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3 years ago

Total 0 1 to 30 31 to 60 61 to 90 over 90

Business

1 answer:

natulia [17]3 years ago

4 0

Answer:

a. $25,650

b. Journal entries

Explanation:

The computation is shown below:

a. The balance of the Allowance for Doubtful Accounts is

= Total account receivable × estimated percentage

= $570,000 × 4.5%

= $25,650

b. The adjusting entry is as follows

Bad Debt Expense $13,650 ($25,650 - $12,000)

To Allowance for Doubtful Accounts $13,650

(Being the bad debt expense is recorded)

c. The adjusting entry is as follows

Bad Debt Expense $26,650 ($25,650 + $1,000)

To Allowance for Doubtful Accounts $26,650

(Being the bad debt expense is recorded)

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Ponzi Products produced 100 chain-letter kits this quarter, resulting in a total cash outlay of $10 per unit. It will sell 50 of

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Answer:

Explanation:

From the given information: we are to:

a) Prepare an income statement for Ponzi for today and for each of the next three quarters. Ignore taxes. (LO1)

An income statement involves depicts the achievement of a certain business over a period of time .

The income statement for Ponzi for today and for each of the next three quarters is as follows:

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Sales $0 $550 $600 $0

(-)

cost of goods 0 $500 $500 $0

sold

Net income 0 $50 $100 0

We will see that in the first and the fourth quarter ; the firm neither pay any cash to purchase goods nor collect cash for sales. Thus ; the cashflow will be zero in those instances and we will consider only the second and the fourth quarter for sales income and production cost.

SO:

Quarter 2 sales = 50 × 11 = $550

Quarter 3 sales = 50 × 12 = $600

(b) What are the cash flows for the company today and in each of the next three quarters?

Cash flow is like a database that helps to keep tracks and records the cash inflows and cash outflows of a financial instrument.

The cash flow in each month is as follows:

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Sales $0 $550 $600 $0

(-)

cost of goods 0 $500 $500 $0

sold

Net income 0 $50 $100 0

Inventories $1000 $500 0 0

Account

Receivables 0 550 600 0

Net working

capital $1000 $1050 $600 0

Change in WC $1000 $50 $450 $600

CashFlow $1000 $0 $550 $600

Hint:

The Cash flow = net income - change in net working capital

The net working capital = Inventory + Account receivables

Quarter 2 sales = 50 × 11 = $550

Quarter 3 sales = 50 × 12 = $600

The net working capital in each quarter can be illustrated as :

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Inventories $1000 $500 0 $0

Account recei- 0 $550 $600 $0

vables

Net working $1000 $1050 $600 $0

capital

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