BF20 ACCOUNTING FUNDAMENTALS 2 Part 2 Question 1 (15 marks) Abercrombie Company uses four special journals: Purchases, Sales, Cash Receipts, and Cash Disbursements. The following transactions were incurred during August: Aug. 1 Purchased merchandise from Able Co. for $2,000, terms 2/10, n/30. 3 Purchased merchandise from Baker Co. for $1,000, terms 1/15, n/30. 4 Sold merchandise on credit to Coe Co. for $4,000, terms 2/10, n/30, Invoice No. 245. 8 Purchased office supplies on credit from Echo Co. for $300, terms n/30. 9 Returned merchandise costing $200 to Able Co. from August 1 purchase. 11 Paid Able Co. for the August 1 purchase, Cheque No. 758. 13 Received payment from Coe Co. for August 4 sale. 15 Paid rent expense $1,500, Cheque No. 759. 18 Received $2,300 for a $2,000 note receivable from Fox Corp. 20 Made payment in full to Baker Co. for the August 3 purchase, Cheque No. 760. 28 Recorded cash sales for the month $9,000. 29 Paid monthly telephone bill $250, Cheque No. 761. Record the above transactions in the appropriate journals below. Ignore transactions that should not be posted to the journals provided. Purchase Journal & Cash Payments Journal are required. Question 2 (15 marks) On May 31, 20X5 the Cash account of Perkins Supply Company had a balance of $43,820. On that date, the bank statement indicated a balance of $54,600. The bank reported the collection of a note receivable for Perkins of $6,300 plus $300 of interest. The $1,700 cheque of a customer, Raymond Frank, was returned by the bank because of insufficient funds. The bank charged Perkins $60 for services. The bank erroneously failed to credit a $4,200 deposit to Perkins' account. It was observed that the bank statement did not include a deposit of $4,700 made by Perkins on May 31 and that cheques totaling $13,400 issued by Perkins had not cleared the bank. Perkins recorded an insurance expense payment of $160 as $1,600. A. Prepare a bank reconciliation (in good form) as of May 31. B. Prepare, in general journal form, the entry (entries) necessary to adjust Perkins' records based on the bank reconciliation. Question 3 (5 marks) Ten days ago a company established a $90 petty cash fund. Today, October 5, the petty cash box contains $3 in cash and the following paid petty cash receipts: transportation - in, $14.25; postage, $34.50; and office supplies, $36. Give the entry to reimburse the fund and to increase its size to $150. Question 4 (15 marks) GHD Company has 10 sales employees, each of whom earns $4,000 per month and is paid the last working day of the month. Canada Pension Plan is 4.95 percent of the pensionable earnings and Employment Insurance is 1.78 percent of the insurable earnings. Withholdings for each employee also include federal income tax of 15% and medical insurance premiums of $220. Present a general journal entry to accrue the payroll on December 31, 20XX. [ NOTE: CPP exemptions must be considered for the answer] Continuing the facts about GHD Company in 1 above, present the entry to record GHD Company's employer benefits for the month of December. Calculate the employee and employer portion of CPP and EI. Question 5 (5 marks) MGB Company has a weekly payroll of $30,500 and grants two weeks' vacation after one year's employment, which amounts to 4% of annual pay. Based on past turnover rates, the employer estimates that 70 percent of employees actually will be granted vacation time. Prepare a general journal entry to record the estimated vacation pay resulting from the weekly payroll. Question 6 (10 marks) Summerville, Inc. has the following account balances at December 31, 2005: Accounts Receivable $185,600 and Allowance for Doubtful Accounts $1,600 (credit balance). Summerville, Inc. uses the aging of accounts receivable to estimate bad debts. The following aging schedule reflects the situation at year-end: Age Group Account Age Current 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due Balance $96,000 64,000 16,000 6,400 3,200 Estimated Uncollectib le Percentage 2.0 5.0 15.0 35.0 45.0 (1) Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, 20X5, balance sheet. (2) Prepare the journal entry to record 20X5 bad debts expense. Question 7 (15 marks) The following is from the financial statements of Exquisite Ensembles: Net sales Accounts receivable (Dec 31) 2006 $1,260,000 2005 $1,020,000 2004 $850,000 92,800 88,000 84,200 Calculate Exquisite Ensembles' accounts receivable turnover for 2005 and 2006. Compare the two results and give a possible explanation for any significant change