Cash in the bank is composed of Checking accoun

I. Cash in the bank is composed of

Checking account: $324,935

Money market savings account= $100,000

Certificate of Deposit, 2% maturing on May 1 2013= $25,000

Certificate of Deposit, 1.5% maturing on January 15 2013= $50,000

Cash held as compensating balance to be held until January 1, 2015= $10,000

Requirement: make any necessary entries to correct the cash balance on the balance sheet.

II. Cash in the bank : consider the following information:

The checking account balance includes an NSF check for $5,000 (payment on an accounts receivable) that the company believes is collectable.

Bank charges for December 2012 of $50 was not recorded by the company.

A check that is dated December 31, 2012 for $34,000 was held and mailed by the company on January 15 (for an accounts payable balance)

Requirement: make any necessary entries.

III. The Big company purchased $2.5 million dollars of merchandise on account. Giant company gives terms of 1%, 10 days and net 20. Giant believes that Big will take the discount if the discount is equal to at least an 16% return. Giant uses the net method to record sales. The transaction was not recorded by Giant. Assume a 360 day year. Big paid 5 days past the discount period.

Requirement: make any necessary entries and/or adjustment as needed on the books of Giant.

IV. Giant has made only an interim preliminary entry for estimated bad debts. Mr. Smith, the controller for Giant, wants you to determine what the proper entries will be, given the following information and also asks for your recommendation (prepare a schedule to support your calculations) as to why you chose a particular method.

Time and amount (000s) Percentage estimated to be uncollectible

Amount considered uncollectible $180

Amount over 180 days=$1,700,000 60%

Amount over 90 days= $2,850,000 30%

Amount over 60 days= $9,100,000 15%

Amount over 30 days=$25,200,000 4%

Remaining amount current .05%

Requirement: What would the entries and amounts be under the following methods: direct write-off, percentage of sales (use .005 of Giant’s net sales) and the aging method. Make any necessary entries and/or adjustments as needed.

V. Giant accepts a 5 year, $40,000 note from Small company. The note is for the purchase of inventory form Giant. The terms are, 0% interest, due 5 years from July 1st of this year and was issued July 1st of this year. The market rate of interest for a similar note is 8%. Giant did not make the entries.

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