Reference no: EM13502144
You are the Accountant for WanneBee Corporation
WannaBee Corporation has $1,500,000 of Receivables on December 31, 2000. WannaBee uses the Allowance Method and historical data indicates that 7% of receivables become uncollectible. The end of year balance in the ADA is 0.
The following are the 2000 end of year receivables.
AR- Goodboy $25,000 AR-NannyNancy $250,000
AR-BusyBody $75,000 AR-AlphaBetCo $130,000
AR-DippyDo $55,000 AR-TipsyTurvy $98,000
AR-MerryMen $145,000 AR-HappyHart $289,000
AR-CurlyCues $211,000 AR-MityMan $47,000
AR-PrettyPenny $109,000 AR-JumpingJax $66,000
During 2001 the following events occurred:
Goodboy defaulted.
BusyBody declared bankruptcy but paid $19,000.
DippyDo paid the account in full.
MerryMen still owes $48,000.
CurlyCueshas not answered the phone for 8 months.
PrettyPennypaid its account.
NannyNancy paid $150,000 and on November 21 made a 120 note at 4% APR for the remainder.
AlphaBetCo paid its account in full.
TipsyTurvy has closed its business.
HappyHart paid its bill.
MityManstill owes its account.
JumpingJax paid ½ its bill and will not pay the rest.
The Receivables balance at the end of the year is $2,235,000
Assignments:
(1) Prepare the Required AJE for December 31, 2000.
(2) Prepare the Required AJE for December 31, 2001.
Problem 2:
Spoiled Baby Corp sells baby buggies and has decided to expand its operations. It needs to borrow $500,000 for 18 months and has sent you to negotiate with the bank.
The bank is more than willing to lend the money to the company and is offering the company a discounted note at 6%. Mr. Moneybags, the banker, has indicated that this is quite a deal and non-discounted notes are currently being charged 6.2% APR
As the company accountant you must provide the necessary information to support your recommendation to the Board of Directors.