Chapter 7: Question 21Q (page 362)

Horizon Outfitters Company includes in its trial balance for December 31 an item for Accounts Receivable $789,000. This balance consists of the following items:
Due from regular customer
$523,000
Refund receivable on prior year’s income taxes (an established claim)
15,500
Travel advance to employees
22,000
Loan to wholly owned subsidiary
45,500
Advance to creditor for goods ordered
61,000
Accounts receivables assigned security for loans payable
75,000
Notes receivable past due plus interest on these notes
47,000
Total
$789,000
Illustrate how these items should be shown in the balance sheet as of December 31.

Short Answer

Expert verified

Accounts receivables total$598,000.

Step by step solution

Definition of Subsidiary Company

The subsidiary company can be defined as the company controlled and managed by another company known as the parent company. Such a company is acquired through mergers and acquisitions.

Balance Sheet

Particular	Amount $
Current assets
Accounts receivables ( $523, 000 + 75, 000$ )	$598,000
Refund receivable on income taxes of the previous year	15,500
Advance for goods ordered	61,000

Non-Trade receivables
Advances to a wholly-owned subsidiary	$45,500

Other Current assets
Travel advances to employees	22,000
Note receivables plus accrued interest	47,000
Total Current assets	$789,000

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	Debit	Credit
Accounts receivables	\(100,000
Allowance for doubtful accounts		\)2,000
Sales revenue (All on credit)		900,000
Sales return and allowance	50,000

Short Answer

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Definition of Subsidiary Company

Balance Sheet

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Due from regular customer	\)523,000
Refund receivable on prior year’s income taxes (an established claim)	15,500
Travel advance to employees	22,000
Loan to wholly owned subsidiary	45,500
Advance to creditor for goods ordered	61,000
Accounts receivables assigned security for loans payable	75,000
Notes receivable past due plus interest on these notes	47,000
Total	$789,000