CMA Study Group

Problem 1

  • 1.  Problem 1

    Posted 21 days ago
    An internal auditor is deriving cash flow data based on an incomplete set of facts. Bad debt expense was $2,000. Additional data for this period follows:
    Credit sales
    $100,000
    Gross accounts receivable -- beginning balance
    5,000
    Allowance for bad debts -- beginning balance
    (500)
    Accounts receivable written off
    1,000
    Increase in net accounts receivable (after subtraction of allowance for bad debts)
    30,000
    How much cash was collected this period on credit sales?  


    answer - . 70000, 68500,68000,64000


  • 2.  RE: Problem 1

    Posted 20 days ago
    Hi Shreshtha,

    as as per my calculation answer is 68000 (100000)-(30000+2000). Please correct me if any error. Will help to understand my mistake.

    Thank you in advance  for your reply.

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    Nikunj Sheth
    Controller
    BRAMPTON ON
    Canada
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  • 3.  RE: Problem 1

    Posted 20 days ago
    Opening AR = 5000-500  = 4500
    bad debt exp = 2000
    Credit sales = 100000
    Ending A/R = 30000 + 4500 = 34500
    Now
    4500+(-2000)+100000+cash to be collected=34500
    Ctbc=34500-102500
    Ctbc= 68000 🙏

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    Shivam Prajapati
    Accountant
    Lagos
    Nigeria
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  • 4.  RE: Problem 1

    Posted 20 days ago
    Sorry = -68000 🙏

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    Shivam Prajapati
    Accountant
    Lagos
    Nigeria
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  • 5.  RE: Problem 1

    Posted 20 days ago
    Hi Shreshtha!

    As per my calculation, we first have to solve for the ending balance of the Allowance for Bad debts that is subtracting the $500 beginning balance of the allowance (since this is a debit) and the $1000 write-off from the $2000 bad debt expense. Hence, the allowance for bad debts will have an ending balance of $500. This $500 ending balance of the allowance for bad debts should be added back to the $30,000 ending balance of the Accounts Receivable to arrive at the gross amount of the ending receivable of $30,500. Then, we will work the amounts back. We should add to the $30,500 the accounts written-off, $1000, and add back the beginning balance of accounts receivable and credit sales of $5000 and $100,000, respectively. Thus, we will get the collections for the year amounting to $73,500.

    Kindly notify me if there are errors in my analysis. Thank you so much!

    Sarah

    Sent from my iPhone




  • 6.  RE: Problem 1

    Posted 20 days ago
    Correction to my first email: the amount of the beginning balance of accounts receivable and the credit sales, $5000 and $100,000, should be deducted from the sum of the gross amount of the ending balance of accounts receivable and the accounts written off, $30,500 and $1000.

    Sarah

    Sent from my iPhone

    > On 8 Feb 2020, at 5:14 PM, Sarah Christine Barbado <barbadosarah@...> wrote:
    >
    > Hi Shreshtha!
    >
    > As per my calculation, we first have to solve for the ending balance of the Allowance for Bad debts that is subtracting the $500 beginning balance of the allowance (since this is a debit) and the $1000 write-off from the $2000 bad debt expense. Hence, the allowance for bad debts will have an ending balance of $500. This $500 ending balance of the allowance for bad debts should be added back to the $30,000 ending balance of the Accounts Receivable to arrive at the gross amount of the ending receivable of $30,500. Then, we will work the amounts back. We should add to the $30,500 the accounts written-off, $1000, and add back the beginning balance of accounts receivable and credit sales of $5000 and $100,000, respectively. Thus, we will get the collections for the year amounting to $73,500.
    >
    > Kindly notify me if there are errors in my analysis. Thank you so much!
    >
    > Sarah
    >
    > Sent from my iPhone




  • 7.  RE: Problem 1

    Posted 19 days ago
    Hey Sarah,
    $73,500 is not one of the options.
    4 options are: a) $70,000, b) $68,500, c) $68,000, b) $64,000.

    ------------------------------
    Jenish Desai
    None
    Stephenville TX
    United States
    ------------------------------



  • 8.  RE: Problem 1

    Posted 19 days ago
    Hi Jenish!

    Thanks for this! I did not notice that there are options.

    Sarah

    Sent from my iPhone




  • 9.  RE: Problem 1

    Posted 13 days ago
    Is there any mcq app or CD 2020 part 1?





  • 10.  RE: Problem 1

    Posted 19 days ago
    Hi ,
    Answer (B) is correct. $68,000
    The beginning balance of gross accounts
    receivable (A/R) was $5,000 (debit). Thus, net beginning A/R
    was $4,500 ($5,000 – $500 credit in the allowance for bad
    debts). The allowance was credited for the $2,000 bad debt
    expense. Accordingly, the ending allowance (credit) was $1,500
    ($500 – $1,000 write-off + $2,000). Given a $30,000 increase in
    net A/R, ending net A/R must have been $34,500 ($4,500
    beginning net A/R + $30,000), with ending gross A/R of $36,000
    ($34,500 + $1,500). Collections were therefore $68,000 ($5,000
    beginning gross A/R – $1,000 write-off + $100,000 credit sales –
    $36,000 ending gross A/R).
    Gross A/R
    $ 5,000 Beg. Bal. $ 1,000 Write-off
    100,000 Cr. Sales 68,000 Collections
    $ 36,000 End. Bal.
    Answer (A) is incorrect because $64,000 equals credit sales
    minus the ending gross accounts receivable. Answer (C) is
    incorrect because $68,500 equals credit sales, minus the
    increase in net accounts receivable, minus the ending
    allowance. Answer (D) is incorrect because $70,000 equals
    credit sales minus the increase in net accounts receivable.

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    Muhammad Adil
    Director/Manager
    3306B Zigzag Tower Lagoona West Bay
    Qatar
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