Problem Set 2 CFSAcct ReceivableInventory

School: Purdue University - Course: MGMT 60000 - Subject: Accounting

Online MBA Problem Set 2: Cash Flow Statement, Accounts Receivable, and Inventory Question 1 Hill Company reported net income of $10,000 for 2010. Additional 2010 information is as follows: Expenditures for productive assets$6000 Depreciation expense on productive assets2000 Dividends paid on common stock900 Increase in accounts payable400 Decrease in inventory200 Amortization of patent100 Decrease in accounts receivable300 Calculate the cash flows from operating activities. $12,000 Question 2 Prior to the year-end adjustment to record bad debt expense the ledger of Stickler Company included the following accounts and balances: Allowance for doubtful accounts $15,000 Bad debt expense 0 Accounts Receivable 200,000 Cash collections on accounts receivable during 2010 amounted to $450,000. Sales revenue during 2010 amounted to $800,000, of which 75% was on credit, and it was estimated that 2% of the credit sales made in 2010 would ultimately become uncollectible. Determine the balances of the allowance for doubtful accounts and bad debt expense Public

after the adjustment to record bad debt expense was made. The allowance for doubtful accounts has a credit balance prior to the adjusting entry. Allowance for doubtful accounts$18,000 Bad debt expense $3,000 Question 3 On December 31, 2011, Colonial Corporation had the following account balances related to credit sales and receivables prior to recording adjusting entries: Accounts receivable $25,000 Allowance for doubtful accounts 200 (credit) Sales revenue (all credit sales) 400,000 Requirements: Present the necessary year-end adjusting entry related to uncollectible accounts for each of the following independent assumptions: 1.An aging of accounts receivable is completed. It is estimated that $5,000 of the receivables outstanding at year-end will be uncollectible. Dec 31. Bad Debt Expense4800 Allowance for doubtful account4800 2.Assume the same information presented in part 1. Except that prior to adjustment, the allowance for doubtful accounts had a debit balance of $200 rather than a credit balance of $200. Dec 31. Bad Debt Expense5200 Allowance for doubtful account5200