Questions -
Q1. 1. On December 31, 2011, when its Allowance for Doubtful Accounts had a debit balance of $1,800, Nova Co. estimates that 12% of its accounts receivable balance of $85,200 will become uncollectible and records the necessary adjustment to the Allowance for Doubtful Accounts.
2. On May 11, 2012, Nova Co. determined that J. Rast's account was uncollectible and wrote off $3,000.
3. On June 12, 2012, Rast paid the amount previously written off.
Prepare the journal entries on December 31, 2011, May 11, 2012, and June 12, 2012.
Q2. The following ratios are available for Tym Inc.
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2012
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2011
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Current ratio
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1.3:1
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1.5:1
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Receivables turnover
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12 times
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10 times
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Inventory turnover
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11 times
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9times
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Is Tym's short-term liquidity improving or deteriorating in 2012? Be specific in your answer, referring to relevant ratios.
Q3. On January 6 Gramke Co. sells merchandise on account to Colt Inc. for $8,000, terms 1/10, n/30. On January 16 Colt pays the amount due.
Prepare the entries on Gramke Co.'s books to record the sale and related collection.
Q4. Green Plains Supply Co. has the following transactions related to notes receivable during the last 2 months of the year.
Nov. 1 Loaned $60,000 cash to B. Younger on a 1-year, 8% note.
Dec. 11 Sold goods to R. P. Meier, Inc., receiving a $3,600, 90-day, 7% note.
Dec. 16 Received an $12,000, 6-month, 9% note to settle an open account from M. Chen.
Dec. 31 Accrued interest revenue on all notes receivable.
Journalize the transactions for Green Plains Supply Co.