• Federal Express Corporation was founded 1971 in Little Rock, Ark.
• The most popular perk for employees is called “jump seating.” This allows employees to hitch an unlimited
number of free rides anywhere FedEx flies.
• In 1973 on the first night of continuous operation, 389 Federal Express employees and 14 aircraft delivered
186 packages overnight to 25 U.S. cities.
• Currently, FedEx employs more than 275,000 employees and contractors worldwide and operates 684
aircraft and delivers an average daily volume of 8 million shipments for express, ground, freight and
expedited delivery services.
1. The allowance method more closely matches revenues (sales) with expenses (uncollectible accounts) in the
year the revenue is earned.
3. On sales. Sales represents the revenues for the current period. The accounts receivable account reflects sales
made in the current period and past periods.
4. Compute the loss from bad debts by multiplying the net credit sales by the predetermined loss percentage.
6. Allowance for Doubtful Accounts.
8. The matching principle and the conservatism constraint.
Fast Facts
Managerial Implications: Thinking Critically
Discussion Questions
CHAPTER 15
ACCOUNTS RECEIVABLE AND UNCOLLECTIBLE ACCOUNTS
Chapter Opener: Thinking Critically
Uncollectible accounts can be estimated in a number of ways. Students might consider historical data on
uncollected accounts as one way of estimating the amount of uncollectible accounts a company can expect.
The aging of accounts receivable would provide information about the length of time required to collect accounts.
The balance sheet and income statement provide total sales, accounts receivable, and uncollectible accounts
expense.
9. Debit Accounts Receivable and the customer’s subsidiary account and credit Allowance for Doubtful
Accounts. Then debit Cash and credit Accounts Receivable and the customer’s subsidiary account.
10. Credit the Allowance account for only enough to bring the balance to the estimated doubtful accounts
based on the aging analysis.
12. Uncollectible Accounts Expenses is shown as either a selling expense (if the sales department is
responsible for granting credit), or as a general expense (if the sales department does not grant credit).
14. Accounts Receivable is overstated and expense is understated for the current year and perhaps for the
prior year(s). The matching principle is violated.
15. Businesses with few accounts receivable (so that the amount involved is immaterial) or with very few
17. Accounts Receivable is debited and an income account, Uncollectible Accounts Recovered is credited.
18. Authorizing all credit sales, sending invoices and monthly statements, aging accounts receivable,
19. Authorizing credit sales, recording receivables transactions, preparing bills and statements for
Discussion Questions (continued)
EXERCISE 15.1
Total credit sales
Less sales returns and allowances—credit sales
PAGE
POST.
REF.
1 2013 1
2 Dec. 31 Uncollectible Accounts Expense 4902600 2
EXERCISE 15.2
Accounts Receivable
$16,403,600
61,600
$1,863,000
GENERAL JOURNAL 2
DATE DESCRIPTION DEBIT CREDIT
EXERCISE 15.2 (continued)
POST.
REF.
1 2013 1
6 6
EXERCISE 15.3
Accounts Receivable $920,000
POST.
REF.
1 2013 1
2 Dec. 31 Uncollectible Accounts Expense 34 2 0 0 00 2
EXERCISE 15.4
POST.
REF.
1 2013 1
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PAGE
GENERAL JOURNAL
DATE DEBIT CREDITDESCRIPTION
PAGE
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PAGE
EXERCISE 15.5
POST.
REF.
1 2013 1
2 Dec. 8 Accounts Receivable/Michele Waters 270000 2
3 Allowance for Doubtful Accounts 270000 3
EXERCISE 15.6
POST.
REF.
1 2014 1
2 Feb. 28 Accounts Receivable/Michele Waters 270000 2
3 Allowance for Doubtful Accounts 270000 3
EXERCISE 15.7
POST.
REF.
1 2013 1
2 Sept. 10 Uncollectible Accounts Expense 84000 2
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PAGE
GENERAL JOURNAL 22
DATE DESCRIPTION DEBIT CREDIT
PAGE
GENERAL JOURNAL 18
DATE DESCRIPTION DEBIT CREDIT
PAGE
EXERCISE 15.8
DESCRIPTION POST. REF.
1 2013 1
2 Dec. 8 Accounts Receivable/Chris Freyer 4 2 0 00 2
EXERCISE 15.9
DESCRIPTION POST. REF.
1 2014 1
2 Jan. 28 Accounts Receivable/Chris Freyer 4 2 0 00 2
PROBLEM 15.1A
1. Wholesale ($2,040,000 × .005) $10,200.00
GENERAL JOURNAL
DATE DEBIT CREDIT
PAGE
GENERAL JOURNAL
DATE DEBIT CREDIT
PAGE
PROBLEM 15.1A (continued)
PAGE
DESCRIPTION
POST.
REF.
1 2013 (2) 1
2 Dec. 31 Uncollectible Accounts Expense 1678320 2
3 Allowance for Doubtful Accounts 1678320 3
4 To record estimated losses from uncollectible 4
5 accounts for the year, based on 0.5% of net 5
19 19
Accounts Receivable 39200000
Balance Sheet
December 31, 2013
GENERAL JOURNAL
DATE DEBIT CREDIT
Ultra Leather Products
PROBLEM 15.2A
1. Over 60 days past due ($1,532 × .25) $383.00
31–60 days past due ($1,968 × .09) 177.12
2. Estimated uncollectible accounts 1,095.80$
POST.
REF.
1 2013 (3) 1
2 Dec. 31 Uncollectible Accounts Expense 8 8 7 60 2
3 Allowance for Doubtful Accounts 88760 3
4 To record adjustment of allowance account 4
ESTIMATE OF UNCOLLECTIBLE ACCOUNTS
DATE DEBIT CREDITDESCRIPTION
GENERAL JOURNAL PAGE
1. a. Credit sales $8,500,000
Less sales returns and allowances on credit sales 200,000
b. Accounts Receivable $850,000
Accounts Receivable estimated uncollectible (0.033 × $850,000) 28,050
2. a. Computations and answers are the same as for 1a.
b. Accounts Receivable estimated uncollectible $28,050
PROBLEM 15.3A
PROBLEM 15.4A
POST.
REF.
1 2013 1
2 Feb. 7 Uncollectible Accounts Expense 60000 2
3 Accounts Receivable/Anne Baker 60000 3
4 To write off account determined to be uncollectible 4
5 5
6 May 16 Uncollectible Accounts Expense 100000 6
7 Accounts Receivable/Martha Falls 100000 7
8 To write off account determined to be uncollectible 8
24 24
25 2014 25
26 Sept. 28 Accounts Receivable/Martha Falls 50000 26
27 Uncollectible Accounts Recovered 50000 27
28 To restore part of account charged off May 16, 2013, 28
29 which was collected from estate of Martha Falls 29
30 today. 30
31 31
32 32
33 33
34 34
35 35
PAG
E
GENERAL JOURNAL 18
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 15.1B
1. Businesses ($1,800,000 × 0.4%) $7,200.00
PAGE
DESCRIPTION POST. REF.
1 2013 (2) 1
2 Dec. 31 Uncollectible Accounts Expense 1800000 2
3 Allowance for Doubtful Accounts 1800000 3
4 To record estimated losses from uncollectible 4
17 today 17
Ideal Plumbing Company
Balance Sheet
December 31, 2013
GENERAL JOURNAL 2
DATE DEBIT CREDIT
PROBLEM 15.2B
1. Over 60 days past due ($1,046 × .40) $418.40
31–60 days past due ($2,398 × .14) 335.72
2. Estimated uncollectible accounts 1,017.83$
PAGE
DESCRIPTION
POST.
REF.
1 2013 (3) 1
2 July 31 Uncollectible Accounts Expense 132783 2
3 Allowance for Doubtful Accounts 132783 3
4 To record adjustment of allowance account to 4
5 needed balance of $1,017.83 based on aging 5
6 of accounts receivable 6
7 (4) 7
8 Aug. 28 Allowance for Doubtful Accounts 18200 8
ESTIMATE OF UNCOLLECTIBLE ACCOUNTS
GENERAL JOURNAL 7
DATE DEBIT CREDIT
1. a. Credit sales $39,100,000
Less sales returns and allowances on credit sales 230,000
b. Accounts Receivable $3,910,000
Accounts Receivable estimated uncollectible (0.028 × $3,910,000) 109,480
2. a. Computations and answers are the same as for 1a.
b. Accounts Receivable estimated uncollectible $109,480
PROBLEM 15.3B
PROBLEM 15.4B
PAGE
POST.
REF.
1 2013 1
2 Mar. 15 Uncollectible Accounts Expense 500000 2
3 Accounts Receivable/Tony Smith 500000 3
4 To write off account of customer who died 4
5 5
6 Apr. 22 Uncollectible Accounts Expense 300000 6
21 21
22 Oct. 8 Uncollectible Accounts Expense 210000 22
23 Accounts Receivable/Lisa Holmes 21000023
24 To write off account determined to be uncollectible 24
25 25
26 2014 26
27 Feb. 12 Accounts Receivable/Tom Greenberg 8 0 0 00 27
28 Uncollectible Accounts Recovered 8000028
GENERAL JOURNAL 18
DATE DESCRIPTION DEBIT CREDIT
PAGE
POST.
REF.
1 2013 1
2 Dec. 31 Allowance for Doubtful Accounts 2551000 2
3 Accounts Receivable/Bob Anderson 1080000 3
4 Accounts Receivable/Suzanne Bennett 2 18000 4
ESTIMATE OF UNCOLLECTIBLE ACCOUNTS
Over 60 days past due 0.40 × $23,840 = $9,536
CRITICAL THINKING PROBLEM 15.1
GENERAL JOURNAL 18
DATE DESCRIPTION DEBIT CREDIT
12/31 Chg. Off 25,510 12/31 Beg. Bal. 28,200 12/31 Beg. Bal. 990,440 12/31 Chg. Off 25,510
12/31 Adjustment 23,555 12/31 Final Bal. 964,930
12/31 Final Bal. 26,245
Allowance for Doubtful Accounts Accounts Receivable
CRITICAL THINKING PROBLEM 15.1 (continued)
CRITICAL THINKING PROBLEM 15.2
PAGE
POST.
REF.
1 2013 (1) 1
2 Dec. 31 Accounts Receivable/Various Accounts 6,480 0 0 0 00 2
3 Sales 6,480 0 0 0
0
03
4 To record sales for 2013 4
5 5
6 31 Allowance for Doubtful Accounts 2220000 6
17 17
18 31 Allowance for Doubtful Accounts 680000 18
19 Accounts Receivable/Toys on the Square 6 8 0 0 00 19
20 To write off account determined to be 20
21 uncollectible 21
22 22
GENERAL JOURNAL 29
DATE DESCRIPTION DEBIT CREDIT
0
CRITICAL THINKING PROBLEM 15.2 (continued)
PAGE
POST. REF.
1 2013 1
2 Dec. 31 Uncollectible Accounts Expense 2484000 2
Old territory:
Provision for losses in 2013 ($6,280,000 × 0.003) $18,840.00
Actual losses during 2013 22,600.00
Excess losses in 2013 over provision in 2013 ($3,760.00)
New territory:
Provision for losses in 2013 ($200,000 × 0.03) $6,000.00
Actual losses during 2013 54,000.00
Excess losses in 2013 over provision in 2013 ($48,000.00)
The provision for uncollectible accounts is grossly inadequate and must be increased for 2013.
There is an ending debit balance in the allowance account which is not acceptable.
ANALYSIS BY TERRITORY
GENERAL JOURNAL 29
DATE DESCRIPTION DEBIT CREDIT
SOLUTIONS TO BUSINESS CONNECTIONS
Managerial Focus:
1. Permits losses from uncollectible accounts to be charged against period revenue.
3. For correct historical documentation of customers’ accounts.
4. Prevents stealing, provides strong internal controls.
Ethical Dilemma:
3. 37.6% ($365.3 ÷ $970.5)
Teamwork:
The sale of an invoice: Debit—A/R, Credit—Sales/Write off the account: Debit—Allowance for
SOLUTIONS TO PRACTICE TEST
Part A True-False
1. TRUE 11. FALSE
Part B Exercise I
Part C Exercise II
ACCOUN
T
BALANC
E
CURREN
T
1–30 31–60 OVER 60
Ameche
,
Joh
n
$6
,
000 $2
,
500 $3
,
500
m
,
Schedule of Accounts Receivable by Age
PAST DUE—DAYS
December 31, 2010
NETWORK DISTRIBUTORS