the
non-cash revenue and expenses item are then added or deducted subsequently from the net
profit, to arrive at the net cash flow from operating activity (Davis 2016).

3ACCOUNTING AND FINANCIAL MANAGEMENT
Q) E8-18
Part 1
The Khouri Corporation uses straight line method for depreciating its truck, which has
a residual value of $9000. The total accumulated depreciation at the beginning of the year is
$6000. Hence the useful life of the truck can be calculated as follow:
The company uses straight line method of depreciation, hence accumulated
depreciation for three years is $6000; therefore, depreciation for 1 year is $2000.
Depreciation expense=¿
$ 2000= ( $ 25000−$ 9000 )
Estimated Useful Life
Estimated Useful Life = 8 years.
Part 2
In the books of Khouri Corporation
Journal Entries

4ACCOUNTING AND FINANCIAL MANAGEMENT
Particulars Amount ($)
Debit
Amount ($)
Credit
Depreciation 2000
Accumulated Depreciation
((Cost – Residual Value) ×1 year ÷ Estimated Useful life)
2000
Accumulated Depreciation (2000 + 6000) 8000
Loss on truck (Balancing figure) 17000
Truck
(Asset disposed completely due to accident and no residual
value can be earned from asset)
25000
Part 3
If the corporation had casual insurance for the truck, then the corporation would have
received insurance claim, in case of any accident (Binion et al., 2015) Assuming that the
corporation has an insurance, the amount that the corporation will receive as a claim is
$13000.
Hence, if the corporation would have received the claim of $13000, the total loss
would have decrease from $17000 to $4000 (17000-13000).

5ACCOUNTING AND FINANCIAL MANAGEMENT
Q) AP6-2
Part 1
Summary of the Journal Entries related to the Bad Debt for year 3.
a) For writing of bad debts
Provision for Doubtful account $1202
Accounts Receivable $1202
b) Recording bad debt as an expense
Bad Debts expense $2051
Provision for Doubtful account $2051
c) Additional Provision to be charged from balance of Year 2.
Provision for Doubtful account $849
Accounts Receivable $849
d) Balance at the end of the year 3.
Provision for Doubtful account $4778
Accounts Receivable $4778
Part 2
Supply of the missing dollar amount for year 1 and year 2.
Allowance for Balance at the Additional Write off Balance at the

6ACCOUNTING AND FINANCIAL MANAGEMENT
Doubtful
Accounts
Beginning
Period
(Charges) to
expense
End of Period
Year 1 $2599 $1796 $513 $3882
Year 2 $3882 $3705 $1960 $5627
Year 3 $5627 $1202 $2051 $4778

7ACCOUNTING AND FINANCIAL MANAGEMENT
Reference
Binion, T., Harr, J., Fields, B., Cielocha, S. and Balbach, S.J., State Farm Mutual Automobile
Insurance Co, 2015. Systems and methods for visualizing an accident involving a vehicle.
U.S. Patent 8,954,226.
Davis, O., 2016. Statement of Cash Flows: Issues in Cash Flow Reporting in Estonia. Tallinn
University of Technology School of Business and Governance, Department of Accounting,
Master's Degree,(sup) Jaan Alver.