On the back of its cereal boxes, Tiger Cereal Company offers a premium to its customers. The premium, a toy truck, may be claimed by sending in $1 plus 10 coupons; one coupon is included in each box of cereal sold. Tiger estimates, based on past experience, that 60% of the coupons will be redeemed. During 2016, Tiger purchased 240,000 toy trucks at $1.25 each for the premium promotion and sold 5,000,000 boxes of cereal, for cash, at $1.80 per box. In 2016, 2,200,000 coupons were redeemed.

Required:

On the back of its cereal boxes, Tiger Cereal Company offers a premium to its customers. The premium, a toy truck, may be claimed by sending in $1 plus 10 coupons; one coupon is included in each box of cereal sold. Tiger estimates, based on past experience, that 60% of the coupons will be redeemed. During 2016, Tiger purchased 240,000 toy trucks at $1.25 each for the premium promotion and sold 5,000,000 boxes of cereal, for cash, at $1.80 per box. In 2016, 2,200,000 coupons were redeemed.

Required:

Randy Company is thinking about extending trade credit to new customers. This will increase the annual sales by $400,000 if credit is extended to these customers. Of the new accounts receivable related to these sales, 10% will be uncollectible. Additional collection costs will be 8% of sales. Besides, production and selling costs will be 85% of sales. The company is in a 40% tax bracket.

16. What is the amount of additional collection costs? *

a-$32,000

b- $40,000

c- $340,000

d- $400,000

e- None of the above

17. What is the profit on the new sales? *

a- $7,200

b- $12,000

c- $30,000

d- $400,000

e- None of the above

18. What is the percentage return on the new sales? *

a- 1.80%

b- 3%

c- 7.50%

d- 10%

e- None of the above

19. What is the amount of the new investment in accounts receivable if the accounts receivable are turned over 5 times a year? *

a- $40,000

b- $68,000

c- $80,000

d- $400,000

e- None of the above

20. What is the return on investment, assuming that the only new investment will be in accounts receivable? *

a- 9%

b- 10%

c- 15%

d- 30%

e- None of the above

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following:

During 2018, credit sales were $1,845,000, cash collections from customers $1,925,000, and $58,000 in accounts receivable were written off. In addition, $4,900 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:

Required:

1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off.
2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:

Bad debt expense is estimated to be 2% of credit sales for the year.

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

3. For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?
  

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following:

During 2018, credit sales were $1,790,000, cash collections from customers $1,870,000, and $43,000 in accounts receivable were written off. In addition, $3,800 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:

2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:

a) Bad debt expense is estimated to be 3% of credit sales for the year.

b) Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.

c) Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent below alternate methods of financing. On September 30, 2021, the company leased a delivery truck to a local florist, Anything Grows. The fiscal year for both companies ends December 31.


The lease agreement specified quarterly payments of $6,000 beginning September 30, 2021, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2024 (three-year lease term). The florist had the option to purchase the truck on September 29, 2023, for $12,000 when it was expected to have a residual value of $13,000. The estimated useful life of the truck is four years. Mid-South Auto Leasing’s quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $46,000 for the truck. Both companies use straight-line depreciation or amortization. Anything Grows’ incremental interest rate is 12%.

Hint: A lease term ends for accounting purposes when an option becomes exercisable if it’s expected to be exercised (i.e., a BPO). (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Calculate the amount of selling profit that Mid-South would recognize in this sales-type lease. (Be careful to note that, although payments occur on the last calendar day of each quarter, since the first payment was at the beginning of the lease, payments represent an annuity due.)
2. Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021.
3. Prepare an amortization schedule(s) describing the pattern of interest expense for Anything Grows and interest revenue for Mid-South Auto Leasing over the lease term.
4. Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, 2021.
5. Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date.

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2020 balance sheet disclosed the following:

During 2021, credit sales were $1,780,000, cash collections from customers $1,860,000, and $41,000 in accounts receivable were written off. In addition, $3,600 was collected from a customer whose account was written off in 2020. An aging of accounts receivable at December 31, 2021, reveals the following:

Required:
1. Prepare summary journal entries to account for the 2021 write-offs and the collection of the receivable previously written off.
2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:

1. Bad debt expense is estimated to be 4% of credit sales for the year.
2. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
3. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

3. For situations (a)−(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet?
  

(1) A company manufacturer pipes which was sent out to customers in losts of 1000.The manufacturer operates a sampling scheme whereby a random sample 10 is taken from each lot ready for despatch and they are released only if the number of defective pipes in the sample is less than 3.Otherwise, the whole lot of 1000 is rejected and reprocessed using the Binomial p.d.f.
(I) if 5% of all the pipes produced are known to be defective, how many lots will be rejected out of 1000 lots processed?
(ii)If the producer replaces his entire pipe producing machines causing the number of defective pipes to drop to only 1% and releases lots if the number of defective pipes in the sample of 10 less than 2.How many lots per 1000 will he expect to save?

(b) The demand for a particular type pump at an isolated place is random and independent of previous occurrences, but the average demand in a week (7dsys) is for 2.8 pumps .Further supplies are ordered each Tuesday morning and arrive on weekly plan on Friday morning . Last Tuesday morning only one pumps was in the stock, so the stores man ordered six more to come on Friday morning .
(I) Find the probability that one pump will still be in stock on Friday morning when new stock arrives,
(ii) Find the probability that stock will be exhausted and there will be unsatisfied demand for at least one pump by Friday.
(iii) Find the probability that one pump will be in stock this Friday morning and at least five will be in stock next Tuesday morning.

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following:

During 2018, credit sales were $1,750,000, cash collections from customers $1,830,000, and $35,000 in accounts receivable were written off. In addition, $3,000 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:

Required:
1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off.
2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:

1. Bad debt expense is estimated to be 3% of credit sales for the year.
2. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
3. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

3. For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?