Question

Problem 7.7A Short Comprehensive Problem L.O. 1, 3, 4, 5, 6, 7 (25) The Scooter Warehouse provided the following information at December 31, 2013: Bank Reconciliation General ledger cash Bank statement balance, balance, 12/31/13 $ 17,566 12/31/13 $ 16,306 Bank service charge Deposits in transit 2,450 Returned customer checks marked NSF (375) Outstanding checks (1,356) Error in recording of office supplies 234 Adjusted cash balance, Adjusted cash balance. 12/31/13 $ 17,400 12/31/13 $ 17,400 Investment in securities The company invested $26,000 in a portfolio of investment in securities on December 22, 2013. The portfolio's market value on December 31, 2013, had increased in value to $28,500. Notes Receivable On November 1, 2013, The Scooter Warehouse sold 25 scooters to Bermuda Fantasy Resort for $65,000. The resort paid $5,000 at the point of sale and issued a one-year, $60,000, 5 percent note for the remaining balance. The note, plus accrued interest, is due in full on October 31, 2014. The Scooter Warehouse adjusts for accrued interest revenue monthly Accounts Receivable The Scooter Warehouse uses a statement of financial position approach to account for impairment loss of receivable. Outstanding accounts receivable on December 31, 2013, total $450,000. After aging these accounts, the company estimates that their estimated collectible amount is $435,000. Prior to making any adjustment to record impaiment loss, The Scooter Warehouse's Allowance for Impairment has a credit balance of $4,000 a. Prepare the journal entry necessary to update the company's accounts immediately after performing its bank reconciliation on December 31, 2013. (Omit the "S" sign in your response.) Date General Journal Debit Credit Dec. 31 (Click to select) (Click to select) Click to select) (Click to select)

Answer 1

BANK RECONCILIATIO STATEMENT AS ON 31.12.2013 16306 BALANCE AS PER BANK STATEMENT ADD:- CHEQUE DEPOSIT BUT NOT CLEARED 2450 18756 LESS:- CHEQUE ISSUED BUT NOT PRESENTED FOR PAYMENT 1356 NET BALANCE AS PER CASH BOOK 17400 INVESTMENT IN SECURITIES INVESTMENT VALUE MARKET VALUE AS ON 31.12.2013 UNREALISED PROFIT 26000 28500 2500 AS PER ACCOUNTING PRINCIPAL OF PRUDENCE CONCEPT, WE HAVE NOT TO RECORD REVENUE UNTIL COMPLETION OF TRANSACTION. MEAN ALL FUTURE UNCERTAIN EXPENSES AND LOSS TO BE RECOGNISED, BUT FUTURE UNCERTAIN INCOME AND GAINS SHOULD NOT BE RECOGNISED. HENCE AT THE ABOVE SECURITIES HAVE NOT BEEN SOLD ON 31.12.2013 AND PROFIT IS UNREALISED. HENCE PROFIT IN THE SECURITIES CAN NOT BE RECOGNISED. REMARKS NO ENTRY IS NEEDED

NOTES RECEIVABLE SALE OF SCOOTER ON 01.11.2013 PAYMENT RECEIVED BALANCE NOTES BEARING RATE OF INTEREST 65000 5000 60000 5% DUE DATE OF PAYMENT 31.10.2014 TIME FROM 01.11.2013 UPTO 31.12.2013 INTEREST FOR 2 MONTHS @ 5% HENCE INTEREST AMOUNT 2 MONTH =60000*5/100*2/12 500 IN THIS CASE THIS INTEREST IS CERTAIN THAT IT WILL BE RECEIVED AS PER TERM OF NOTES RECEIVABLE HENCE THIS INTEREST INCOME WILL BE BOOKED IN THE FOLLOWING ACCOUNTING ENTRY ACCOUTING ENTRY 31.12.2013 5% NOTES RECEIVEBALE A/C DR 500 TO INTEREST ON NOTES RECEIVED (BEING AMOUNT OF INTEREST ON 5% NOTES RECEIVABLE IS ACCRUED) 500 ACCOUNTS RECEIVABLE TOTAL OUTSTANDING AS ON 31.12.2013 ESTIMATED COLLECTABLE AMOUNT AMOUNT OF IMPAIMENT LOSS LESS:- CR BALANCE ALLOWANCE FOR IMPAIRMENT 450000 435000 15000 4000 TOTAL IMPAIRMENT 11000 ACCOUTING ENTRY 31.12.2013 IMPAIRMENT LOSS FOR ACCOUNT RECEIVABLE ALLOWANCES FOR IMPAIRMENT IN ACCOUNT RECEIVABLE TO ACCOUNTS RECEIABLE 11000 4000 15000 (BEING AMOUNT OF IMPAIRMENT LOSS ON ACCOUNT RECEIVABLE RECOGNISED)