# CMA Study Group

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## Problem 1

• #### 1.  Problem 1

Posted 10 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?

• #### 2.  RE: Problem 1

Posted 9 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.

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

Posted 8 days ago
Opening AR = 5000-500  = 4500
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 8 days ago
Sorry = -68000 🙏

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

Posted 8 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 8 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 7 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.

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Jenish Desai
None
Stephenville TX
United States
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• #### 8.  RE: Problem 1

Posted 7 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 2 days ago
Is there any mcq app or CD 2020 part 1?

• #### 10.  RE: Problem 1

Posted 7 days ago
Hi ,
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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