Prepare a computation of net sales for the month of july

Question 1:

Apply GAAP for Short Term Investments

Norton Corporation reports short-term investments on its balance sheet. Suppose a division of Norton completed the following short-term investment transactions during 2012:

(1) Journalize each transaction. Use the following account names: Cash, Short-term Investments, Dividend Revenue, Unrealized Gain (Loss) on Investment, and Gain on Sale of Investment.

a. Dec. 12, 2012. Purchased 900 shares of Armor, Inc. stock for $ 38,700. Norton plans to sell the stock in the near future.

b. Dec. 21, 2012. Received a cash dividend of $ 0.72 per share on the Armor, Inc. stock.

c. Dec. 31, 2012. Adjusted the investment in Armor, Inc. stock. Current market value is $ 50,400. Norton still plans to sell the stock in early 2013.

d. Jan. 16, 2013. Sold the Armor, Inc. stock for $ 54,300

(2) Show the effects of Norton’s investment transactions on the T-accounts for Cash, Short- term Investments, Dividend Revenue, Unrealized Gain (Loss) on Investment, and Gain on Sale of Investment. Start with a cash balance of $ 98,000. All other accounts start at zero.

Question 2:

GAAP for Revenue Recognition

Unique Interiors reported the following transactions in July.

(1) Journalize each transaction.

a. July 2. Sold merchandise on account to Erin Bailey, $ 800, terms 2/10, n/30

b. July 10. Sold merchandise on account to Alise O’Brien, $ 1,500, terms 2/10, n/30

c. July 12. Collected payment from Erin Bailey for the July 2 sale.

d. July 15. Alise returned $ 500 of the merchandise purchased on July 10.

e. July 20. Collected payment from Alise O’Brien for the balance of the July 10 sale.

(2) Prepare a computation of net sales for the month of July.

Question 3:

GAAP and Uncollectible Receivables – Percent of Sales Approach

On November 30, High Peaks Part Planners had a $ 34,000 balance in Accounts Receivable and a $ 3,000 credit balance in Allowance for Uncollectible Accounts. During December, the store made credit sales of $ 159,000. December collections on account were $ 130,000, and write-offs of uncollectible receivables totaled $ 2,700. Uncollectible accounts expense is estimated at 1% of revenue.

1a. Journalize sales during December Format the text in BOLD BLUE.

1b. Journalize collections during December.

1c. Journalize write-offs of uncollectibles during December.

1d. Journalize uncollectible accounts expense by the allowance method during December.

2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts, and Net Accounts Receivable at December 31. How much does the store expect to collect?

3. Show how the store will report accounts receivable and net sales on its December 31 balance sheet and income statement.

Question 4:

GAAP and Uncollectible Receivables – Aging Receivables Approach

At December 31, 2012, before any year-end adjustments, the Accounts Receivable balance of Stenner’s Electronics is $ 180,000. The Allowance for Doubtful Accounts has an $ 11,600 credit balance. Stenner’s Electronics prepares the following aging schedule for Accounts Receivable.

1. Based on the aging of Accounts Receivable, is the unadjusted balance of the allowance account adequate? Too high? Too low?

2. Make the entry required by the aging schedule. Prepare a T-account for the allowance.

3. Show how Stenner’s Electronics will report Accounts Receivable on its December 31 balance sheet.