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Problem 7-3A (35 minutes)
Part 1
Calculation of the estimated balance of the allowance for uncollectibles
Not due: $830,000 x .0125 = $10,375
1 to 30: 254,000 x .0200 = 5,080
Part 2
Dec. 31 Bad Debts Expense.............................................. 27,150
Allowance for Doubtful Accounts................. 27,150
To record estimated bad debts.*
Part 3
Writing off the account receivable in 2016 will not directly affect year 2016
net income. The entry to write off an account involves a debit to Allowance
for Doubtful Accounts and a credit to Accounts Receivable, both of which
Problem 7-4A (35 minutes)
2014
a. Accounts Receivable.......................................... 1,345,434
Sales............................................................... 1,345,434
To record sales on account.
b. Allowance for Doubtful Accounts..................... 18,300
Accounts Receivable.................................... 18,300
To write off accounts.
d. Bad Debts Expense............................................ 28,169
Allowance for Doubtful Accounts .............. 28,169
To record estimated bad debts.*
*Beginning receivables....................... $ 0
Credit sales........................................ 1,345,434
Collections......................................... (669,200)
Write-offs............................................ (18 ,300 )
Problem 7-4A (Concluded)
2015
e. Accounts Receivable............................................... 1,525,634
Sales.................................................................... 1,525,634
To record sales on account.
Cost of Goods Sold......................................................1,250,000
Merchandise Inventory........................................... 1,250,000
To record cost of sales.
*Beginning receivables............................. $ 657,934
Credit sales.............................................. 1,525,634
Collections............................................... (1,204,600)
Write-offs.................................................. (27,800)
Ending receivables.................................. 951,168
Problem 7-5A (75 minutes)
Part 1
2014
Dec. 16 Notes Receivable—D. Todd................................. 10,800
Accounts Receivable—D. Todd.................... 10,800
To record note received on account.
2015
Feb. 14 Cash...................................................................... 10,944
Interest Revenue*........................................... 108
Mar. 2 Notes Receivable—Midnight Co......................... 6,100
Accounts Receivable—Midnight Co............. 6,100
To record note received on account.
17 Notes Receivable—A. Privet............................... 2,400
Accounts Receivable—A. Privet 2,400
To record note received on account.
Apr. 16 Accounts Receivable—A. Privet......................... 2,414
May 31 Accounts Receivable—Midnight Co.................. 6,222
Interest Revenue*........................................... 122
Problem 7-5A (Concluded)
July 16 Cash...................................................................... 6,286
Aug. 7 Notes Receivable—Mulan................................... 7,450
Accounts Receivable—Mulan....................... 7,450
To record note received on account.
Sept. 3 Notes Receivable—N. Carson............................. 2,100
Accounts Receivable—N. Carson................ 2,100
To record note received on account.
5 Cash...................................................................... 7,636
Dec. 1 Allowance for Doubtful Accounts...................... 2,414
Accounts Receivable—A. Privet................... 2,414
To record write-off of account.
Part 2
Analysis Component: When a business pledges its receivables as security
for a loan and the loan is still outstanding at period-end, the business must
disclose this information in notes to its financial statements. This is a
PROBLEM SET B
Problem 7-1B (30 minutes)
Aug. 4 Accounts Receivable—M. Carpenter....................... 3,700
Sales..................................................................... 3,700
10 Cash........................................................................... 5,044
Credit Card Expense*................................................ 156
Sales..................................................................... 5,200
To record credit card sales less fee. *($5,200 x .03)
11 Accounts Receivable—Aztec................................... 1,225
Credit card expense*................................................. 25
Sales..................................................................... 1,250
14 Cash........................................................................... 3,626
Sales Discounts*....................................................... 74
Accounts Receivable—M. Carpenter................. 3,700
To record cash received less discount.*($3,700 x .02)
15 Accounts Receivable—Aztec................................... 3,175
Credit Card Expense*(rounded to nearest dollar)...... 65
18 No journal entry required.
22 Allowance for Doubtful Accounts............................ 498
Accounts Receivable—Craw Co........................ 498
To write off account due.
25 Cash........................................................................... 4,400
Problem 7-2B (35 minutes)
Part 1
a. Expense is 2.5% of credit sales
Dec. 31 Bad Debts Expense.............................................. 33,550
Allowance for Doubtful Accounts................. 33,550
b. Expense is 1.5% of total sales
Dec. 31 Bad Debts Expense............................................ 35,505
c. Allowance is 6% of accounts receivable
Dec. 31 Bad Debts Expense.............................................. 27,000
Part 2
Current assets
Part 3
Current assets
Accounts receivable..................................... $575,000
Less allowance for doubtful accounts....... (34 ,500 )** $540,500
Problem 7-3B (35 minutes)
Part 1
Calculation of the estimated balance of the allowance
Not due: $396,400 x .020 = $ 7,928
1 to 30: 277,800 x .040 = 11,112
Part 2
Part 3
Writing off the account receivable in 2016 will not directly affect Year 2016
net income. The entry to write off an account involves a debit to Allowance
for Doubtful Accounts and a credit to Accounts Receivable, both of which
