Problem #1

Based on an analysis of the financial statements, the following information is available for the Dun-Wrong Construction Company's cash flows for the year ended December 31, 210X.

1) Cash sales for the year were $1,250,000.

2) Credit sales for the year were $2,000,000. 75% of the credit sales were collected in the current year.

3) Last year's uncollectible accounts receivable were $35,000.

4) Accounts receivable decreased by $20,000.

5) Inventory increased by $10,000.

6) Accounts payable increased by $15,000.

7) Net income reported was $225,000.

8) Depreciation and amortization expenses reported were $75,000.

9) The book value of assets sold this year was $50,000. There was a $5,000 gain on the sale reported.

10)   Cash payments to creditors, employees, etc. were $2,250,000.

11)   The accrued expenses at year end were $10,000.

12)   Income taxes accrued this year were $35,000.

13)   Income taxes paid from last year's profits were $30,000.

14)   Fixed assets purchased this year were $240,000. 50% of the purchase was made in cash.

15)   Note receivable collections for the year were $25,000 for the principal and $3,000 for the interest.

16)   Bonds were exchanged for land and a building. The fair market value of bonds was $500,000. Interest is paid on an annual rate of *%, but is paid semi-annual interest payment was made during the year.

17)   Loan payments made to the bank were $50,000. This included interest in the amount of $4,500.

18)   Dividends in the amount of $50,000 were declared on December 15^th.

19)   Dividends declared last year, but paid this year, was $25,000.

20)   Cash and cash equivalents at the beginning of the year was $44,000.

Required: Prepare, in good form, a formal statement of cash flows, using the "Direct Method"

Problem #2

The bank statement for Steve's Service, Inc., as of June 30^th, 201X, shows a balance of $54,780. The general ledger shows a balance of $68,757.

Other data"

1) Check #748 in the amount of $3,000 was originally recorded on the books for $4,500. The check was used to purchase office equipment.

2) A customer's note dated March 25^th was discounted on April 12^th. The note was dishonored by the bank on June 29^th. The bank charged Steve's account $14,265, which included a service fee of $42.

3) The deposit of June 24^th was recorded in the books in the amount of $2,895, but was corrected by the bank for the actual amount of $2,700. The difference was due to a book recording error on a customer's check which was received on account.

4) Checks outstanding at the end of June amounted to $9,885.

5) Bank service charges for the month were $210.

6) A customer's check, in the amount of $1,296, received from a "cash" sale was deposited on June 27^th , but was returned by the bank on June 29^th  marked "NSF".

7) A deposit for $600 made on June 22^nd, was credited by bank to another customer's account. Steve's Service properly recorded the deposit.

8) Receipts in the amount of $13,425 were recorded on June 30^th, but not deposited into the account until July 1^st.

9) A bank credit memo indicated that a customer had made an electronic funds transfer on June 29^th to Steve's account in the amount of $4,629. Steve's did not record this deposit. The payment was on the customer's account.

1. Prepare, in good form, the bank reconciliation as of November 30^th.

2. Prepare, in good form, the required adjusting journal entries.

Bonus Point: Prepare the adjusting journal entry using only one entry.

Problem #3

The total outstanding accounts receivable for the Do-Right Corporation is $450,000 as of June 30^th, 200X. An evaluation of the customers' accounts reflects an aging of the receivables as follows: Current - $260,000; 1 to 30 days overdue - $95,000; 31 to 60 days overdue - $50,000; 61 to 90 days overdue - $10,000; and over 90 days past due - $35,000. Past history of the uncollectible accounts resulted in the following percentages: Current - .5% (.005); 1 to 30 days overdue - 5%; 31 to 60 days overdue - 10%; 61 to 90 days overdue - 20%, and over 90 days overdue - 50%.

The trial balance, prior to the adjustment for this year's estimate, reflects a debit balance of $30,000 in the Allowance for Doubtful Accounts. Management considers anything over (under) +/- $10,000 a material amount.

Required:

1) Prepare, in good form, an aging schedule for June 30^th.

2) Prepare the adjusting entry required at June 30^th.

3) Do you think the amount at June 30^th is inadequate (too low), or excessive (too high)? Explain.

4) If it is inadequate or excessive, how can management correct the problem?