EBK AUDITING & ASSURANCE SERVICES: A SY
11th Edition
ISBN: 9781260687668
Author: Jr
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 5, Problem 5.38P
A
To determine
Introduction: Expectation statement is a calculation made by the auditor based on the information provided by the management.
To calculate: An expectation for the reserve for returns account.
B
To determine
Introduction: Tolerable difference refers to the difference between amount stated in the statements and auditor’s expectation that would not affect the decision making of the auditor.
To find: The tolerable difference.
C
To determine
Introduction: Tolerable difference refers to the difference between amount stated in the statements and auditor’s expectation that would not affect the decision making of the auditor.
To compare:The expectation to the book value and check if it is greater than the tolerable difference.
D
To determine
Introduction: Tolerable difference refers to the difference between amount stated in the statements and auditor’s expectation that would not affect the decision making of the auditor.
To explain: The steps to be followed by the auditor if the difference between the book value and the expectation is greater than the tolerable difference.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
USM records $120,000 of sales in the month of December 2020. USM estimates that $10,000 of returns of December sales will eventually be returned. As of December 31, 2020, $2,000 of returns have been processed. Assuming zero balance in the refund liability account, what is the effect of the entry necessary at December 31 to record estimated returns? Omit the cost of sales entry.
Group of answer choices:
a,) Decrease revenues and increase liabilities for $8,000
b.) Decrease revenues and increase liabilities for $10,000
c.) Increase expenses and Increase Liabilities for $8,000
d.) Increase expenses and Increase Liabilities for $10,000
e.) None of the above
During 2019, Lacee Enterprises had gross sales of $247,000. At the end of 2019, Lacee had accounts receivable of $83,000 and a credit balance of $5,600 in Allowance for Bad Debts. Lacee has used the percentage-of-gross-sales method to estimate the bad debt expense. For the past several years, the amount estimated to be uncollectible has been 3%.
Instructions:
1. Using the percentage-of-gross-sales method, estimate the bad debt expense and make any necessary adjusting entries.
2. Assuming that 6% of receivables are estimated to be uncollectible and that Lacee decides to sue the percentage-of-receivables method to estimate the bad debt expense, estimate the bad debt expense and make any adjusting entries.
Assume that Silver Company has total sales of $90,000 during 2020 and the Accounts Receivable balance on December 31 2020, is $50,000.
Required:
(1) Prepare the adjusting entry to record the estimated bad debts, which are estimated to be 5% of total sales on December 31, 2020. There is a zero balahce in the
Allowance for Doubtful Accounts at December 31.
(2) Prepare the adjusting entry to record the estimated bad debts, which are estimated to be 5% of accounts Receivable on December 31, 2020. There is a zero balance in
the Allowance for Doubtful Accounts at December 31.
10,000
Dr. Equipment
Cr. Cash
Example of Answer:
10,000
For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).
*D自Q
...
A v
BIUS
Paragraph
Arial
14px
Activate Windows
GodwORDS BOWERED BY INWihdows.
P.
!!
Chapter 5 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
Ch. 5 - Prob. 5.1RQCh. 5 - Prob. 5.2RQCh. 5 - Prob. 5.3RQCh. 5 - Prob. 5.4RQCh. 5 - Prob. 5.5RQCh. 5 - Prob. 5.6RQCh. 5 - Prob. 5.7RQCh. 5 - Prob. 5.8RQCh. 5 - Prob. 5.9RQCh. 5 - Prob. 5.10RQ
Ch. 5 - Prob. 5.11RQCh. 5 - Prob. 5.12RQCh. 5 - Prob. 5.13RQCh. 5 - Prob. 5.14RQCh. 5 - Prob. 5.15RQCh. 5 - Prob. 5.16RQCh. 5 - Prob. 5.17MCQCh. 5 - Prob. 5.18MCQCh. 5 - Prob. 5.19MCQCh. 5 - Prob. 5.20MCQCh. 5 - Prob. 5.21MCQCh. 5 - Prob. 5.22MCQCh. 5 - Prob. 5.23MCQCh. 5 - Prob. 5.24MCQCh. 5 - Prob. 5.25MCQCh. 5 - Prob. 5.26MCQCh. 5 - Prob. 5.27MCQCh. 5 - Prob. 5.28MCQCh. 5 - Prob. 5.29MCQCh. 5 - Prob. 5.30PCh. 5 - Prob. 5.31PCh. 5 - Prob. 5.32PCh. 5 - Prob. 5.33PCh. 5 - Prob. 5.34PCh. 5 - Prob. 5.35PCh. 5 - Prob. 5.36PCh. 5 - Prob. 5.37PCh. 5 - Prob. 5.38PCh. 5 - Prob. 5.39P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- On December 31, 2016, Rusell estimated that 2% of its net sales of RM360,000 will become uncollectible. The company recorded this amount as an additional of Allowance for doubtful accounts. On May, 11, 2017, Rusell determined that Vetter account was uncollectible and wrote of RM1,100. On June 12, 2017, Vetter paid the amount previously written off. Required: Prepare the journal entries on December 31, 2016, May 11, 2017 and June 12, 2017.arrow_forwardOn January 1, 2022, Nash's Trading Post, LLC had Accounts Receivable of $57,300 and Allowance for Doubtful Accounts of $3,500. Nash's Trading Post, LLC prepares financial statements annually. During the year, the following selected transactions occurred: Sold $4,500 of merchandise to Rian Company, terms n/30. Accepted a $4,500, 4-month, 10% promissory note from Rian Company for balance due. Sold $14,400 of merchandise to Cato Company and accepted Cato's $14,400, 2-month, 10% note for the balance due. Sold $5,700 of merchandise to Malcolm Co., terms n/10. Accepted a $5,700, 3-month, 8% note from Malcolm Co. for balance due. Jan. 5 Feb. 2 12 26 Apr. 5 12 Collected Cato Company note in full. June 2 Collected Rian Company note in full. 15 Sold $2,100 of merchandise to Gerri Inc. and accepted a $2,100, 6-month, 11% note for the amount due.arrow_forwardThe company had credit sales of $100,000 for the calendrer period 2021. Accounts receivable at the beginning of the year was $25,000. $80,000 was collected during 2021.The allowance for doubtful accounts totals at the beginning of the year was $1500. $ 1800 of accounts receivable were written off during the year as uncollectible. Assuming: 1)The company estimates the allowance for bad debts to be 2% of credit sales, what is the year end adjusting entry? Prepare the end of year 2021 accounts receivable and allowance for uncollectible accounts balances. 2) The company estimates that 10% of ending accounts receivables will not be collected, . What is the year-end adjusting entry to record the bad debt expense?Prepare the end of year 2021 accounts receivable and allowance for uncollectible accounts balances.arrow_forward
- The company had sales of $100,000 for the calendrer period 2021. The allowance for doubtful accounts total at the beginning of the year was $1500. $ 1800 of accounts receivable were written off during the year as uncollectible. Assuming the company estimates the allowance for bad debts to be 2% of sales, what is the year end adjusting entry? Would your answer be different if the company utilized the direct write off method? If so, how?arrow_forwardThe company had credit sales of $100,000 for the calendrer period 2021. Accounts receivable at the beginning of the year was $25,000. $80,000 was collected during 2021.The allowance for doubtful accounts totals at the beginning of the year was $1500. $ 1800 of accounts receivable were written off during the year as uncollectible. Assuming: 1- The company estimates the allowance for bad debts to be 2% of credit sales, what is the year end adjusting entry? Prepare the end of year 2021 accounts receivable and allowance for uncollectible accounts balances. 2-arrow_forwardBluebird, Inc. had net sales (all on account) in 2020 of$600,000. At December 31,2020 , before adjusting entries, the balances in selected accounts were: accounts receivable$75,000debit and allowance for doubtful accounts$1,500debit. Bluebird estimates that3%of its net sales will prove to be uncollectible. What is the net realizable value of the receivables reported on the financial statements at December 31,2020 ?arrow_forward
- On January 1, 2022, Kingbird, Inc. had Accounts Receivable of $49,900 and Allowance for Doubtful Accounts of $3,500. Kingbird, Inc. prepares financial statements annually. During the year, the following selected transactions occurred: Jan. 5 Sold $3,450 of merchandise to Rian Company, terms n/30. Feb. 2 Accepted a $3,450, 4-month, 8% promissory note from Rian Company for balance due. 12 Sold $11,800 of merchandise to Cato Company and accepted Cato’s $11,800, 2-month, 9% note for the balance due. 26 Sold $5,300 of merchandise to Malcolm Co., terms n/10. Apr. 5 Accepted a $5,300, 3-month, 8% note from Malcolm Co. for balance due. 12 Collected Cato Company note in full. June 2 Collected Rian Company note in full. 15 Sold $2,200 of merchandise to Gerri Inc. and accepted a $2,200, 6-month, 11% note for the amount due. Journalize the transactions. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is…arrow_forwardIndigo Corporation had record sales in 2023. It began 2023 with an Accounts Receivable balance of $613,500 and an Allowance for Expected Credit Losses of $40,400. Indigo recognized credit sales during the year of $8,020,000 and made monthly adjusting entries equal to 0.5% of each month's credit sales to recognize the loss on impairment. Also during the year, the company wrote off $42,400 of accounts that were deemed to be uncollectible, although one customer whose $4,800 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $7,882,200 in cash was collected on account in 2023. To assess the reasonableness of the allowance for expected credit losses, the controller prepared the following aged listing of the receivables at December 31, 2023: Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (b) Amount $378,500…arrow_forwardThe following is sample list of the Speiran Company's transactions completed during 2019. The company's fiscal year ends on December 31. Jan. 8 Purchased merchandise for resale on account. The invoice amount was $14,720; assume a perpetual inventory system. 17 Paid January 8 invoice. Apr. 1 Borrowed $72,000 from Lowell Bank for general use; signed a 12-month, 8% annual interest-bearing note for the money. May 1 Rented office space in one of Speiran Company's buildings to another company and collected six months' rent in advance amounting to $27,000. Required: 1. Prepare journal entries for each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forward
- At the end of the year, Dahl Enterprises estimates the uncollectible accounts expense to be 0.8 percent of net sales of $7,575,000. The current credit balance of Allowance for Uncollectible Accounts is $12,900. Prepare the entry to record the uncollectible accounts expense. What is the balance of Allowance for Uncollectible Accounts after this adjustment? You must show your computations.arrow_forwardOn January 1, 2022, Skysong, Inc. had Accounts Receivable of $52,500 and Allowance for Doubtful Accounts of $3,800. Skysong, Inc. prepares financial statements annually. During the year, the following selected transactions occurred. Jan. 5 Sold $4,200 of merchandise to Rian Company, terms n/30. Feb. 2 Accepted a $4,200, 4-month, 9% promissory note from Rian Company for balance due. 12 Sold $10,800 of merchandise to Cato Company and accepted Cato’s $10,800, 2-month, 10% note. 26 Sold $5,500 of merchandise to Malcolm Co., terms n/10. Apr. 5 Accepted a $5,500, 3-month, 8% note from Malcolm Co. 12 Collected Cato Company note in full. June 2 Collected Rian Company note in full. 15 Sold $2,200 of merchandise to Gerri Inc. and accepted a $2,200, 6-month, 12% note. Journalize the transactions. (Omit cost of goods sold entries.) (Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275. Credit account titles are…arrow_forwardBayabas Company started operations on January 1, 2021. Following data are available as of June 30, 2021: Purchase of merchandise - P9,000,000; Inventory, June 30, 2021 – P1,500,000; Goods were sold at 50% above cost; 75% of sales were on credit; Estimated bad debts – 1% of credit sales; Collections from charge customers – P6,300,000; Allowance for doubtful accounts, June 30, 2021, after write-off of uncollectible accounts – P78,075. What is the outstanding accounts receivable on June 30, 2021? * a.P2,200,000 b.P2,137,500 c.P2,131,200 d.Answer not givenarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License