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Nanyang Technological University BU8101 Accounting: A User Perspective Semester 2, 2012/2013 Seminar 3 (for week commencing 4 February 2013)

) (Unless otherwise stated, questions are taken from WHB) Review Demonstration Problem on pages 313 to 315 before you commence on the seminar questions. 1. Bank Reconciliation(Adapted from Semester 1 AY2011_2012 Examination question 2(2)) The records of Daily Company indicate a 30 June cash balance of $9,400, which includes undeposited receipts of $4,000 for 29 June and 30 June. The cash balance on the bank statement as of 30 June is $6,575. This balance includes a note of $4,000 plus $160 interest collected by the bank but not recorded in the journal. Cheques outstanding on 30 June were as follows: No. 370, $580; No. 379, $615; No. 390, $900; No. 1148, $225; No. 1149, $300; and No. 1151, $750. On 3 June, the cashier resigned effective at the end of the month. Before leaving on 30 June, the cashier prepared the following bank reconciliation: Cash balance per books, 30 June Add: outstanding cheques No. 1148 No. 1149 No. 1151 $9,400 $225 300 750 1,175 $10,575 4,000 $6,575 4,160 $2,415

Less: undeposited receipts Cash balance per bank, 30 June Deducted: unrecorded note with interest True cash, 30 June Calculator Tape of Outstanding Cheques 0* 225+ 300+ 750+ 1,175

Subsequently, the owner of Daily Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $1,000 to be deposited on 30

June. The owner, a close family friend, has asked for your help in determining the amount that the former cashier has stolen. Required (a) Prepare the proper bank reconciliation and determine the amount the cashier has stolen from Daily Company. How did the cashier attempt to conceal the theft? (i) Identify two major weaknesses in internal controls, which allowed the cashier to steal the undeposited cash receipts. (ii) Recommend improvements in internal controls, so that similar types of thefts of undeposited cash receipts can be prevented. 2. Accounts Receivable (Adapted from Semester 1 AY2012_2013 Examination question 2(4)) The company uses the accounts receivable aging method to estimate impairment of Accounts Receivable account. At 1 October 2011, the balance of the Accounts Receivable account was a debit of $88,430, and the balance in the Allowance for Impairment of Accounts Receivable account was a credit of $7,200. During the year, the company had sales on account of $468,800, accounts receivable written off of $7,900, and collections from customers of $450,730 (this amount includes the $183 NSF cheque received from Ann Kelly). An aging analysis showed the following for accounts receivable at 30 September 2012: Time Not yet due 1- 30 days past due 31- 60 days past due 61- 90days past due Over 90 days past due Total at 30 September 2012 Required: Based on the information gathered by you, Mary requested you to: (d) by: Determine the net realizable value of accounts receivable at 30 September 2012 Amount $58,030 24,253 9,210 3,990 3,300 $98,783 Percentage considered impaired 2 5 15 25 50

(b) (c)

(i)

(ii)

Computing the year-end balances of Accounts Receivable account and the Allowance for Impairment of Accounts Receivable account (before yearend adjustments for impairment of accounts receivable). Completing the aging analysis and calculating the estimated impairment of accounts receivable adjustment for the year (round the amount to the nearest whole number)

3. Problem 7.5B (page 332) Accounting for marketable securities 4. Exeercise 7.3 Grandmothers Secret Self-Practice Problems 5. The following self-practice questions are from the main text 16th edition: (a) Students, who have bought the 16th edition text, please register in the Connect website: http://connect.mcgraw-hill.com/class/self_practice_exercises_semester_2_ay2012_2013. Thereafter, you can do the problems (with guided solutions and references) in the Connect site. (b) Students who do not want to buy the 16th edition with Connect could solve the problems and then check for key answers in the Check Figures file (only problem questions in the Course Documents folder in the BU8101 Accounting Learning Centre 2012/2013 semester 2 site. Seminar 3 Financial Assets Brief Exercise 7.1, 7.2, 7.3 (a to c), 7.4, 7.7 and 7.9 Exercise 7.5, 7.10 and 7.12 Problems 7.1A, 7.2A, 7.3A, 7.4A, 7.5A and 7,8A 6. Do all self-test questions on pages 315 to 316, except question 8.

7. At December 31, 2008, Athens Company reports the following results for its calendar year. Cash sales $1,905,000 Credit sales.. 5,682,000 In addition, its unadjusted trial balance includes the following items: Accounts Receivable................................ Allowance for Impairment of Accounts Receivable Required $1,270,100 debit 16,580 debit

a. Prepare the adjusting entry for Athens Co. to recognize impairment of Accounts Receivable under the following situation: An aging analysis estimates that 5% of year-end accounts receivable are uncollectible. (Required adjustment: $80,085) b. Show how Accounts Receivable and the Allowance for Impairment of Accounts Receivable appear on its December 31, 2008, balance sheet given the facts above.
[Accounts receivable (net of $63,505** for impairment of AR)= $1,206595]

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