(Bad-Debt Reporting) Presented below are a series of unrelated situations

P7-2 (Bad-Debt Reporting) Presented below are a series of unrelated situations.

1. Halen Company’s unadjusted trial balance at December 31, 2010, included the following accounts.
Debit Credit
Allowance for doubtful accounts $4,000
Net Sales $1,200,000
Halen Company estimates its bad debt expense to be 1 and 1/2% of net sales. Determine its bad debt expense for 2010.

2. An analysis and aging of Stuart Corp. accounts receivable at December 31, 2010, disclosed the following.
Amounts estimated to be uncollectible $ 180,000
Accounts receivable 1,750,000
Allowance for doubtful accounts (per books) 125,000
What is the net realizable value of Stuart’s receivables at December 31, 2010?

3. Shore Co. provides for doubtful accounts based on 3% of credit sales. The following data are available for 2010.
Credit sales during 2010 $2,400,000
Allowance for doubtful accounts 1/1/10 17,000
Collection of accounts written off in prior years (customer credit was reestablished) 8,000
Customer accounts written off as uncollectible during 2010 30,000
What is the balance in the Allowance for Doubtful Accounts at December 31, 2010?

4. At the end of its first year of operations, December 31, 2010, Darden Inc. reported the following information.
Accounts receivable, net of allowance for doubtful accounts $950,000
Customer accounts written off as uncollectible during 2010 24,000
Bad debt expense for 2010 84,000
What should be the balance in accounts receivable at December 31, 2010, before subtracting the allowance for doubtful accounts?

5. The following accounts were taken from Bullock Inc.’s trial balance at December 31, 2010.
Debit Credit
Net credit sales $750,000
Allowance for doubtful accounts $14,000
Accounts receivable 310,000
If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported for 2010.

Instructions
Answer the questions relating to each of the five independent situations are requested.

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Described below are three independent and unrelated situations involving accounting changes

P11-10 Accounting changes; three accounting situations

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2011 before any adjusting entries or closing entries are prepared.

a. On December 30, 2007, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2011, the estimate of useful life was revised to 28 years in total with no change in residual value.

b. At the beginning of 2007, the Hoffman Group purchased office equipment at a cost of $330,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years'-digits method. On January 1, 2011, the company changed to the straight-line method.

c. At the beginning of 2011, Jantzen Specialties, which uses the sum-of-the-years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $445,000.


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Bailey is one of four equal unrelated shareholders of Checker Corporation

C:4-52 Comparison of Dividends and Redemptions. Bailey is one of four equal unrelated shareholders of Checker Corporation. Bailey has held Checker stock for four years and has a basis in her stock of $40,000. Checker has $280,000 of current and accumulated E&P and distributes $100,000 to Bailey.
a. What are the tax consequences to Checker and to Bailey if Bailey is an individual and the distribution is treated as a dividend?
b. In Part a, what would be the tax consequences if Bailey were a corporation?
c. What are the tax consequences to Checker and to Bailey (an individual) if Bailey surrenders all her stock in a redemption qualifying for sale treatment?
d. In Part c, what would be the tax consequences if Bailey were a corporation?
e. Which treatment would Bailey prefer if Bailey were an individual? Which treatment would Bailey Corporation prefer?

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(Future Value and Present Value Problems) Presented below are three unrelated situations

E6-6 (Future Value and Present Value Problems) Presented below are three unrelated situations.

(a) Ron Stein Company recently signed a lease for a new office building, for a lease period of 10 years.
Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

(b) Kate Greenway Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $620,000. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not, what will the deficiency be?

(c) Under the terms of his salary agreement, president XXXXX XXXXX has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $75,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?

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