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Jayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, Its fiscal year-end, and determined the account balance to be $14,000. The unadjusted balances of selected accounts at December 31, 2023 are as follows: Accounts receivable Allowance for doubtful accounts (debit) Sales revenue (including 80 percent in sales on account) $300,000 10,000 800,000 Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts. Required: 1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Sales revenue B 2 Cash Accounts receivable Debit 700,000 Credit 700,000 500,000 500,000 с 3 Allowance for doubtful accounts 8,000 Accounts receivable 8,000 D 4 Bad debt expense 6,000 x Allowance for doubtful accounts 6,000 x Beg. bal. Credit sales Bad debt expense Collections End. bal. Accounts Receivable 0 700,000 192,000 500,000 8,000 Beg. bal. Write-offs x x End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Allowance for Doubtful Accounts 0 8,000 22,000 Bad debt expense 14,000 2. Prepare the journal entries to record all the transactions during 2023 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Cash Sales revenue B 2 Allowance for doubtful accounts Accounts receivable C 3 Cash D Accounts receivable Debit 640,000 Credit 160,000 800,000 24,000 24,000 508,000 508,000 Bad debt expense 24,000 x Allowance for doubtful accounts 24,000 x Accounts Receivable Allowance for Doubtful Accounts Beg. bal. 192,000 Credit sales 640,000 508,000 Collections 24,000 Write-offs Beg. bal. Write-offs 14,000 24,000 Unadj. Bal 10,000 24,000 × Bad debt expense End. bal. 300,000 End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 14,000 3. Compute the receivables turnover ratio and the average collection period for 2023. (Use 365 days a year. Round "Receivables turnover" to 2 decimal places and other answer to nearest whole number.) Receivables turnover 2.60 x times Average collection period 140 x days

Jayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, Its fiscal year-end, and determined the account balance to be $14,000. The unadjusted balances of selected accounts at December 31, 2023 are as follows: Accounts receivable Allowance for doubtful accounts (debit) Sales revenue (including 80 percent in sales on account) $300,000 10,000 800,000 Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts. Required: 1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Sales revenue B 2 Cash Accounts receivable Debit 700,000 Credit 700,000 500,000 500,000 с 3 Allowance for doubtful accounts 8,000 Accounts receivable 8,000 D 4 Bad debt expense 6,000 x Allowance for doubtful accounts 6,000 x Beg. bal. Credit sales Bad debt expense Collections End. bal. Accounts Receivable 0 700,000 192,000 500,000 8,000 Beg. bal. Write-offs x x End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Allowance for Doubtful Accounts 0 8,000 22,000 Bad debt expense 14,000 2. Prepare the journal entries to record all the transactions during 2023 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Cash Sales revenue B 2 Allowance for doubtful accounts Accounts receivable C 3 Cash D Accounts receivable Debit 640,000 Credit 160,000 800,000 24,000 24,000 508,000 508,000 Bad debt expense 24,000 x Allowance for doubtful accounts 24,000 x Accounts Receivable Allowance for Doubtful Accounts Beg. bal. 192,000 Credit sales 640,000 508,000 Collections 24,000 Write-offs Beg. bal. Write-offs 14,000 24,000 Unadj. Bal 10,000 24,000 × Bad debt expense End. bal. 300,000 End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 14,000 3. Compute the receivables turnover ratio and the average collection period for 2023. (Use 365 days a year. Round "Receivables turnover" to 2 decimal places and other answer to nearest whole number.) Receivables turnover 2.60 x times Average collection period 140 x days

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter6: Cash And Receivables
Section: Chapter Questions
Problem 12E: Inferring Accounts Receivable Amounts At the end of 2019, Karras Inc. had a debit balance of 141,120...
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  1. Problem Three (15 marks) 

    You are an analyst in charge of valuing common stocks. You have been asked to value two stocks. The first stock NEWER Inc. just paid a dividend of $6.00. The dividend is expected to increase by 60%, 45%, 30% and 15% per year, respectively, in the next four years. Thereafter, the dividend will increase by 4% per year in perpetuity. 

    1. Calculate NEWER’s expected dividend for t = 1, 2, 3, 4 and 5.

    The required rate of return for NEWER stock is 14% compounded annually.

    1. What is NEWER’s stock price?

    The second stock is OLDER Inc. OLDER Inc. will pay its first dividend of $10.00 three (3) years from today. The dividend will increase by 30% per year for the following four (4) years after its first dividend payment. Thereafter, the dividend will increase by 3% per year in perpetuity. 

    1. Calculate OLDER’s expected dividend for t = 1, 2, 3, 4, 5, 6, 7 and 8.

    The required rate of return for OLDER stock is 16% compounded annually.

    1. What is OLDER’s stock price?

    Now assume that both stocks have a required rate of return of 40% per year compounded annually for the first six years, 25% per year compounded annually for the following five years, then 12% per year compounded annually thereafter.

    1. What is NEWER’s stock price?
    2. What is OLDER’s stock price?

    (Hint: You may need to forecast more dividends than you did in parts a, and c.)

    Note 1: You cannot use the NPV function to immediately value the stocks at time 0, as the required rate of return changes during the forecast period. 

    Note 2: All calculations should be rounded to the nearest cent. That is two decimal places.

    Problem Four (15 marks)

     

    On December 31st, 2004, your grandmother decided to buy a 30-year Government of Canada bond. The bond had a face value of $1,000,000. The annual coupon rate on the bond was 4.40%. Coupons were paid semi-annually. On December 31st, 2004, the yield to maturity on Government of Canada bonds was 3.70% per year. (The term structure of interest rates or yield curve was flat.)

     

    After holding the bond for 20 years, your grandmother decided to sell the bond on December 31st, 2024. Prior to selling the bond, your grandmother received the December 31st, 2024 coupon payment. On December 31st, 2024, the yield to maturity on Government of Canada bonds had increased to 4.10% per year. (The term structure of interest rates or yield curve was flat.)

     

    1. How much did your grandmother pay for the bond on December 31st, 2004?

     

    1. How much did your grandmother sell the bond for on December 31st, 2024?

     

    1. What was the rate of return that your grandmother earned on her investment during the 20 years?
    1. Quote it as an effective periodic rate.
    2. Quote it as an effective annual rate.

     

    1. What would have been your grandmother’s rate of return on her investment if she had held the bond until maturity instead?
    1. Quote it as an effective periodic rate.
    2. Quote it as an annual percentage rate. What do you notice about this rate?


    ANSWR ALL QUESTIONS #3-6

Jayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, Its fiscal year-end, and determined the account balance to be $14,000. The unadjusted balances of selected accounts at December 31, 2023 are as follows: Accounts receivable Allowance for doubtful accounts (debit) Sales revenue (including 80 percent in sales on account) $300,000 10,000 800,000 Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts. Required: 1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Sales revenue B 2 Cash Accounts receivable Debit 700,000 Credit 700,000 500,000 500,000 с 3 Allowance for doubtful accounts 8,000 Accounts receivable 8,000 D 4 Bad debt expense 6,000 x Allowance for doubtful accounts 6,000 x Beg. bal. Credit sales Bad debt expense Collections End. bal. Accounts Receivable 0 700,000 192,000 500,000 8,000 Beg. bal. Write-offs x x End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Allowance for Doubtful Accounts 0 8,000 22,000 Bad debt expense 14,000
Transcribed Image Text:Jayco Inc. started its operations in 2022. Its sales during 2022, all on account, totalled $700,000. The company collected $500,000 in cash from customers during the year and wrote off $8,000 in uncollectible accounts. The company set up an allowance for doubtful accounts at December 31, 2022, Its fiscal year-end, and determined the account balance to be $14,000. The unadjusted balances of selected accounts at December 31, 2023 are as follows: Accounts receivable Allowance for doubtful accounts (debit) Sales revenue (including 80 percent in sales on account) $300,000 10,000 800,000 Aging of the accounts receivable on December 31, 2023, resulted in an estimate of $11,000 in potentially uncollectible accounts. Required: 1. Prepare the journal entries to record all the transactions during 2022 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Sales revenue B 2 Cash Accounts receivable Debit 700,000 Credit 700,000 500,000 500,000 с 3 Allowance for doubtful accounts 8,000 Accounts receivable 8,000 D 4 Bad debt expense 6,000 x Allowance for doubtful accounts 6,000 x Beg. bal. Credit sales Bad debt expense Collections End. bal. Accounts Receivable 0 700,000 192,000 500,000 8,000 Beg. bal. Write-offs x x End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Allowance for Doubtful Accounts 0 8,000 22,000 Bad debt expense 14,000
2. Prepare the journal entries to record all the transactions during 2023 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Cash Sales revenue B 2 Allowance for doubtful accounts Accounts receivable C 3 Cash D Accounts receivable Debit 640,000 Credit 160,000 800,000 24,000 24,000 508,000 508,000 Bad debt expense 24,000 x Allowance for doubtful accounts 24,000 x Accounts Receivable Allowance for Doubtful Accounts Beg. bal. 192,000 Credit sales 640,000 508,000 Collections 24,000 Write-offs Beg. bal. Write-offs 14,000 24,000 Unadj. Bal 10,000 24,000 × Bad debt expense End. bal. 300,000 End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 14,000 3. Compute the receivables turnover ratio and the average collection period for 2023. (Use 365 days a year. Round "Receivables turnover" to 2 decimal places and other answer to nearest whole number.) Receivables turnover 2.60 x times Average collection period 140 x days
Transcribed Image Text:2. Prepare the journal entries to record all the transactions during 2023 and post them to appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Transaction General Journal A 1 Accounts receivable Cash Sales revenue B 2 Allowance for doubtful accounts Accounts receivable C 3 Cash D Accounts receivable Debit 640,000 Credit 160,000 800,000 24,000 24,000 508,000 508,000 Bad debt expense 24,000 x Allowance for doubtful accounts 24,000 x Accounts Receivable Allowance for Doubtful Accounts Beg. bal. 192,000 Credit sales 640,000 508,000 Collections 24,000 Write-offs Beg. bal. Write-offs 14,000 24,000 Unadj. Bal 10,000 24,000 × Bad debt expense End. bal. 300,000 End. bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 14,000 3. Compute the receivables turnover ratio and the average collection period for 2023. (Use 365 days a year. Round "Receivables turnover" to 2 decimal places and other answer to nearest whole number.) Receivables turnover 2.60 x times Average collection period 140 x days
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