AssignmentSix Chapter Seven DueNov 12th

Question one(6 marks)

On January 1, 2013, Cameroon Corp. lent $50,000 to its CEO, interest-free. Use salaries expense for any expense related to the transaction. The loan is repayable in full in five years. The market rate for similar loans (with similar credit risk) is 4%.

Instructions

a)Calculate the present value (fair value) of this loan (round to the nearest dollar).Why is it not the same as the actual cash advanced?

b)Prepare the journal entry to record this transaction.

Question Two(6 marks)

Marilyn Corporation had record sales in 2016. It began 2016 with an Accounts Receivable balance of $675,000 and an Allowance for Doubtful Accounts of $41,000. Marilyn recognized credit sales during the year of $5,675,000 and made monthly adjusting entries equal to 0.6% of each month's credit sales to recognize bad debt expense. Also during the year the company wrote off $45,500 of accounts that were deemed to be uncollectible, although one customer whose $7,000 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $5,703,500 cash was collected on account in 2016.

In preparation for the audited year-end financial statements, the controller prepared the following aging listing of the receivables at December 31, 2016:

Balance

Percentage estimated to be uncollectible

0-30 days outstanding

$385,000

2%

31-60 days outstanding

$ 109,000

10%

61-90 days outstanding

$ 47,000

15%

Over 90 days outstanding

$67,000

20%

Instructions:

Prepare a schedule calculating the balance in Marilyn's Allowance for Doubtful Accounts at December 31, 2016. Prepare any necessary journal entry at year end to adjust the allowance for doubtful accounts to the required balance.

Question Three (10 marks)

Benin Company deposits all receipts daily and makes all payments by cheque. The following information is available from the cash records:

March 31 Bank Reconciliation

Balance per bank.................................................................... $35,160

Add:Deposits in transit.......................................................... 4,200

Deduct:Outstanding cheques............................................... (3,200)

Balance per books.................................................................. $36,160

Month of April Results

Per BankPer Books

Balance April 30...................................................................... $38,000$42,140

April deposits recorded.......................................................... 11,20017,300

April cheques recorded.......................................................... 12,01011,320

Items on bank statement but not in books:

Note collectedby bank........................................................... 5,500-0-

Bank service charge............................................................... 50-0-

Customer's NSF cheque returned by the bank....................... 1,800-0-

Instructions

a)Calculate the amount of the April 30:

1.Deposits in transit

2.Outstanding cheques

b)What is the April 30 adjusted cash balance? Show all work.

*

Question 4(8 marks)

Notes Receivable.

On December 31, 2016 Marilyn Inc. provided service to Sports Unlimited, accepting a six percent, five-year promissory note having a maturity value of $800,000 (interest payable annually on December 31). Marilyn Inc.pays 7 percent for its borrowed funds. Sports Unlimited, however, because it is considered a higher risk, pays 9 percent for its borrowed funds.

Instructions

a)Prepare the journal entries to record the transaction on the books of Marilyn Inc.at December 31, 2016. (Assume that the effective interest method is used.)

b)Make all appropriate entries for 2017 on the books of Marilyn..