12. Bank reconciliations are normally prepared on a monthly basis to identify ad
ID: 2586797 • Letter: 1
Question
12. Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the depositor's records and to identify bank errors. Adjustments should be recorded for a. bank errors, outstanding checks, and deposits in transit. b, all items except bank errors, outstanding checks, and deposits in transit. c. book errors, bank errors, deposits in transit, and outstanding checks. d. outstanding checks and deposits in transit. Teeming Company uses the allowance method of accounting for bad debts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year. No. of Days Outstanding Probability of Collection Amount $500, 000 200, 000 100,000 0-30 days .982 31-60 days Over 60 days 90 .80 .24) The following additional information is available for the current year: Net credit sales for the year . . . . . . . . . . . . . . . Allowance for Doubtful Accounts: $4,000,000 45,000 (cr) 4,000 (dr) 13. See Teeming Company information above. If Teeming determines bad debt expense using 1.5 percent of net credit sales, the net realizable value of accounts receivable on the December 31 balance sheet will a. $744,000. b. $740,000. c. $738,000. d. $750,000. 14. See Teeming Company information above. If Teeming bases its estimate of bad debts on the aging of accounts receivable, doubtful accounts expense for the current year ending December 31 is a. $54,000.. b. $47,000. c. $50,000.Explanation / Answer
Answer 12
c.all items except bank errors, outstanding checks, and deposits in transit.
Explanation : We can make entries for rectification entry in our books for errormade in our books or any permanent timinng diference between Bank statement & Cash book. No entry in our boks need to pass for bank errors, outstanding checks, and deposits in transit..
Answer 13
Note :
Amount of accounts receivable = $500,000 + 200,000 +$100,000 = $800,000
Bad debt = $4,000,000 * 1.5 % = $60,000
Correct ending blance in allowance for doubtful accounts = $60,000 - $4,000 (dr) = $56,000
Net realizable value of accounts receivable on December 31 = $800,000 - $56,000 = $744,000 (option a )
Answer 14
Total bad debt in current Accounts Receivable account
= $500,000 ( 1 - 0.98)+ 200,000 (1 - 0.90) +$100,000 (1 - 0.80) = $50,000
Correct balance allowance for doubtful accounts = $50,000 + $4,000 (dr) = $54,000
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