A note disclosed that the allowance for uncollectible accounts had a balance of

Question

A note disclosed that the allowance for uncollectible accounts had a balance of $19.9 million and $21.7 million at the end of 2013 and 2012, respectively. Bad debt expense for 2013 was $12.0 million.

Determine the amount of cash collected from customers during 2013. (All sales are on credit. Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

On June 30, 2016, General Mills sold some merchandise to a customer for $30,000. In payment, Mills agreed to accept a 6% note requiring the payment of interest and principal on March 31, 2017. The 6% rate is appropriate in this situation.

Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2016 interest accrual, and the March 31, 2017 collection. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1.

Record the sale of merchandise.

2.

Record the interest accrual.

3.

Record the cash collection.

If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over-or understated in 2016 and 2017?

2016 income before income taxes would be                by      

2017 income before income taxes would be                by               

Explanation / Answer

Q1. ACCOUNTS RECEIVABLE Balance 1345.30 Allowance for uncollectible accounts 13.80 Sales revenue 17774.10 Cash 17639.30 balance 1466.30 ALLOWANCE FOR UNCOLLECTIBLES ACCOUNTS Accounts recievble 13.80 balance 21.70 (write offs) Bad Debts expense 12.00 balance 19.90 Hence, Cash collected is $ 17,639.30 Q2. JOURNAL ENTRY: Date Accounts title and explanations Debit $ Credit $ 30-Jun Notes Receivable Dr. 30,000        Sales revenue 30,000 (for goods sold) 31-Dec Interest recievable Dr. 900       Interest Revenue 900 (for Accrual of interest receivable for 6 months) 31-Mar Cash Account Dr.     Notes receivable 30000     Interest receivable 900     Interest revenue 450 (for interest of current year for three months is also due to be received) 2 If no adjustment entry is prepared, then: 2016 income before income tax will be understated by $900 2017 Income before tax will be overstaed by $900

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