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132 Part Case 5-1 Stern Corporation (A) On December 31, 2010, before the yearly financial were circulating that the trustee in bankruptcy for statements were prepared the controller of the Stern the Hollowell Company would pay all obligations 00 cents on the dollar. Corporation reviewed certain transactions that affected accounts receivable and the allowance for doubtful ac 5. The Allowance for Bad Debts was adjusted to equal counts. The controller first examined the December 3i. of the balance in Accounts at 3 percent 2009, balance sheet (Exhibit I on page 133). A subse- the end of the year. quen: review of the year's transactions applicable to accounts receivable revealed the items listed below. uestions during 2010 amounted I. Sales $9.965,575 1. Analyze the effect of each of these transactions in 2. Payment received on accounts receivable during terms of its effect on Accounts Receivable, 2010 totaled S9.685,420. Allowance for Doubtful Accounts, and any other 3. During the year. accounts receivable totaling account that may be involved. and prepare neces S26,854 were deemed uncollectible and were written sary journal entries. 2. the correct totals for Accounts Receivable 4. Two accounts that had been written off as uncol and the Allowance for Doubtful Accounts as of lectible in 2009 were collected in 2010. One ac Derember 31, 2010, after the transactions affecting count for S2,108 was paid in full. A partial payment them had been recorded. of SI 566 was made by the Hollowell Company on another account that originally had amounted to 3. Calculate the current ratio, acid-test ratio, and days $2.486. The controller was reasonably sure this ac- receivables figures as of December 31, 2010. As count would be paid in full because reliable reports sume that amounts for items other than those de- scribed in the case are the same as on December 31. 2009 Copyright o James S. Reece