Question 1
1.
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS:
The September 30, 2012 balance sheet of the Blackmon Corporation disclosed the following information relating to its receivables:
Current Assets:
Accounts Receivable
$245,000
Less: Allowance for Doubtful Accounts
(15,000)
Net Realizable Value
$ 230,000
Note Receivable (Note 1)
$ 60,000
Less: Discount on Note Receivable
( 6,429)
Carrying Value of Note
$ 53,571
TOTAL RECEIVABLES
$ 283,571
Note 1: The non-interest-bearing note was accepted from a customer on September 30, 2012 for services rendered. The note matures on September 30, 2013. The imputed rate of interest on this type of note is 12% APR.
During the 4th quarter of 2012, the following transactions occurred:
Credit sales totaled $2,200,000 and collections on accounts receivable (unassigned) amounted to $1,900,000. Uncollectible accounts totaling $18,000 from several customers were written off, and a $1,350 accounts receivable previously written off was collected. Additionally, the following transactions relating to Blackmons receivables occurred during the fourth quarter:
Nov 1: Assigned $140,000 of accounts receivable to a finance company. Under the terms of the agreement, Blackmon receives 85% of the value of the accounts assigned, less a service charge of $5,000, and is charged 1.5% per month on the outstanding loan balance.
Nov 30: Collections of $50,000 are made on assigned accounts. A sales allowance of $2,500 on an assigned account was allowed by Blackmon and a sales return of $1,000 was also granted by Blackmon. The cash collections were remitted to the finance company and include accrued interest for November.
Dec 31: Assigned accounts of $60,000 are collected and an assigned account of $1,500 was written off as uncollectible. The cash proceeds were remitted to the finance company to cover principal and accrued interest.
At year-end,Blackmon estimated 3% of the total accounts receivable and accounts receivable assigned to be t buncollectible. Blackmon also accrued the quarterly interest on the outstanding note receivable.
Determine each of the following as of December 31, 2012 (after adjustment):
a.
Accounts Receivable – General
$_________
Accounts Receivable Assigned
$_________
Less: Note Payable at 12/31/12
(_________)
Equity in Accounts Receivable Assigned
$ 13,153
Less: Allowance for Doubtful Accounts
$(________)
Net Realizable Value
$ BLANK A
Note Receivable (Note 1)
$ ________
Less: Discount on Note Receivable
(________)
Carrying Value of Note
$ BLANK B
TOTAL RECEIVABLES
$ 578,771
*ROUND ALL FINAL ANSWERS TO THE NEAREST WHOLE NUMBER. Do not use punctuation marks to enter your answer (no commas or dollar signs)
a. Determine the Net Realizable Value of Accounts Receivable as of 12/31/12: $[BLANK_A]
b. Determine the Carrying Value of the Note Receivable at 12/31/12: $__________
c. Interest Expense for the period ending December 31, 2012: $__________
d. Bad Debt Expense for the period ending December 31, 2012: $__________
e. Interest Revenue for the period ending December 31, 2012: $__________
Answer
0.625 points
Question 2
1.
Using the information presented in #1 above, determine the Carrying Value of the Note Receivable at December 31, 2012: $[BLANK_B]
Answer
0.625 points
Question 3
1.
Using the information presented in #1 above, determine Interest Expense for the period ending December 31, 2012: $[Blank_C]
Answer
0.625 points
Question 4
1.
Using the information presented in #1 above, determine Bad Debt Expense for the period ending December 31, 2012: $[Blank_D]
Answer
0.625 points
Question 5
1.
Using the information presented in #1 above, determine Interest Revenue for the period ending December 31, 2012: $[Blank_E]
Answer
0.625 points
Question 6
1.
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (3) QUESTIONS:
Mint Corporation factored, with recourse, $300,000 of accounts receivable with Huskie Financing. The agreement met all three conditions to be considered an outright sale. Huskie advanced 90% of the amount factored and retained the remainder to cover a 3% finance fee (to be remitted at the end of the agreement) and any sales returns/allowances/discounts. The recourse obligation is estimated to be 2.4% of accounts factored. Mint estimates the fair value of the final 10% of the receivables factored to be $26,000.
Determine the effect of this transaction on Mints financial position: (Use I for increased; D for decreased; or NE for No Effect. If there is an Effect, state the dollar amount. Indicate the letter first, then the number. Do not space between the letter and number. Do not use commas. For example, if your answer is Increased by $4,000, enter I4000).
ASSETS
LIABILITIES
EQUITY
BLANK 1
BLANK 2
BLANK 3
1. Determine the effect on Assets: $[Blank_1]
Answer
0.625 points
Question 7
1.
Using the information presented in #6 above, determine the effect on Liabilities: $[Blank_2]
Answer
0.625 points
Question 8
1.
Using the information presented in #6 above, determine the effect on Equity: $[Blank_3]
Answer
0.625 points
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