ACCT 1211 Accounting I Assignment 8: Solutions and Analysis

This document provides comprehensive solutions for ACCT 1211 Assignment 8, covering key accounting concepts such as bad debt expense, allowance for doubtful accounts, and various journal entries. Question 1 presents general journal entries, account analysis, and balance sheet presentation related to writing off receivables and calculating bad debt expense. Question 2 involves journal entries for bad debts, along with balance sheet and income statement impacts. Question 3 presents general journal entries for note receivables and related interest income, while Question 4 focuses on financial ratio analysis, including current and acid-test ratios, along with the interpretation of these ratios and their changes from the prior year. The assignment covers topics like journalizing transactions, preparing financial statements, and understanding financial ratios.

ACCT 1211: Accounting I A8-1
Acct 1211_Student ID_Student
Name_Assignment_8
Question 1
(25 marks)
A.
General Journal
DATE
2018
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Sep 29
Allowance for Doubtful Debts
Account……………Dr $8,300
To Connie Downs Account $3,000
To Dennis Jade Account $3,200
To Evan Sander Account $2,100
(To write off receivables)
Sep 30 Bad Debt Expenses Account……….Dr $9,850
To Allowance for Doubtful Debts
Account $9,850
*Computation:
Age of Accounts
Accounts
Receivable 1–30 Days 31–60 Days 61–90 Days
Over 90
Days
Total = $
420,000
$
2,50,000 $ 1,00,000
$
40,000
$
30,000
Estimated %
Uncollectible
0.10%
0.40%
0.50% 30%
Individual
total
$
250 $ 400
$
200
$
9,000
Total
$
9,850

A8-2 Assignment 8
B.
ACCOUNT ALLOWANCE FOR DOUBTFUL ACCOUNTS
DATE
2018 ITEM
JRNL.
REF. DEBIT CREDIT BALANCE
Sep 1 By Opening Balance $20,000 ($20,000)
Sep 29 To Connie Downs $3,000 ($17,000)
Sep 29 To Dennis Jade $3,200 ($13,800)
Sep 29 To Evan Sander $2,100 ($11,700)
Sep 30 By Bad Debts Expense $9,850 ($21,550)
Sep 30 To Closing Balance $21,550 -
Total $29,850 $29,850 -
C.
In the Books of Sarvory Sweet Limited
Balance Sheet Statement
As on September 2018
Particulars 2018 2017
Equity and liabilities:
Reserves and surplus
Allowance for Doubtful Debts $21,550 $30,000
Assets:
Current assets:
Receivables $400,000 $440,000
D.
General Journal
DATE
2018
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Sep 30 Bad Debts Expense Account………Dr $12,000
To Allowance for Doubtful Debts
Account $12,000
(To record bad debts expense)

ACCT 1211: Accounting I A8-3

A8-4 Assignment 8
Question 2
(25 marks)
A.
Journal
DATE
2018
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
30 Jun 2018 Bad Debts Expense Account…………Dr $8,580
To Allowance for Uncollectible
Receivables Account $8,580
(To record adjusting entry)
07 Jul 2018
Allowance for Uncollectible Receivables
Account………………………………Dr $10,000
To Accounts Receivable- Quadra
Prints Account $10,000
(To write off bad debt)
13 Jul 2018 Bank Account………………………...Dr $9,000
To Accounts Receivable- Mega
Contracts Account $9,000
(To record cash collection for sales)
17 Jul 2018
Allowance for Uncollectible Receivables
Account………………………………Dr $36,000
To Accounts Receivable- Work
Wear Account $36,000
(To write off bad debt)
22 Jul 2018 Bank Account………………………..Dr $4,000
To Bad Debts Expense Account $4,000
(To recover bad debt)
28 Jul 2018 No entry needed
31 Jul 2018 Bank Account………………………..Dr $80,000
Accounts Receivable Account………Dr $320,000
To Sales Account $400,000
(To realize sales)
31 Jul 2018 Bank Account………………………..Dr $224,000

ACCT 1211: Accounting I A8-5
To Accounts Receivable Account $224,000
(To realize cash)
Month
Accounts
receivable
Estimated
percent
uncollectible
Estimated
uncollectible
March
$
38,000 10%
$
3,800
April
$
45,000 4%
$
1,800
May
$
74,000 3%
$
2,220
June
$
76,000 1%
$
760
Total
$
8,580
Allowance for Doubtful Accounts
By Bad Debt
Expense
Account
$8,500

A8-6 Assignment 8
B.
Allowance Method June 30 July 31
a. Balance Sheet:
Accounts receivable $233,000
Less: Allowance for uncollectible receivables $8,500
Net Accounts receivable $224,500
b. Income Statement:
Decrease in income $25,000 $8,500

ACCT 1211: Accounting I A8-7
Question 3
(25 marks)
A.
General Journal
DATE
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
2017
Dec 01 Note Receivable Account…………..Dr $50,000
To Sales Account $50,000
Dec 31 Interest Receivable Account………..Dr $583
To Interest Income Account $583
($50,000 x 2% x 1/12)
Dec 31
Allowance for Doubtful Debts
Account…………………………….Dr $49,000
Bad Debts Expense Account……….Dr $11,000
To Accounts Receivable Account $60,000
2018
Jun 1 Bank Account……………………….Dr $50,500
To Notes Receivable Account $50,000
To Interest Receivable Account $83
To Interest Income Account $417
($50,000 x 2% x 5/7)
Aug 1 Notes Receivable Account…………..Dr $30,000
To Sales Account $30,000
Sep 15 Accounts Receivable Account……….Dr $30,148
To Notes Receivable Account $30,000
To Interest Income Account $148
($30,000 x 4% x 45/365)
Nov 20 Notes Receivable Account…………..Dr $50,000
To Sales Account $50,000
Dec 10 Bank Account……………………….Dr $30,148
To Accounts Receivable Account $30,148
Dec 31 Interest Receivable Account…………Dr $168

A8-8 Assignment 8
To Interest Income Account $168
($50,000 x 3% x 41/365)
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ACCT 1211: Accounting I A8-9
Question 4
(25 marks)
A.
Task Force
(Dollar amounts in thousands)
2018 2017
a. Current ratio =
Current assets/Current
liabilities = 1.55 1.88
b. Acid-test
ratio =
(Current assets – Inventory
– Prepaid
expenses)/Current
liabilities
=
0.60 0.76
=
c. One day’s
sales =
Accounts
receivable/(Annu
al sales/3650 26.55
24.33

A8-10 Assignment 8
B.
MEMORANDUM
DATE:
TO:
FROM: (Student Name)
SUBJECT: Ratio value changes from 2017 to 2018
From the above table, it is apparent that the current ratio of the organization has fallen
from 1.88 in 2017 to 1.55 in 2018. The trend is similar in case of quick ratio as well, as the
organization has focused on maintain excess inventory. Therefore, the liquidity position of the
firm is observed to be deteriorating. However, improvement could be observed in one day’s sales
due to rise in market demand. Therefore, focus needs to be kept on maintaining liquidity by
minimizing inventory and debtors’ collection period.
4-10 Copyright © 2017 Pearson Canada Inc.