Question ? 1

On January 1, 2002, ABC Corporation reports the following information pertaining to its

For the year ended December 31, 2002, ABC Corporation had credit sales of $100,000.

Collections for the year amounted to $92,000, of which $16,000 was from 2001 sales and

$76,000 was from current year?s sales. Bad debts written off during the year totalled $9,000;

$4,000 of this total pertained to receivables outstanding as of January 1, 2002, and $5,000 was from this year?s sales. On December 31, 2002, the company prepared the following aging schedule to determine the ending balance in the allowance for un-collectibles:

Aging information Book Value Expected Bad Debts

Over 90 days old	$2,000	30%
31-90 days old	7,000	20%

Current (0-30 days) (To be computed by you) 10%

Required:

• Provide journal entries to record the preceding transactions as well as year-end bad debt expense. Compute the ending accounts receivable and allowance balances.
• Show how the accounts receivable balance you computed will be disclosed in the balance sheet as of December 31, 2002.

Show how much of the bad debt expense for 2002 relates to actual and expected future write-offs from 2002 sales versus prior year?s sales.

Question - 2

Mystic Lakes Food Company began investing in equity securities for the first time in 2002. During 2002, the company engaged in the following transactions involving equity securities. Assume that the stock of Thayers International and Bayhe Enterprises is not considered marketable and that ownership is less than 20 percent of the equity. Prepare journal entries to record these transactions.

Purchased 10,000 shares of Thayers International for $26 per share.

Purchased 25,000 shares of Bayhe Enterprises for $35 per share.

Thayers International declared a $2-per-share dividend to be paid at a later date.

Sold 4,500 shares of Bayhe Enterprises for $30 per share.

• Sold 8,000 shares of Thayers International for $32 per share.
• Assume that on December 31, 2002, the market value of Thayers International and Bayhe Enterprises are $25 and $32 respectively. Prepare the entry to adjust the company?s long-term investments to market value.

Evaluate the mark-to-market rule as applied to investments in equity securities. In what manner does it provide useful information, and how and to what extent can management?s subjective judgment influence the reported dollar amounts

Question - 1 On January 1, 2002, ABC Corporation reports the following information pertaining to its Accounts receivable (gross) Less: Allowance for un-collectibles Accounts receivable (net) $20,000 (2,000) $18,000 For the year ended December 31, 2002, ABC Corporation had credit sales of $100,000. Collections for the year amounted to $92,000, of which $16,000 was from 2001 sales and $76,000 was from current year's sales. Bad debts written off during the year totalled $9,000; $4,000 of this total pertained to receivables outstanding as of January 1, 2002, and $5,000 was from this year's sales. On December 31, 2002, the company prepared the following aging schedule to determine the ending balance in the allowance for un-collectibles: Aging information Book Value Expected Bad Debts Over 90 days old 31-90 days old Current (0-30 days) $2,000 7,000 (To be computed by you) 30% 20% 10% Required: 1. Provide journal entries to record the preceding transactions as well as year-end bad debt expense. Compute the ending accounts receivable and allowance balances. 2. Show how the accounts receivable balance you computed will be disclosed in the balance sheet as of December 31, 2002. 3. Show how much of the bad debt expense for 2002 relates to actual and expected future write-offs from 2002 sales versus prior year's sales. Question - 2 a. Mystic Lakes Food Company began investing in equity securities for the first time in 2002. During 2002, the company engaged in the following transactions involving equity securities. Assume that the stock of Thayers International and Bayhe Enterprises is not considered marketable and that ownership is less than 20 percent of the equity. Prepare journal entries to record these transactions. 1. 2. 3. 4. 5. Purchased 10,000 shares of Thayers International for $26 per share. Purchased 25,000 shares of Bayhe Enterprises for $35 per share. Thayers International declared a $2-per-share dividend to be paid at a later date. Sold 4,500 shares of Bayhe Enterprises for $30 per share. Sold 8,000 shares of Thayers International for $32 per share. b. Refer to the data provided in (a) above. (i) Assume that the stock of Thayers International and Bayhe Enterprises is considered marketable, and Mystic Lakes Food Company wishes to hold all investments indefinitely. Prepare journal entries to record the transactions. c. Assume that on December 31, 2002, the market value of Thayers International and Bayhe Enterprises are $25 and $32 respectively. Prepare the entry to adjust the company's long-term investments to market value. d. Evaluate the mark-to-market rule as applied to investments in equity securities. In what manner does it provide useful information, and how and to what extent can management's subjective judgment influence the reported dollar amounts