Problem 1 (20%)

Anne starts to work for XYZ Company when she is 24 years old, making $66,000 per year.One of the benefits she is offered is voluntary contribution to a 401-K plan.Although she would like to maximize her contributions, Anne calculates that she will only be able to afford to contribute 6% of her salary at first.Assuming that she receives salary increases of 3% each year and stabilizes her expenses, she intends to increase the contribution to 8% of her salary when she is 35 years old and to 10% when she is 45 years old. Anne believes that she will be able to live comfortably if she receives $60,000 per year from the 401-K plan in each year of her retirement. The actuarial estimate of her life expectancy is 85 and the assumed discount is 7%.

Required:

a.Given the assumptions, how much will Anne have in her 401-K when she is 55?

b.Will Anne be able to retire at 55 years old and receive the benefits she anticipates needing?

c.If Anne lived to age 90, would she have enough in the 401-K to continue receiving payments at this level?

d.What changes in the assumptions could negatively affect Anne's retirement plan?

Problem 2 (15%):

You have been asked by Simmons Company to reconcile the cash account balance of $34,754 at 12/31/19.You have obtained the following information:

1.The 12/31/19 bank statement shows a beginning balance of $38,783, receipts of $229,832, disbursements of $226,625, and an ending balance of $41,990.

2.There were deposits of $11,450 on 11/30/19 that did not reach the bank until December.On 12/31/19, deposits of $10,900 were mailed to the bank.

3.The list of outstanding checks totaled $29,831 at 11/30/19 and $33,450 at 12/31/19.

4.On 11/15/19, the bank made an error charging Simmons for a $1,000 withdrawal that should have been deducted from the account of Simmands Company.Simmons has notified the bank and is waiting for the bank to correct the error.

5.On 12/20/19, Simmons wrote a check for $415.30, but recorded it as $451.30.The check cleared the bank in December.

6.Simmons's 12/22/19 deposit for $11,930 was recorded in the books as $19,330.

7.The bank statement showed that deposited checks totaling $6,520 were dishonored (NSF) during December.

8.Interest on a bank loan for the month of December charged by the bank but not recorded on the books amounted to $355.

9.The bank charged Simmons a $75 service charge for December.

Required:

(a)Prepare a bank reconciliation for Simmons, determining the correct cash balance.

(b)Prepare the journal entries required by Simmons at 12/31/19.

(c)What cash amount will appear on Simmons's balance sheet at 12/31/19?

Problem 3 (20%):

Prior to 12/31/19, Maxwell Company provided for uncollectible accounts using the allowance method, but used the income statement approach for recording estimates of uncollectible accounts; accordingly, Maxwell did not adjust the balance in the Allowance account at year end.

At 1/1/19, Maxwell Company had $120,000 cr. in the Allowance for doubtful accounts. During 2019, credit sales totaled $8,000,000, and over the year, provisions of $160,000 (2% of credit sales) were added to the Allowance.In addition, $100,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000.

For the first time, at 12/31/19 Maxwell prepared an aging of its accounts receivable.A summary of this aging, along with estimates of collectability for each category, is as follows:

Classification by month of sale

Balance of A/R

Estimated % Uncollectible

November-December 2019

1,080,000

2%

July-October

650,000

10%

January-June

420,000

25%

Prior to 1/1/19

150,000

90%

2,300,000

Based on the review of collectability of the account balances in the "prior to 1/1/19" aging category, additional receivables totaling $70,000 were written off at 12/31/19.The 90% uncollectible estimate was applied to the remaining balance in the category in making the adjusting entry.As of the year ended 12/31/19, Maxwell adopted the balance sheet method for estimating the Allowance for doubtful accounts, as indicated in the year-end aging analysis.

Required:

(a)Prepare a schedule analyzing the changes in the Allowance for doubtful accounts for the year ended 12/31/19. Show supporting computations.

(b)Prepare the adjusting entry needed for 2019.

(c)Show how Accounts Receivable would appear on the Balance Sheet.