116. Discuss the similarities and differences between accounts receivables, notes receivables and other
receivables.
117. List at least three things that indicate a receivable may be uncollectible.
118. Discuss the two methods for recording bad-debt expense. What type of company uses each method?
119. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.
120. Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On
September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is
expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.
121. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables:
Feb 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment.
122. The following journal entries would be used in one of the two methods of accounting for uncollectible
receivables. Identify each.
(a)
Bad Debt Expense
900
Accounts Receivable-Billings
900
(b)
Allowance for Doubtful Accounts
900
Accounts Receivable-Grover
900
(a)
Direct Write-Off Method
(b)
Allowance Method
Feb.
20
Cash
1,000
Bad Debt Expense
4,000
Accounts Receivable—Andrew Warren
5,000
Bad Debt Expense
4,000
10
Cash
4,000
Accounts Receivable—Andrew Warren
4,000
123. Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and
indicate the ending balance in each case.
(a)
Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates
uncollectible receivables of $8,500.
(b)
Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of
credit sales, which totaled $1,000,000 for the year.
124. Journalize the following transactions using the allowance method of accounting for uncollectible
receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
125. At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.
126. At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful
Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.
127. At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful
Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated
at 2.5% of net sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of
Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value
of accounts receivable.
128. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.
129. At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful
Accounts has a debit balance of $5,400; and net sales for the year total $3,000,000. An analysis of receivables
indicates the uncollectible receivables are estimated to be $45,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.
130. Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December
12th the company receives a $550 check from Chad Thomas in settlement of Thomas’ $1,100 outstanding
accounts receivable. Due to Thomas’ failing health he is closing his company and is expecting to make no
further payments to Discount Mart. Journalize this declaration.
131. On June 30th (the end of the period) Brown Company has a credit balance of $2,275 in Allowance for
Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025.
Journalize the appropriate adjusting entry.
132. Discuss the (1) focus and (2) financial statement emphasis of (a) the percent of sales and (b) the analysis of
receivables methods of estimating bad debts.
133. Fellows Corporation has determined that the $2,700 accounts receivable due from Andrew Stevens is
uncollectible. Compare the journal entry that is required under the direct write-off method to the journal entry
that is required using the allowance method.
134. Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on
account.
a.
Determine the due date of the note.
b.
Determine the maturity value of the note.
c.
Journalize the entry to record the receipt of the payment of the note at maturity.
April
18 days (30-12)days (30-12)
May
31 days
June
30 days
August
10 days
Aug. 10
Cash
40,800
Interest Revenue
800
135.
Fill in the blanks related to the characteristics of a promissory note:
1.
The party promising to pay the note is called the ________.
2.
The amount for which the note is written is called the _______ amount.
3.
The date the note is to be paid is the _______ date.
4.
The time between the date when a note is written and the time it must be paid is called the _____ of the note.
136. Determine the due date and amount of interest due at maturity on the following notes:
Origination
Face
Term
Interest
Maturity
Interest
Date
Amount
of Note
Rate
Date
Amount
(a)
Mar 15
$8,000
60 days
9%
_______
_______
(b)
May 1
$12,000
90 days
8%
_______
_______
(a)
May 14; $120 = ($8,000 ´ .09) ´ (60/360)
(b)
July 30; $240 = ($12,000 ´ .08) ´ (90/360)
137. Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a customer on
account.
Required:
1.
Determine the due date of the note.
2.
Determine the maturity value of the note.
3.
Journalize the entry to record the receipt of the payment of the note at maturity.
138. Based on the following data and using a 365-day year, compute (a) the accounts receivable turnover and
(b) the number of days’ sales in receivables. The industry average is a collection period of once every 20 days,
and the number of days’ sales in receivables averages 25. (c) Comment on this situation.
12/31/11 Accounts Receivable, net
$90,000
12/31/12 Accounts Receivable, net
$70,000
For the year ended 12/31/11, net credit sales
$1,050,000
For the year ended 12/31/12, net credit sales
$1,200,000
$1,200,000 [($90,000 + $70,000) 2] = 15
[($70,000 + $90,000) 2] ($1,200,000 365 days) = 24.33 days
(c)
This situation is better than the industry average.
September
30 days
October
31 days
November
30 days
December
8 days
Total
3.
Dec
8
Cash
185,400
Notes Receivable
180,000
Interest Revenue
5,400
139. Posner Company wrote off the following accounts receivable as uncollectible for the first year of its
operations ending December 31, 2011:
Customer
Amount
J. Jackson
$10,000
L. Stanton
9,500
C. Barton
13,100
S. Fenton
2,400
Total
$35,000
Required:
(1)
Journalize the write-offs for 2011 under the direct write-off method.
(2)
Journalize the write-offs for 2011 under the allowance method. Also, journalize the adjusting entry for uncollectible receivables
assuming the company made $2,400,000 of credit sales during 2011 and the industry average for uncollectible receivables is
1.50% of credit sales.
(3)
How much higher or lower would Posner Company’s 2011 net income have been under the direct write-off method than under the
allowance method?
(1)
Bad Debt Expense
35,000
Accounts Receivable—J. Jackson
10,000
Accounts Receivable—L. Stanton
9,500
Accounts Receivable—C. Barton
13,100
Accounts Receivable—S. Fenton
2,400
Accounts Receivable— J. Jackson
10,000
Accounts Receivable— L. Stanton
9,500
Accounts Receivable— C. Barton
13,100
Accounts Receivable— S. Fenton
2,400
Bad Debt Expense
36,000
Allowance for Doubtful Accounts
36,000
($2,400,000 ´ 1 1/2% = $36,000)
140.
Determine the due date and the amount of interest due at maturity on the following notes:
Date of Note
Face Amount
Interest Rate
Term of Note
(1)
October 1
$21,000
8%
60 days
(2)
August 30
9,000
10
120 days
(3)
May 30
12,000
12
90 days
(4)
March 6
15,000
9
60 days
(5)
May 23
9,000
10
60 days
Due Date
Interest
(1)
Nov. 30
$280
[$21,000 ´ 0.08 ´ (60/360)]
(2)
Dec. 28
300
[$9,000 ´ 0.10 ´ (120/360)]
(3)
Aug. 28
360
[$12,000 ´ 0.12 ´ (90/360)]
(4)
May 5
225
[$15,000 ´ 0.09 ´ (60/360)]
(5)
July 22
150
[$9,000 ´ 0.10 ´ (60/360)]