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Concept explainers
(a)
Allowance method:
It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method,
To compute: The percentage of allowance for doubtful accounts to the
(b)
To compute: The percentage of allowance for doubtful accounts to the accounts receivable for J & J manufactures.
(c)
To discuss: The possible reasons for the difference in percentage of allowance for doubtful accounts to the accounts receivable between MGM Resorts and J & J manufactures.
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Chapter 8 Solutions
Financial & Managerial Accounting
- Domesticarrow_forwardThe Yankee Corporation has recently begun to accept credit cards. On July 7, Year 1, Yankee made a credit card sale of $600. Assume that the credit card fee is recorded on the date of sale and that the credit card company charges a fee of 3% for handling a credit card transaction. Which of the following correctly shows the effects of the sale on July 7? Assets 600 A. B. 582 C. 582 D. 600 Multiple Choice O Balance Sheet Liabilities + 18 ΝΑ ΝΑ ΝΑ Option B Option D Option C Option A Stockholders' Equity 582 582 582 600 Revenue 582 600 600 600 Income Statement Expense = Net Income Statement of Cash Flows ΝΑ ΝΑ 18 582 0A 18 ΝΑ 582 582 582 600 ΝΑ ΝΑarrow_forwardBassett Stores Company and Fox Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions): Merchandise sales Bassett Fox $208,050 $292,000 53,969 16,961 41,551 Credit card receivables beginning 20,317 Credit card receivables-ending a. (1) Determine the accounts receivable turnover for both companies. Round to one decimal place. Bassett Stores Fox Stores (2) Determine the days' sales in receivables for both companies. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place. Bassett Stores Fox Stores days days b. What conclusion can be drawn regarding the two companies and their credit card policies?arrow_forward
- Revenue Recognition Policy Decisions. For each of these situations, describe the revenue recognition policy that you believe that the company should follow. An international health club sells lifetime memberships costing $1,500 which allow the purchaser unlim-ited use of any of the club’s 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance. Franklin Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a $1,500 payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the customer sells the vehicle, whichever occurs first.…arrow_forwardplease answerarrow_forwardAccounts receivable analysis Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): A. Determine the (1) accounts receivable turnover and (2) the number of days sales in receivables for both companies. Round to one decimal place. B. Compare the two companies with regard to their credit card policies.arrow_forward
- Consider the following independent situations: For each of these situations, describe the revenue recognition policy that you believe that they should follow, explaining the basis for your recommendation 1. An international health club sells lifetime memberships costing $1,500 which allow the purchaser unlimited use of any of the club's 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance. 2. Franklin Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a $1,500 payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the…arrow_forwardAirport Accessories (AA) has several loans outstanding with a local bank. The loan contract contains an agreement that AA must maintain a current ratio of at least 0.90. Micah, the assistant controller, estimates that the year-end current assets and current liabilities will be $2,100,000 and $2,400,000, respectively. These estimates provide a current ratio of only 0.875. Violation of the debt agreement will increase AA’s borrowing costs because the loans will be renegotiated at higher interest rates.Micah proposes that AA purchase inventory of $600,000 on credit before year-end. This will cause both current assets and current liabilities to increase by the same amount, but the current ratio will increase to 0.90. The extra $600,000 in inventory will be used over the next year. However, the purchase will cause warehousing costs and financing costs to increase. Micah is concerned about the ethics of his proposal. What do you think?arrow_forwardMan Please give me correct answer with explanationarrow_forward
- Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…arrow_forwardConsider the following information from Alliance Data Systems Corporation 2009 10K.On October 30, 2009, the Company assumed the operations of the Charming Shoppes’ credit card program, including the service center operations associated with Charming Shoppes’ branded card progams, portfolio and securitization master trust. The transaction consisted of purchasing existing accounts and the rights to new accounts along with certain other assets that are required to support the securitization program including retained certificates and interests, cash collateral accounts, and an interest-only strip, totaling a combined $158.9 million. The Company obtained control of the assets and assumed the liabilities on October 30, 2009, the acquisition date. The reults of operations for this acquisition have been included since the date of acquisition and are reflected in the Private Label Services and Private Label Credit segments.The Company engaged a third-party specialist to assist it in the…arrow_forwardanswer in text form please (without image), Note: .Every entry should have narration pleasearrow_forward
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
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