Question 1 - Prepare entry for factored accounts

Ronald Distributors is a growing company whose ability to raise capital has not been growing as quickly as its expanding assets and sales. Ronald's local banker has indicated that the company cannot increase its borrowing for the foreseeable future. Ronald's suppliers are demanding payment for goods acquired within 30 days of the invoice date, but Ronald's customers are slow in paying for their purchases (60-90 days). As a result, Ronald has a cash flow problem.

Ronald needs $160,000 to cover next Friday's payroll. Its balance of outstanding accounts receivable totals $1,000,000. What might Ronald do to alleviate this cash crunch? Record the entry that Ronald would make when it raises the needed cash. (Assume a 2% service charge.)

Question 2 - Prepare entries for notes receivable

Galen Wholesalers accepts from Picard Stores a $6,200,4-month, 12% note dated May 31 in settlement of Picard's overdue account,

(a) What is the maturity date of the note?

(b) What is the entry made by Galen at the maturity date, assuming Picard pays the note and interest in full at that time?

Question 3 - Compute ratios for receivables

In 2010, Drew Gooden Company has net credit sales of $1,600,000 for the year. It had a beginning accounts receivable (net) balance of $101,000 and an ending accounts receivable (net) balance of $107,000. Compute Drew Gooden Company's (a) accounts receivable turnover and (b) average collection period in days.

Question 4 - Presented below are selected transactions of Pale Force Company. Pale Force sells in large quantities to other companies and also sells its product in a small retail outlet.

March   1    Sold merchandise on account to CC Company for $3,000, terms 2/10, n/30. 3   CC Company returned merchandise worth $500 to Pale Force. 9   Pale Force collected the amount due from CC Company from the March 1 sale. 15    Pale Force sold merchandise for $400 in its retail outlet. The customer used his Pale

Force credit card. 31    Pale Force added 1.5% monthly interest to the customer's credit card balance.

Instructions - Prepare journal entries for the transactions above.

Question 5 - Presented below are two independent situations.

(a) On January 6, Arneson Co. sells merchandise on account to Cortez Inc. for $9,000, terms 2/10, n/30. On January 16, Cortez Inc. pays the amount due. Prepare the entries on Arneson's books to record the sale and related collection.

(b) On January 10, Mary Dawes uses her Pierson Co. credit card to purchase merchandise from Pierson Co. for $9,000. On February 10, Dawes is billed for the amount due of $9,000. On February 12, Dawes pays $5,000 on the balance due. On March 10, Dawes is billed for the amount due, including interest at 2% per month on the unpaid balance as of February 12.

Prepare the entries on Pierson Co.'s books related to the transactions that occurred on January 10, February 12, and March 10.

Question 6 - The ledger of Hixson Company at the end of the current year shows Accounts Receivable $120,000, Sales $840,000, and Sales Returns and Allowances $30,000.

Instructions

(a) If Hixson uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Hixson determines that Fell's $1,400 balance is uncollectible.

(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.

(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.

Question 7 - Ingles Company has accounts receivable of $93,100 at March 31. An analysis of the ac¬counts shows the information on the next page.