160. On September 30, Emerson Co. has $540,250 of accounts receivable. Emerson 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. 2. Show
how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31
balance sheet.
a. Sold $325,000 of merchandise (that cost $178,500) to customers on credit.
b. Received $425,100 cash in payment of accounts receivable.
c. Wrote off $16,700 of uncollectible accounts receivable.
d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that
3.0% of accounts receivable will be uncollectible.
161. Loma 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.
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162. On May 31, Rayco has $375,800 of accounts receivable. Rayco 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.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its
May 31 balance sheet.
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.
163. At December 31, Warren Company reports the following results for its calendar year
from the adjusted trial balance.
Credit sales $2,100,000
Cash sales 950,000
Accounts Receivable 295,000
Allowance for doubtful accounts (debit 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.
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164. Bardo 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 Bardo immediately when credit card receipts are deposited. Bardo 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 Buford.
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 Alex Company.
10 Accepted a $6,700, 45-day, 8% note dated this day in granting Sam Sail a time
extension on his past-due account receivable.
12 Received Buford’s check in full payment of the purchase on June 4.
15 Wrote off the account of B. Zanak 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 Art Attac a time
extension on his past-due account receivable.
July 17 Received the amount previously written-off from B. Zanak.
20 Art Attac dishonored his note when presented for payment.
25 Received payment of principal plus interest from Sam Sail.
Fill in the Blank Questions
165. A supplementary record created to maintain a separate account for each customer is
called the ________________________.
166. A ____________________ is a signed promise to pay a specified amount of money
either on demand or at a definite future date.
167. The person to whom a note is payable is known as the ______________.
168. ____________________ is the charge for using (not paying) money until a later date.
169. The ____________________ of a note is the day the principle plus interest of a note
must be repaid.
170. Converting receivables to cash before they are due is usually done by either (1)
_______________________ or (2) ________________________________.
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171. The accounts receivable turnover is calculated by dividing _________________ by
________________.
172. 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).
173. ____________________________ are amounts owed by customers from credit sales
where payment is required in periodic amounts over an extended time period.
174. 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.
175. The _________________________ method 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.
176. The ________________________ methods use balance sheet relations to estimate bad
debts – mainly the relation between accounts receivable and the allowance amount.
177. 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.
178. Myrex Corporation purchased $4,000 in merchandise from TechCom. Myrex signed a
60-day, 10%, $4,000 promissory note. TechCom should record the sale with a journal entry
debiting ____________________ for $ ________ and crediting __________________ for $
________.
179. When the maker of a note is unable or refuses to pay at maturity, the note is said to be
___________________.
180. _______________ refers to the expected proceeds from converting an asset into cash.