As Ena and Al have expanded their business, they have noticed how hard it can be to keep track of which customers owe them money and when they should be paying. As a result of their haphazard approach to managing their receivables they have noticed that Shortcuts to Food has experienced an increase in the number of bad debts they have recorded. In the past Ena would simply write off any bad debts as an expense once she got official notification the customer could not pay. Al has suggested this is a very muddled way of doing things and would prefer to be a bit proactive. Surprisingly, Al has already set up an Allowance for Doubtful Debts account with a balance of $500 Cr in it and has done some research and based on the past couple of years has worked out that about 5% of the credit sales they make end up becoming bad debts. Based on the current year's income statement net sales totalled $38,160 and Al has determined $5,820 of those were cash sales. Al has also

As Ena and Al have expanded their business, they have noticed how hard it can be to keep track of which customers owe them money and when they should be paying. As a result of their haphazard approach to managing their receivables they have noticed that Shortcuts to Food has experienced an increase in the number of bad debts they have recorded. In the past Ena would simply write off any bad debts as an expense once she got official notification the customer could not pay. Al has suggested this is a very muddled way of doing things and would prefer to be a bit proactive. Surprisingly, Al has already set up an Allowance for Doubtful Debts account with a balance of $500 Cr in it and has done some research and based on the past couple of years has worked out that about 5% of the credit sales they make end up becoming bad debts. Based on the current year's income statement net sales totalled $38,160 and Al has determined $5,820 of those were cash sales. Al has also

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Elaborate and discuss the following quetions 1. While you are working as a bookkeeper in retail company, Sage 50 is giving you a warning message that the customer has exceeded his credit limit. What would you do? How would you advice your manager as a professional? 2. What is overdraft and how does it happen? 3. What is a Cash Flow Report? What does it help us? 4. Explain the concept of aging in customer accounts? 5. How do you record a Senior's Discount?
On September 1, 2023, Kingbird, Inc. sold goods to Ayayai Corp., a new customer. Before shipping the goods, Kingbird's credit and collections department conducted a credit check and determined that Ayayai is a high credit-risk customer. As a result, Kingbird did not provide Ayayai with open credit by recording the sale as an account receivable. Instead, Kingbird required Ayayai to provide a non-interest-bearing promissory note for $32,700 face value, to be repaid in one year. Ayayai has a credit rating that requires it to pay 9% interest on borrowed funds. Kingbird pays 7% interest on a loan recently obtained from its local bank. Kingbird has a December 31 year end and follows IFRS. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Prepare the entries required on Kingbird's books to record the sale, annual adjusting entry, and collection of the note's full face value. (For calculation purposes, use 5…
Henri is the owner of the “Chez Henri” Restaurant. It is not a large restaurant (78 seats). For this reason, it does not have many people on the payroll. Henri has been handling the general manager’s responsibilities and has a good friend working half a day, five days a week, to take care of such matters as bank deposits, preparing accounts payable and payroll checks, and all other routine office and bookkeeping work. Henri is not concerned about the honesty of the person, but he has learned from courses he has taken that any company, however small, needs to have some internal controls. REQUIRED Write a short report to Henri pointing out three specific areas where you believe controls might need to be implemented. For each of the three areas, advise Henri what might happen if a dishonest bookkeeper was hired and how internal control can be implemented to prevent dishonesty. Henri would like to prepare the coming year restaurant budget himself. Please, help Henri understand the…
You work as a cashier in a service business. Some days you are short of cash at the end of the day, and some days you have more cash than the cash register tape says was earned. You’re embarrassed when your cash is short and don't want the owner to know, so you use your own money to make up the difference. On days when you’re over, you keep the difference to help recoup what you paid to cover your shortages. What do you think of this practice and why?
In each of the situations described below, indicate the accounting principles or concepts, if any, that have been violated and explain briefly the nature of the violation. If you believe the practice is in accord with generally accepted accounting principles, state this as your position and defend it. a. A small business in which credit sales fluctuate greatly from year to year uses the direct writeoff method both for income tax purposes and in its financial statements. b. Computer Systems often sells merchandise in exchange for interest-bearing notes receivable, maturing in 6, 12, or 24 months. The company records these sales transactions by debiting Notes Receivable for the maturity value of the notes, crediting Sales for the sales price of the merchandise, and crediting Interest Revenue for the balance of the maturity value of the note. The cost of goods sold also is recorded. c. A company has $400,000 in unrestricted cash, $1 million in a bank account specifically earmarked for the…
Kadri is a sole proprietor who makes toys that he sells at local fairs and bazaars. Which would be the best source of documentation for him to determine his gross income? Copies of canceled checks. Receipt books. Current inventory. Petty cash slips.
Please , if you do not know the answer then please skip normally so that who knows about this question can answer . Please do not reject this,
As part of the review of her business Rita has been looking into what she is owed by various customers and how many debts are outstanding. Rita has been able to gather the following information about her customers and credit sales. Rita has reached out to an old University friend to get some advice about the likelihood of the amounts owed to her being uncollectible. Age of Customer Debt Amounts owed Estimate of % that (including GST) will not be collected. 1-30 days overdue 14,107.50 5% 31– 180 days overdue 6,204.00 16 % 181 – 365 days overdue 2,458.50 25 % 1 year + overdue 517.00 100 % 23,287.00 Perfect Cover Insurance Brokers sales data for the past year is Credit Sales and Commissions $42,900 $11,600 $ 2,400 (returns are only available on credit sales) Cash Sales and Commissions Sales Returns Industry data shows that 5% of credit transactions are likely to go bad. Rita has also informed you that the current balance in her allowance for doubtful debts account is 500 Dr after a recent…
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b. Discuss whether there has or has not been any violation of ethical conduct.
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You joined Henderson Technology Limited as accounting manager recently. In a management meeting, William Buckle, the managing director, expressed his concern on an amount due from Hunters Limited, which is long overdue and is unlikely to be recoverable. In a review of the aged debtors report, you found that over 40% of the debtors have overdue accounts. You also noted that there is no control system in place. You believe a better credit control system would help. You are required to prepare notes for your meeting with William, to outline the objective of having a control system in place, and the key points of a credit control system that would help to reduce overdue accounts.