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Instructions

Hello Class -

Please complete the following problems for this week assignment.

Part 1 (E7-20)

(Analysis of Receivables) Presented below is information for Jones Company.

1. Beginning-of-the-year Accounts Receivable balance was $15,000. 2. Net sales (all on account) for the year were $100,000. Jones does not offer cash discounts. 3. Collections on accounts receivable during the year were $70,000.

Instructions

(a) Prepare (summary) journal entries to record the items noted above. (b) Compute Joness accounts receivable turnover and days to collect receivables for the year. The company does not believe it will have any bad debts. (c) Use the turnover ratio computed in (b) to analyze Joness liquidity. The turnover ratio last year was 6.0.

Part 2 (E7-21)

(Transfer of Receivables) Use the information for Jones Company as presented in E7-20.

Jones is planning to factor some accounts receivable at the end of the year. Accounts totaling $25,000 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 5% of the balances for probable adjustments and assesses a finance charge of 4%. The fair value of the recourse obligation is $1,200.

Instructions

(a) Prepare the journal entry to record the sale of the receivables. (b) Compute Joness accounts receivable turnover for the year, assuming the receivables are sold, and discuss how factoring of receivables affects the turnover ratio.

Part 3 (P7 - 1)

(Determine Proper Cash Balance) Francis Equipment Co. closes its books regularly on December 31, but at the end of 2017 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of January were recorded as December transactions. The information is given below.

1. January cash receipts recorded in the December cash book totaled $45,640, of which $28,000 represents cash sales, and $17,640 represents collections on account for which cash discounts of $360 were given. 2. January cash disbursements recorded in the December check register liquidated accounts payable of $22,450 on which discounts of $250 were taken. 3. The ledger has not been closed for 2017. 4. The amount shown as inventory was determined by physical count on December 31, 2017. The company uses the periodic method of inventory.

Instructions

(a) Prepare any entries you consider necessary to correct Franciss accounts at December 31. (b) To what extent was Francis Equipment Co. able to show a more favorable balance sheet at December 31 by holding its cash book open? (Compute working capital and the current ratio.) Assume that the balance sheet that was prepared by the company showed the following amounts:

	Debit (Dr)	Credit (Cr)
Cash	$39,000
Accounts Receivable	42,000
Inventory	67,000
Accounts Payable		$45,000
Other Current Liabilities		14,200