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Rainbow Appliances performs an aging schedule, and the results

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solution


Question

On December 31, 2007 Rainbow Appliances has $275,000 in accounts Receivable and an allowance account with a credit balance of $240. Current period net credit sales were $771,000, cash sales were $68,000.;A. Rainbow Appliances performs an aging schedule, and the results are summarized below, along with the appropriate percentages that Rainbow applies to the categories shown.;Percent;Days Outstanding Amount Uncollectible;Not yet due $150,000 1%;31-60 days past due $50,000 5%;61-90 days past due $40,000 10%;91-120 days past due $25,000 25%;Over 120 days past due $10,000 50%;Assume Rainbow uses the aging approach of accounting uncollectible accounts, prepare the adjusting entry required at the end of the accounting period.;B. Assume now Rainbow uses the percent-of-sales method of accounting for uncollectible accounts. If historical data indicates that approximately 3% net credit sales are uncollectible, what is the amount of uncollectible-account expense and what is the balance in the allowance for uncollectible accounts after adjustment?;a. General Journal;Date Accounts Debit Credit;b.;2. When prices are rising, LIFO generally results in the lowest taxable income, and therefore helps reduce taxes paid.;A. TRUE;B. FALSE;3. One way of decreasing the equity of a business is to increase an asset.;A. TRUE;B. FALSE;4. The purchase of supplies on account will decrease equity;A. TRUE;B. FALSE;5. The following information is available for Blue Moon Company regarding its June 30, 2005 bank statement;? Balance per bank statement is $10,241.43.;? Balance per books is $9,745.06.;? Check #506 for $1,948.52 and check #510 for $1,800.25 was not returned with the June 30 bank statement.;? A deposit in transit of $5,113.40 had not been received by the bank when the bank statement was generated;? A bank debit memo indicated an NSF check written by Bruce Garrett to Blue Moon Company on June 13 for $79.;? A bank credit memo indicated a ban collection of $1,900 and interest revenue of $75 on June 20.;? The bank Statement indicated a service charge of $35.;Prepare bank reconciliation for Blue Moon date June 30, 2005;6. If beginning capital was $25,000, ending capital is $37,000, and owner?s withdrawals were $23,000, the amount of net income or net loss for the period was;A. Net loss of $35,000;B. Net income of $16,000;C. Net income of $35,000;D. Net loss of $14,000;7. Performing a service and immediately collecting cash would;A. Increase net income less than if the services had been performed on account;B. Have no effect on liabilities;C. Increase owner?s equity less than if the service had been performed on account;D. Increase assets more than if the service had been performed on account;8. Cash received on account would increase total assets;A. True;B. False;9. Failure to adjust for an accrued expense will understate expenses and overstate net income.;A. True;B. False;10. If an adjustment for prepaid insurance is not made at year end, liabilities will be;A. Unaffected;B. Understated;C. Overstated;D. Unable to determine with the given information

 

Paper#24797 | Written in 18-Jul-2015

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