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Chapter 7: Question 21Q (page 362)

Horizon Outfitters Company includes in its trial balance for December 31 an item for Accounts Receivable \(789,000. This balance consists of the following items:

Due from regular customer

\)523,000

Refund receivable on prior year鈥檚 income taxes (an established claim)

15,500

Travel advance to employees

22,000

Loan to wholly owned subsidiary

45,500

Advance to creditor for goods ordered

61,000

Accounts receivables assigned security for loans payable

75,000

Notes receivable past due plus interest on these notes

47,000

Total

$789,000

Illustrate how these items should be shown in the balance sheet as of December 31.

Short Answer

Expert verified

Accounts receivables total$598,000.

Step by step solution

01

Definition of Subsidiary Company

The subsidiary company can be defined as the company controlled and managed by another company known as the parent company. Such a company is acquired through mergers and acquisitions.

02

Balance Sheet

Particular

Amount $

Current assets

Accounts receivables (523,000+75,000)

$598,000

Refund receivable on income taxes of the previous year

15,500

Advance for goods ordered

61,000

Non-Trade receivables

Advances to a wholly-owned subsidiary

$45,500

Other Current assets

Travel advances to employees

22,000

Note receivables plus accrued interest

47,000

Total Current assets

$789,000

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Most popular questions from this chapter

(Petty Cash) The petty cash fund of Fonzarelli鈥檚 Auto Repair Service, a sole proprietorship, contains the following.

1. Coins and Currency

\(15.20

2. Postage Stamps

2.90

3. An I.O.U from Cunningham, an employee, for cash advance

40

4. Check payable to Fonzarelli鈥檚 Auto Repair from Pottsie Weber, an employee, marked NSF

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Stamps

20

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170

Printer cartridge

14.35

204.35

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The general ledger account Petty Cash has a balance of $300.

Instructions

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Explain how accounting for bad debts can be used for earnings management.

What is the fair value option? Where do companies that elect the fair value option report unrealized holding gains and losses?

(Expected Cash Flows) On December 31, 2017, Conchita Martinez Company signed a \(1,000,000 note to Sauk City Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Conchita Martinez鈥檚 financial situation worsened. On December 31, 2019, Sauk City Bank determined that it was probable that the company would pay back only \)600,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,000,000 loan.

Instructions

(a) Determine the amount of cash Conchita Martinez received from the loan on December 31, 2017.

(b) Prepare a note amortization schedule for Sauk City Bank up to December 31, 2019.

(c) Determine the loss on impairment that Sauk City Bank should recognize on December 31, 2019.

(Recording Bad Debts) Duncan Company reports the following financial information before adjustments.

Debit

Credit

Accounts receivables

\(100,000

Allowance for doubtful accounts

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Sales revenue (All on credit)

900,000

Sales return and allowance

50,000

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Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at (a) 5% of accounts receivable and (b) 5% of accounts receivable but Allowance for Doubtful Accounts had a $1,500 debit balance.
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