Chapter 9: Receivables
119.
Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note.
Harper
Company prepares financial statements on March 31. What adjusting entry should be made before
the financial
statements can be prepared?
a.
Cash 200
Interest Revenue 200
b. Interest Receivable
Interest Revenue
800
800
c. Interest Receivable
Interest Revenue
200
200
d. Note Receivable
Cash
40,000
40,000
120.
On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu
Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal
entry to
record the collection of the note should include a
a.
credit to Notes Receivable for $20,300
b.
debit to Interest Receivable for $300
c.
credit to Interest Revenue for $300
d.
debit to Notes Receivable for $20,000
Chapter 9: Receivables
121.
Current assets are usually listed in order
a.
of the due date
b.
of the size
c.
alphabetically
d.
of liquidity
122.
The accounts receivable turnover measures
a.
how frequently during the year the accounts receivable are converted to cash
b.
the number of days of accounts receivable outstanding
c.
the fair market value of accounts receivable
d.
the efficiency of the accounts payable function
123.
The number of days’ sales in receivables
a.
is an estimate of the length of time the receivables have been outstanding
b.
measures the number of times the receivables turn over each year
c.
is net credit sales divided by average receivables
d.
is not meaningful and therefore is not used
Chapter 9: Receivables
124.
Given the following information, compute accounts receivable turnover:
Gross sales
$150,000
Accounts receivable, beginning of year
$18,000
Sales
135,000
Accounts receivable, end of year
22,000
a. 6.75
b. 7.50
c. 6.13
d. 6.82
125.
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 sales for the year total $2,500,000. An analysis of receivables
estimates
uncollectible receivables as $25,000.
Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of
Allowance of
Doubtful Accounts, respectively.
a. $19,500 and $25,000 b. $30,500 and $525,000
c. $19,500 and $525,000 d. $30,500 and $25,000
Chapter 9: Receivables
126.
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 sales for the year total $2,500,000. An analysis of receivables
estimates
uncollectible receivables as $25,000.
Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of
the
adjusting entry for bad debt expense and the adjusted balance of Allowance of Doubtful Accounts.)
a. $550,000 b. $544,500
c. $525,000 d. $575,000
127.
Other than Accounts Receivable and Notes Receivable, name other receivables that might be
included in the
general ledger.
128.
Discuss the similarities and differences between accounts receivable, notes receivable, and other receivables.
Chapter 9: Receivables
129.
List at least three indicators that a receivable may be uncollectible.
130.
Discuss the two methods for recording bad debt expense. What type of company uses each method?
Chapter 9: Receivables
131.
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.
132.
Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On September
15 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 from Jacob Marley.
Chapter 9: Receivables
133.
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.
134.
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
Chapter 9: Receivables
135.
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.
136.
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.
Chapter 9: Receivables
137.
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 sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of
1% of sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of
accounts
receivable.
138.
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 sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of
1% of sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of
accounts
receivable.
139.
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 sales for the year total $300,000. Bad debt expense is estimated
at 2.5% of
sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of
Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable
value of
accounts receivable.
140.
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 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 for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of
accounts
receivable.
Chapter 9: Receivables
141.
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 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 for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of
accounts
receivable.
142.
Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December 12
the
company receives a $550 check from Chad Thomas in settlement of Thomas’s $1,100 outstanding
accounts
receivable. Due to Thomas’s failing health he is closing his company and is expecting to make no
further payments
to Discount Mart. Journalize this declaration.
Chapter 9: Receivables
143.
On June 30 (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.
Chapter 9: Receivables
144.
a) The aging of Torme Designs’ accounts receivable is shown below. Calculate the amount of each
periodicity
range that is deemed to be uncollectible.
Est. Uncollectible Accts
Age Interval:
Balance:
Percentage:
Amount:
Not past due
850,000
3.50%
1~30 days past due:
47,500
5.00%
31~60 days past due:
21,750
10.00%
61~90 days past due:
11,250
20.00%
91~180 days past due:
5,065
30.00%
181~365 days past due:
2,500
50.00%
Over 365 days past due:
1,145
95.00%
Total:
939,210
b) If the Allowance for Doubtful Accounts has a credit balance of $1,135.00, record the adjusting entry
for
the bad debt expense for the year.
Est. Uncollectible Accts
Age Interval:
Amount:
Not past due
850,000
1~30 days past due:
47,500
31~60 days past due:
21,750
61~90 days past due:
11,250
91~180 days past due:
181~365 days past due:
Over 365 days past due:
Chapter 9: Receivables
145.
For each of the following scenarios, indicate the amount of the adjusting journal entry for bad debt
expense to be
recorded, the balance in allowance for doubtful accounts after adjustment at December 31,
and the net realizable
value of accounts receivable at December 31.
a) Based on an analysis of Simmon’s Company’s $380,000 balance in Accounts Receivable at December
31, it was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance
for Doubtful
Accounts before adjustment.
b)
Blake Company had net credit sales of $900,000 at year-end, and has an Accounts Receivable balance of
$425,000 at December 31, and an Allowance for Doubtful Accounts credit balance of $11,000 before
adjustment. Blake estimates bad debt expense as 3/4 of 1% of net credit sales.
c)
Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those
receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the
Allowance
for Doubtful Accounts has a debit balance of $750.
Chapter 9: Receivables
146.
A partially competed aging of receivables schedule for Lindy Designs’ is shown below. Calculate the amount
that is estimated to be uncollectible.
a)
Determine the amount estimated to be uncollectible by completing the aging of receivables schedule.
Round
calculations to the nearest dollar.
Est. Uncollectible
Accounts
Age Interval
Balance
Percentage
Amount
Not past due
550,000
2.50%
1~30 days past due
96,500
4.00%
31~60 days past due
43,750
9.50%
61~90 days past due
22,250
16.00%
91~180 days past due
5,600
31.00%
181~365 days past due
3,100
60.00%
Over 365 days past due
1,250
95.00%
Total
722,450
b)
If the Allowance for Doubtful Accounts has a credit balance of $9,700, record the adjusting entry for
the bad
debt expense for the year.
c)
If the Allowance for Doubtful Accounts has a debit balance of $9,700, record the adjusting entry for
the bad
debt expense for the year.
Total
Chapter 9: Receivables
147.
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.
Chapter 9: Receivables
148.
Morry Company wrote off the following accounts receivable as uncollectible for the first year of its
operations
ending December 31:
Required:
Customer
Amount
J. Jackson
$10,000
L. Stanton
9,500
C. Barton
13,100
S. Fenton
2,400
Total
$35,000
(1)
Journalize the write-offs for the current year under the direct write-off method.
(2)
Journalize the write-offs for the current year under the allowance method. Also,
journalize the adjusting entry for uncollectible receivables assuming the
company made $2,400,000 of credit sales during the year and the industry
average for uncollectible
receivables is 1.50% of credit sales.
(3)
How much higher or lower would Morry Company’s net income have been under the direct write-off
method than under the allowance method?
Chapter 9: Receivables
149.
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.
150.
For a business that uses the allowance method of accounting for uncollectible receivables:
(a)
Journalize the entries to record the following:
(1)
Record the adjusting entry at December 31, the end of the first fiscal year, to
record the bad debt expense. The accounts receivable account has a balance of
$800,000,
and the contra asset account before adjustment has a debit balance of
$600. Analysis
of the receivables indicates uncollectible receivables of
$18,000.
(2)
In March of the next year, the $350 owed by Fronk Co. on account is written
off as
uncollectible.
(3)
In November of the next year, $200 of the Fronk Co. account is reinstated
and
payment of that amount is received.
(4)
In December of the next year, $400 is received on the $600 owed by Dodger
Co. and
the remainder is written off as uncollectible.
(b)
Redo the entries in steps (2), (3), and (4) assuming the company uses the direct
write-off
method.
Chapter 9: Receivables
Chapter 9: Receivables
151.
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.
152.
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