hort Comprehensive Problem LO$7-1,$ LO$7-3,$ LO$7-4,$ LO$7-5,$ LO$7-6,$ LO$7-7$

The Cash account in the general ledger of Ciavarella Corporation shows a balance of $$112,000$ at December $31,$ year $1($prior to performing a bank reconciliation$).$ The company$$s bank statement shows a balance of $$104,100$ at the same date. An examination of the bank statement reveals the following:

Deposits in transit amount to $$16,800.$

Bank service charges total $$100.$

Outstanding checks total $$12,400.$

A $$2,500$ check marked NSF from Needham Company $($one of Ciavarella$$s customers$)$ was returned to Ciavarella Corporation by the bank. This was the only NSF check that Ciavarella received during year $1.$

Check no$.550$ was correctly written by Ciavarella in the amount of $$3,200$ for computer equipment but was incorrectly recorded in the general ledger as a debit to Computer Equipment of $$2,300,$ and a credit to Cash of $$2,300.$

In addition to the given information, Ciavarella owns the following assets at December $31,$ year $1$: $(1)$ money market accounts totaling $$150,000$; $(2)$ $$5,000$ of high$-$grade, $60-$day commercial paper; and $(3)$ highly liquid stock investments valued at $$245,000$ at December $31,$ year $1($these investments originally cost Ciavarella $$225,000).$

On December $1,$ year $1,$ Ciavarella sold a used truck to Ritter Industries for $$18,000.$ Ciavarella accepted a $3-$month, $$18,000,6$ percent note receivable from Ritter. The note, plus accrued interest, is due in full on March $1,$ year $2.$ Ciavarella adjusts for accrued interest revenue monthly.

Ciavarella uses the income statement approach to compute uncollectible accounts expense. The general ledger had reported Accounts Receivable of $$540,000$ at January $1,$ year $1.$ At that time, the Allowance for Doubtful Accounts had a credit balance of $$12,000.$ Throughout year $1,$ the company wrote off actual accounts receivable of $$14,000$ and collected $$5,252,500$ on account from credit customers $($this amount includes the $$2,500$ NSF check received from Needham Company$).$ Credit sales for the year ended December $31,$ year $1,$ totaled $$6,480,000.$ Of these credit sales, $1$ percent were estimated to eventually become uncollectible.

Page $334$

Instructions

Prepare Ciavarella$$s bank reconciliation dated December $31,$ year $1,$ and provide the journal entry necessary to update the company$$s general ledger balances.

Compute cash and cash equivalents to be reported in Ciavarella$$s balance sheet dated December $31,$ year $1.$

Prepare the adjusting entry necessary to account for the note receivable from Ritter Industries at December $31,$ year $1.$

Determine the net realizable value of Ciavarella$$s accounts receivable at December $31,$ year $1.$

Determine the total dollar amount of financial assets to be reported in Ciavarella$$s balance sheet dated December $31,$ year $1.$

Assume that it is normal for firms similar to Ciavarella to take an average of $60$ days to collect an outstanding receivable. Is Ciavarella Corporation$$s collection performance above or below this average?