196) Prepare general journal entries for the following transactions of Norman Company,
assuming they use the allowance method to account for uncollectible accounts.
Apr 01
Sold $3,500 of merchandise to Lance Co., receiving an 8%, 90-day,
$3,500 note.
15
Wrote off $1,500 owed by Guy Co. from a previous period sale.
30
Received a $5,000, 6%, 30-day note receivable from James Co. as
settlement for its $5,000 account receivable.
May 30
The note received from James on April 30 was collected in full.
Jun 30
Lance Co. was unable to pay the note on the due date.
Jul 15
Guy Co. paid $1,000 of the amount written off on April 15.
Apr
1
Notes Receivable
15
Allowance for Doubtful Accounts
30
Notes Receivable
30
Cash
June
30
Account Receivable-Lance
July
15
Accounts Receivable–Guy
15
Cash
197) Jordan Co. uses the allowance method of accounting for uncollectible accounts. Jordan Co.
accepted a $5,000, 12%, 90-day note dated May 16, from Beckam Co. in exchange for its past-
due account receivable. Make the necessary general journal entries for Jordan Co. on May 16
and the August 14 maturity date, assuming that the:
a. Note is held until maturity and collected in full at that time.
b. Note is dishonored; the amount of the note and its interest are written off as uncollectible.
198) Prepare general journal entries for the following transactions for the current year:
Apr. 25
Sold $4,500 of merchandise to Dunn Corp., receiving a 10%, 60-day,$4,500
note receivable.
June 24
The note of Dunn Corp. received on April 25 was dishonored.
Apr 25
Notes Receivable………………………………..
June 24
Accounts Receivable—Dunn Corp………………
199) The following data are taken from the comparative balance sheets of Grayling Company.
Compute and interpret its accounts receivable turnover for Year 2. Competitors average a
turnover of 7.5. How is the company doing in relation to its competitors?
Accounts receivable, net
Net sales
200) On July 31, Orwell Co. has $448,800 of accounts receivable.
Required:
1. Prepare journal entries to record the following selected August transactions. The company
uses the perpetual inventory system.
2. Explain what should be included in the footnotes to the August 31 financial statements as a
result of these transactions.
3. Calculate the balance in the Accounts Receivable account as of August 10.
Aug 3
Sold $250,000 of merchandise (that cost $122,000) to customers on credit.
Aug 5
Sold $300,000 of accounts receivable to Cash Solutions. Cash Solutions
charges a 7% factoring fee.
Aug 8
Received $165,200 from customers in payment on their accounts.
Aug 9
Borrowed $50,000 cash from State Bank, pledging $65,000 of accounts
receivable as security for the loan. The note is a 90-day, 9% note.
Aug 3
Accounts Receivable……………………………………………..
3
Cost of goods sold………………………………………………..
5
Cash (300,000 — 21,000)……………………………………….
Aug 8
Cash……………………………………………………………………
Aug 9
Cash……………………………………………………………………
101
201) On September 30, Waldon Co. has $540,250 of accounts receivable. Waldon uses the
allowance method of accounting for bad debts and has an existing credit balance in the
allowance for doubtful accounts of $13,750.
1. Prepare journal entries to record the following selected October transactions. The company
uses the perpetual inventory system.
a. Sold $305,000 of merchandise (that cost $178,500) to customers on credit.
b. Received $395,100 cash in payment of accounts receivable.
c. Wrote off $15,700 of uncollectible accounts receivable.
d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that 4.0%
of accounts receivable will be uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its
October 31 balance sheet.
202) Bonita Company estimates uncollectible accounts using the allowance method at December
31. It prepared the following aging of receivables analysis.
Days
Past
Due
Total
Current
1 to 30
31 to 60
61 to 90
Over 90
Accounts receivable
$110,000
68,000
17,000
10,000
8,000
7,000
Percent
uncollectible
1%
2%
5%
8%
13%
a. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts
receivable method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.
Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit.
c. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.
Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.
Current
31 to 60
Accounts
receivable
68,000
10,000
7,000
Percent
uncollectible
1%
5%
Estimated
uncollectible
3,070
340
b.
Bad Debts Expense
Bad Debts Expense
203) On May 31, Cray has $375,800 of accounts receivable. Cray uses the allowance method of
accounting for bad debts and has an existing credit balance in the allowance for doubtful
accounts of $14,250.
1. Prepare journal entries to record the following selected May transactions. The company uses
the perpetual inventory system.
a. Sold $415,200 of merchandise (that cost $249,000) to customers on credit.
b. Received $465,800 cash in payment of accounts receivable.
c. Wrote off $15,800 of uncollectible accounts receivable.
d. In adjusting the accounts on May 31, its fiscal year-end, the company estimated that 4.0% of
accounts receivable will be uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its May
31 balance sheet.
204) At December 31, Yarrow Company reports the following results for its calendar year from
the adjusted trial balance.
Credit sales
$2,300,000
Cash sales
1,050,000
Accounts Receivable
295,000
Allowance for doubtful accounts (credit balance)
750
a. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated
to be 1.1% of credit sales.
b. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are
estimated to be .8% of total sales.
c. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated
to be 7.0% of year-end accounts receivable.
a..
Bad Debts Expense
b.
Bad Debts Expense
Bad Debts Expense
106
205) White Company allows customers to make purchases on credit. The terms of all credit sales
are 2/10, n/30, and all sales are recorded at the gross price. Other customers can use a bank credit
card where the bank deducts a 4% service charge for credit card sales and credits the bank
account of White immediately when credit card receipts are deposited. White uses the perpetual
inventory method. Prepare journal entries to record the following selected transactions and
events.
June 4
Sold $12,000 of merchandise (cost $7,000) on credit to Grant.
6
Sold $17,000 of merchandise (cost $9,350) to customers who used a bank
credit card, receipts were processed and deposited the same day.
8
Sold $8,500 of merchandise (cost $4,500) on credit to Emma Company.
10
Accepted a $6,700, 45-day, 6% note dated this day in granting Cory Tam a
time extension on his past-due account receivable.
12
Received Grant’s check in full payment of the purchase on June 4.
15
Wrote off the account of Z. Westmore against the Allowance for Doubtful
Accounts. The $1,580 balance stemmed from a credit sale in January.
20
Accepted a $6,240, 30-day, 10% note dates this day in granting F. Potter a
time extension on his past-due account receivable.
July 17
Received the amount previously written-off from Z. Westmore.
20
F. Potter dishonored his note when presented for payment.
25
Received payment of principal plus interest from Cory Tam.
206) A supplementary record created to maintain a separate account for each customer is called
the ________.
207) A ________ is a signed agreement to pay a specified amount of money either on demand or
at a definite future date.
208) The person to whom a note is payable is known as the ________.
209) ________ is the charge for using borrowed money until its due date.
210) The ________ of a note is the day the principle plus interest of a note must be repaid.
211) Converting receivables to cash before they are due is usually done by either (1) ________
or (2) ________.
212) The accounts receivable turnover is calculated by dividing ________ by ________.
213) The________ method of accounting for bad debts records the loss from an uncollectible
account receivable at the time it is determined to be uncollectible (and not before).
214) ________ are amounts owed by customers from credit sales where payment is required in
periodic amounts over an extended time period.
215) To write off an uncollectible account receivable when the allowance method of accounting
for uncollectible accounts is used, a company should debit ________ and credit accounts
receivable.
216) The ________ method of computing uncollectible accounts uses income statement
relationships to estimate bad debts and is based on the idea that a given percent of a company’s
credit sales for a period are uncollectible.
217) The ________ methods of computing uncollectible accounts use balance sheet relations to
estimate bad debts–mainly the relation between accounts receivable and the allowance amount.
218) The ________ method uses both past and current receivables to estimate the allowance
amount, and assumes that the longer an amount is past due, the more likely it is to be
uncollectible.
219) Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed a 60-
day, 10%, $4,000 promissory note. Marita should record the sale with a journal entry debiting
________ for $ ________ and crediting ________ for $ ________.
220) When the maker of a note is unable or refuses to pay at maturity, the note is said to be
________.
221) ________ refers to the expected proceeds from converting an asset into cash.