Task 1: Dusty Horseman Corporation provides the following aging schedule of accounts receivable at December 31, 2011. The balance in the Allowance for Doubtful Accounts was $175,000 at January 1. During the year, $159,000 of bad debts were written off.
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Classification by Month of Sale
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Balance in Each Category
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Estimated Uncollectible
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November-December
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$1,080,000
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3%
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July-October
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650,000
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15%
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January-June
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420,000
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50%
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Prior to 1/1
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150,000
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90%
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$2,300,000
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Instructions:
A) Prepare a spreadsheet analyzing the accounts receivable and allowance for Doubtful Accounts for the year ended December 31, 2011. Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts..
B) The company discovered $100,000 of the accounts receivable listed as January-June sales had been ordered during that time period, but the actual sales were not made until August. Revise your report to include this information.
C) In addition to the change in part (B), assume Dusty Horseman Corporation revises its estimates of uncollectible accounts for the November-December sales category to 5%. Revise your report to include this additional information.
Task 2: Insole Vent Company purchased a building on January 1, 2003, paying $500,000 down and signing a mortgage note for an additional $4,500,000. The mortgage will be paid off with semi-annual payments (June 30 and December 31) over a period of 15 years. The mortgage rate is 8%.
Required:
A.
1. Prepare the mortgage amortization schedule for the 15 years of this note.
2. Prepare the journal entries for the date of the sale and for the first two payments.
B. Repeat part A assuming the mortgage rate is 6%.
C. Repeat part A assuming the down payment of $1,000,000 and a mortgage of $4,000,000.