PART 1

Rogala Foods Inc. was formed in 2015 with the merger of Grouch Mayer and Tashamo Corporation. The company reported the following rounded amounts for the year ended January 3, 2016 (all amounts in millions):

Debits Credits

Accounts Receivable $1,140

Allowance for Doubtful Accounts $28

Sales (assume all on credit) 18,500

1. Required:Assume Rogala uses 3/4 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.
2. Assume instead Rogala uses the aging of accounts receivable method and estimates that $82 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense.
3. Assume instead that Rogala's uses the aging of accounts receivable method and estimates that $82 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense assuming Rogala's unadjusted balance in Allowance for Doubtful Accounts at January 3, 2016 was a debit balance of $22.
4. If one of Rogala's customers declared bankruptcy, what journal entry would be used to write off its $20 balance?

Required 1

Assume Rogala uses 3/4 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Round your answers to the nearest whole number.)

Record the entry for bad debt expenses under the percentage of credit sales method. (Note: Enter debits before credits.)

Date General Journal Debit Credit

January 03, 2016

Required 2

Assume instead Rogala uses the aging of accounts receivable method and estimates that $82 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense.(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Round your answers to the nearest whole number.)

Record the entry for bad debt expenses under the aging of accounts receivable method. (Note: Enter debits before credits.)

Date General Journal Debit Credit

January 03, 2016

Required 3

Assume instead that Rogala's uses the aging of accounts receivable method and estimates that $82 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense assumingRogala's unadjusted balance in Allowance for Doubtful Accounts at January 3, 2016 was a debit balance of $22.(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Record the adjusting entry for bad debts as of January 3, 2016 using the aging of accounts receivable method. (Note: Enter debits before credits.)

Date General Journal Debit Credit

January 03, 2016

Required 4

If one of Rogala's customers declared bankruptcy, what journal entry would be used to write off its $20 balance?(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Record the write-off of a certain customer account totaling $20 which is not collectible due to bankruptcy declared by the customer. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

1

PART 2

TravelToday, Inc., disclosed the following rounded amounts (in thousands) concerning the Allowance for Doubtful Accounts on its Form 10-K annual report.

Allowance for Doubtful Accounts

(dollars in thousands)

Beginning Increases for Decreases for Ending

Year Balance Bad Debt Expense Write Offs Balance

2016 $9,000 $4,000 $? $1,200

2015 8,000 4,600 3,600 9,000

2014 12,500 900 5,400 8,000

Required:

1. 1-a.Create a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance.
2. 1-b.Write the T-account in equation format to prove the above items account for the changes in the account.
3. 2.Record summary journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances.
4. 3.Supply the missing information for 2016.
5. 4.If TravelToday had written off an additional $30 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased?

Required 1-a

Create a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance.(Enter your answers in thousands.)

Allowance for Doubtful Accounts

Beg. Bal. [ ][ ][ ]

[ ][ ][ ][ ]

[ ][ ][ ][ ]

[ ][ ][ ][ ]

End. Bal. [ ][ ][ ]

Required 1-b

Write the T-account in equation format to prove the above items account for the changes in the account.(Enter your answers in thousands.)

Beginning Balance + - = Ending Balance

[ ] + [ ] - [ ] [= $[ ]

Required 2

Record summary journal entries for 2015 related to(a)estimating Bad Debt Expense and(b)writing off specific customer account balances.(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands.)

Record the adjusting entry in 2015 for bad debts. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

a

Record the adjusting entry in 2015 for the write-off of specific customer balances. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

b

Required 3

Supply the missing information for 2016.(Enter your answers in thousands.)

Allowance for Balance at Additions Charged to Write Offs Balance at End of Year

Doubtful Accounts Beginning of Year Bad Debt Expense

2016 9,000 [ ] 4,000 [ ] [ ] = 1,200

Required 4

IfTravelToday had written off an additional $30 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased?(Enter your answers in thousands.)

Net Receivables [ ]

Net Income [ ]

PART 3

C&S Marketing (CSM) recently hired a new marketing director, Jeff Otos, for its downtown Minneapolis office. As part of the arrangement, CSM agreed on February 28, 2018, to advance Jeff $30,000 on a one-year, 7 percent note, with interest to be paid at maturity on February 28, 2019. CSM prepares financial statements on June 30 and December 31.

Prepare the journal entry CSM will make when the note is established, accrue interest on June 30 and December 31, and the interest and principal payments on February 28, 2019.(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your final answers to whole dollar amount.)

• Record the receipt of a note on February 28, 2018 for a $30,000 loan to an employee. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Feb 28, 2018

• Record the interest accrued on the note as of June 30, 2018. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Jun 30, 2018

• Record the interest accrued on the note as of December 31, 2018. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2018

• Record the receipt of the payment for interest for the period ending February 28, 2019. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Feb 28, 2019

• Record the receipt of the payment for the principal on the note's maturity date. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Feb 28, 2019

PART 4

Web Wizard, Inc., has provided information technology services for several years. For the first two months of the current year, the company has used the percentage of credit sales method to estimate bad debts. At the end of the first quarter, the company switched to the aging of accounts receivable method. The company entered into the followingpartiallist of transactions during the first quarter.

a. During January, the company provided services for $38,000 on credit.

b. On January 31, the company estimated bad debts using 1 percent of credit sales.

c. On February 4, the company collected $19,000 of accounts receivable.

d. On February 15, the company wrote off a $100 account receivable.

e. During February, the company provided services for $28,000 on credit.

f. On February 28, the company estimated bad debts using 1 percent of credit sales.

g. On March 1, the company loaned $2,400 to an employee, who signed a 6% note, due in 6 months.

h. On March 15, the company collected $100 on the account written off one month earlier.

i. On March 31, the company accrued interest earned on the note.

j. On March 31, the company adjusted for uncollectible accounts, based on an aging analysis (below). Allowance for Doubtful Accounts has an unadjusted credit balance of $1,180.

Number of Days Unpaid

Customer: Total 0-30 31-60 61-90 Over 90

Alabama Tourism $200 $100 $80 $20

Bayside Bungalows 380 $380

Others (not shown to save space) 16,600 6,600 8,200 1,000 800

Xciting Xcursions 400 400

Total Accounts Receivable $17,580 $7,100 $8,280 $1,020 $1,180

Estimated Uncollectible (%) 2% 15% 20% 40%

Part 4 Required 1

For items(a)-(j), analyze the transaction to determine effects on specific financial statement accounts and the overall accounting equation.(Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign. Do not round intermediate calculations.)

Assets = Liabilities + Stockholders' Equity

a. [ ] [ ] [ ] [ ] [ ] [ ]

b. [ ] [ ] [ ] [ ] [ ] [ ]

c. [ ] [ ] [ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ] [ ] [ ]

d. [ ] [ ] [ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ] [ ] [ ]

e. [ ] [ ] [ ] [ ] [ ] [ ]

f. [ ] [ ] [ ] [ ] [ ] [ ]

g. [ ] [ ] [ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ] [ ] [ ]

h. [ ] [ ] [ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ] [ ] [ ]

i. [ ] [ ] [ ] [ ] [ ] [ ]

j. [ ] [ ] [ ] [ ] [ ] [ ]

Part 4 Required 2

Prepare the journal entries for items (a)-(j).(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

• Record service revenue of $38,000 sold on account during January. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

a.

• Record the adjusting entry for bad debts as of January 31 using 1 percent of credit sales. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

b.

• Record the collection of $19,000 of outstanding accounts receivables on February 4. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

c.

• Record the write-off of a $100 account receivable on February 15. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

d.

• Record service revenue of $28,000 provided on account during February. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

e.

• Record the adjusting entry for bad debts as of February 28 using 1 percent of credit sales. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

f.

• Record the receipt of a note on March 1 for a $2,400 loan to an employee. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

g.

• Record the reversal of a $100 account receivable previously written off one month earlier. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

h(1).

• Record the receipt of cash of $100 from the customer. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

h(2).

• Record the interest accrued on the note as of March 31. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

i.

• Record the adjusting entry for bad debts as of March 31 using the aging of accounts receivable method. (Note: Enter debits before credits.)

Transaction General Journal Debit Credit

j.

Part 4 Required 3

Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet at the end of the quarter on March 31.(Do not round intermediate calculations.)

WEB WIZARD, INC.

Partial Balance Sheet

At March 31

Assets

Current Assets:

[ ] [ ]

[ ] [ ]

Accounts Receivable, Net of Allowance [ ]

[ ] [ ]

[ ] [ ]

[ ] [ ]

Part 4 Required 4

Sales Revenue and Service Revenue are two income statement accounts that relate to Accounts Receivable. Name two other accounts related to Accounts Receivable and Notes Receivable that would be reported on the income statement and indicate whether each would appear before, or after, Income from Operations.

Web Wizard would report

[ ] [ ] Income from Operations.

[ ] [ ] Income from Operations.

PART 5

Cola Inc. and Soda Co. are two of the largest and most successful beverage companies in the world in terms of the products that they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following rounded amounts reported in their annual reports (amounts in millions).

Cola Inc. Soda Co.

Fiscal Year Ended: 2015 2014 2013 2015 2014 2013

Net Sales $32,719 $28,190 $29,444 $55,338 $40,732 $40,751

Accounts Receivable 4,428 3,763 3,091 6,417 4,664 3,734

Allowance for Doubtful Accounts 43 50 46 139 85 65

Accounts Receivable, Net of Allowance 4,385 3,713 3,045 6,278 4,579 3,669

Required:

1.Calculate the receivables turnover ratios and days to collect for Cola Inc. and Soda Co. for 2015 and 2014.(Use 365 days in a year. Do not round intermediate calculations on Accounts Receivable Turnover Ratio. Round your final answers to 1 decimal place. Use final rounded answers from Accounts Receivable Turnover Ratio for Days to Collect ratio calculation.)

2015 2014

Cola Inc. Soda Co. Cola Inc. Soda Co.

Receivables Turnover Ratio [ ] [ ] [ ] [ ]

Days to collect [ ] [ ] [ ] [ ]

2.Which of the companies is quicker to convert its receivables into cash?

Cola Inc. OR Soda Co.?