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coldgirl [10]
3 years ago
5

Santana Rey, owner of Business Solutions, realizes that she needs to begin accounting for bad debts expense. Assume that Busines

s Solutions has total revenues of $44,000 during the first three months of 2019, and that the Accounts Receivable balance on March 31, 2019, is $21,967.Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense on March 31, 2019, under each of the following independent assumptions:(assume a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31)(Round amounts to the nearest dollar)a) Bad debts are estimated to be 1% of total revenues.b) Bad debts are estimated to be 2% of accounts receivable.
Business
1 answer:
Anastasy [175]3 years ago
4 0

Answer:

The Journal entries are as follows:

(a)

Bad Debt Expense A/c      Dr. $440

To Allowance for Doubtful Accounts     $440

(To record the bad debts)

Workings:

Bad Debt Expense = 1% of Total revenue

                                 = 0.01 × $44,000

                                 = $440

(b)

Bad Debt Expense A/c      Dr. $439.34

To Allowance for Doubtful Accounts     $439.34

(To record the bad debts)

Workings:

Bad Debt Expense = 2% of accounts receivable

                                 = 0.02 × $21,967

                                 = $439.34

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Transactions related to purchases and cash payments completed by Wisk Away Cleaning Services Inc. during the month of May 20Y5 a
yKpoI14uk [10]

Answer:

Wisk Away Cleaning Services Inc.

a) Purchases Journal

Date         Description                                  Debit                    Credit

May 3       Cleaning Supplies    14                  $200

                Accounts Payable (Brite N’ Shine Products Inc.) 2`1  $200

To record the purchase of cleaning supplies on account.

May 18     Cleaning Supplies   14                    $240

                Accounts Payable (Bio Safe Supplies Inc.)          21      $240

To record the purchase of cleaning supplies on account.

May 20    Electrical Service Expense 53       $110

                Accounts Payable (Bowman Electrical Service)  21      $110

To record the purchase of electrical repair service on account.

b) Cash Payments Journal

Date      Description                                                  Debit         Credit

May 1     Accounts Payable (Safe Supplies Inc.) 21  $345

             Cash Account      11                                                       $345

To record the issue of Check No. 57 in payment.

May 15  Accounts Payable (Bowman Electrical Service)  21  $145

             Cash       11                                                                               $145

To record the issue of Check No. 59 in payment.

May 26 Accounts Payable (Brite N' Shine Products Inc.) 21 $200

           Cash       11                                                                               $200

To record the issue of Check No. 60 in payment.

May 31 Salaries Expense    51                             $5,600

           Cash      11                                                                         $5,600

To record the issue of Check No. 61 in payment of salaries.

Explanation:

Journals are prepared to record transactions.  There are many types of journal.  They are classified according to the type of transactions.  There are purchases journal, sales journal, general journal, cash journal, etc.

6 0
3 years ago
All states withhold state income taxes. true false
weeeeeb [17]
False is the answer.
3 0
3 years ago
Dickinson Company has $11,880,000 million in assets. Currently half of these assets are financed with long-term debt at 9.4 perc
Ronch [10]

Answer:

Dickinson Company

a) Effect of each plan on earnings per share:

                                 Current Plan      Plan D          Plan E

Earnings per share        $0.45            $0.36           $0.45

b-1) Earnings per share  $0                $0                 $0.14

b-2. Plan E would be most favorable if return on assets fell to 4.70%.

b-3 Earnings per share      $0.93            $0.70           $0.76

b-4 Current Plan would be most favorable if return on assets increased to 14.4%.

c-1 Earnings per share      $0.45            $0.36           $0.45

c-2 If the market price for common stock rose to $12 before the restructuring, Plan E would then be most attractive to the company as it would get additional paid-in capital of $1,485,000 ($4 * 371,250).

Explanation:

a) Data and Calculations:

Return on assets before interest and taxes = 9.4%

Tax rate = 40%

                                 Current Plan          Plan D            Plan E

Assets                       $11,880,000   $11,880,000   $11,800,000

Long-term debt          5,940,000      5,940,000     2,970,000

New debt                                           2,970,000

Total debt                                          8,910,000

Common stock          5,940,000     5,940,000      8,910,000

Less repurchased shares               (2,970,000)

New common stock                        2,970,000

Interest rate of old debt   9.4%            9.4%               9.4%

Interest rate for new debt                   11.4%

Stock par value              $8                 $8                 $8

Return on assets before

interest and taxes     $1,116,720    $1,116,720       $1,116,720

Interest expense          558,360       896,940          298,180

Return before taxes  $558,360      $219,780       $837,540

Tax rate = 40%             223,344          87,912          335,016

Return after taxes      $335,016      $131,868       $502,524

Shares outstanding    742,500       371,250         1,113,750

Earnings per share      $0.45            $0.36           $0.45

Return on assets falling to 4.70%

Return on assets before

interest and taxes     $558,360     $558,360      $558,360

Interest expense          558,360       896,940         298,180

Return before taxes     $0             -$338,580       $260,180

Tax rate = 40%                0                   0                   104,072

Return after taxes       $0                $0                   $156,108

Shares outstanding     742,500       371,250         1,113,750

Earnings per share          $0                $0                 $0.14

Return on assets increasing to 14.4%:

Return on assets before

interest and taxes    $1,710,720    $1,710,720      $1,710,720

Interest expense          558,360       896,940          298,180

Return before taxes $1,152,360      $431,380     $1,412,540

Tax rate = 40%             460,944        172,552         565,016

Return after taxes       $691,416    $258,828       $847,524

Shares outstanding     742,500       371,250         1,113,750

Earnings per share      $0.93            $0.70           $0.76

Market price for common stock rose to $12 before restructuring:

Return on assets before

interest and taxes     $1,116,720    $1,116,720       $1,116,720

Interest expense          558,360       896,940          298,180

Return before taxes  $558,360      $219,780       $837,540

Tax rate = 40%             223,344          87,912           335,016

Return after taxes      $335,016      $131,868       $502,524

Shares outstanding     742,500       371,250         1,113,750

Earnings per share       $0.45            $0.36           $0.45

6 0
3 years ago
Holtzman Clothiers's stock currently sells for $31.00 a share. It just paid a dividend of $1.00 a share (i.e., D0 = $1.00). The
Llana [10]

Answer:

1. Year 1 expected value = $32.24

2. Required rate of return = 7.35%

Explanation:

1. For computing the stock price which is expected 1 year from now is shown below:

= Current Price × (1+rate)^number of years

= $31 × (1+0.04)^1

= $31 × 1.04

= $32.24

Hence, the expected 1 year value of stock price is $32.24

2. The required rate of return is computed by using an formula which is shown below:

= (Current Year dividend ÷ Current stock price)+ growth rate

where,

current year dividend is = D1

And, D1 = DO × (1+g)

where,

DO = previous dividend share

g = growth rate

So, $1 × (1+0.04)

= $1 × 1.04

= $1.04

Now apply these values to the above formula

So, required rate of return is equals to

= ($1.04 ÷ $31) + 0.04

= 7.35%

Hence, the required rate of return is 7.35%

5 0
3 years ago
Quantitative Problem 1: Assume today is December 31, 2017. Barrington Industries expects that its 2018 after-tax operating incom
ziro4ka [17]

Answer:

$29.630

Explanation:

For computation of stock price first we need to follow some steps which is shown below:-

Free cash flow = EBIT (1 - T) + Depreciation - Capital expenditure - Working capital

= $450 million + $65 million - $110 million - $30 million

=  $375 million

Value of firm = Free cash flow ÷ (WACC - Growth)

= $375 million ÷ (9% - 4.5%)

= $375 million ÷ 0.045

= $8,333.33 million

Value of equity = Value of firm - Value of debt

= $8,333.33 million - $3,000 million

= $5,333.33 million

Stock price = Value of equity ÷ Outstanding shares

= $5,333.33 million ÷ 180 million

= $29.630

3 0
4 years ago
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