Exercise 5-11
Requirement 1
Age Group
Amount
Receivable
Estimated
Percent
Uncollectible
Estimated
Amount
Uncollectible
Not yet due $ 69,500 10% $ 6,950
0-60 days past due 56,700 20% 11,340
61-120 days past due 32,400 45% 14,580
Requirement 2
December 31, 2012 Debit Credit
Bad Debt Expense 47,200
Requirement 3
Total accounts receivable $173,700
Less: Allowance for uncollectible accounts (44,950)
Exercise 5-12
Credit sales
transaction cycle Assets Liabilities
Stockholders’
equity Revenues Expenses
1. Provide services on
account I NE I I NE
2. Estimate uncollectible
accounts D NE D NE I
3. Write off accounts as
uncollectible NE NE NE NE NE
4. Collect on account
previously written off NE NE NE NE NE
Exercise 5-13
Requirement 1
a. Debit Credit
Accounts Receivable 270,700
b.
Cash 140,200
c.
Bad Debt Expense 32,625
Allowance for Uncollectible Accounts 32,625
d.
Allowance for Uncollectible Accounts 15,075
Requirement 2
a. Debit Credit
Accounts Receivable 270,700
c.
No entry
d.
Bad Debt Expense 15,075
Exercise 5-13 (concluded)
Requirement 3
Bad Debt Expense
Allowance
Method
Direct Write-off
Method
2012: $32,625 $0
2013: $0 $15,075
Under the allowance method, we record bad debt expense in the period we estimate
them (2012) so net income would be lower under the allowance method in 2012.
Exercise 5-14
a. April 1 Debit Credit
Notes Receivable 8,000
b. June 1
Notes Receivable 15,000
c. November 1
Notes Receivable 4,000
Exercise 5-15
March 1 Debit Credit
Notes Receivable 18,600
September 1
Cash 19,716
Notes Receivable 18,600
Exercise 5-16
March 1 Debit Credit
Legal Fees Expense 18,600
September 1
Notes Payable 18,600
Interest Expense 1,116
Exercise 5-17
Requirement 1
April 1, 2012 Debit Credit
Notes Receivable 450,000
Requirement 2
December 31, 2012 Debit Credit
Interest Receivable 27,000
Requirement 3
April 1, 2013 Debit Credit
Cash 486,000
Notes Receivable 450,000
Interest Receivable 27,000
Exercise 5-18
Wal-Mart Target Costco
Receivables
turnover
ratio
=
Net Sales $337,500 $93,600 $115,500
Average
accounts
receivable
($1,825 +
$3,575) / 2
($5,200 +
$10,400) / 2
($900 +
$2,100) / 2
Average
collection
period
=365 365 365 365
Receivables
turnover ratio
125 12 77
Of these three companies, Wal-Mart appears to be collecting cash most efficiently
from sales.
Exercise 5-19
Requirement 1
December 31, 2012 Debit Credit
Bad Debt Expense 4,500
Requirement 2
December 31, 2012 Debit Credit
Bad Debt Expense 5,700
Requirement 3
Percentage-of-rec
eivables method
Percentage-of-cr
edit-sales
method
Total Assets −$4,500 −$5,700
In this example, the amount of the adjustment is greater under the
Exercise 5-20
Requirement 1
December 31, 2012 Debit Credit
Bad Debt Expense 7,500
Requirement 2
December 31, 2012 Debit Credit
Bad Debt Expense 5,700
Requirement 3
Percentage-of-rec
eivables method
Percentage-of-cr
edit-sales
method
Total Assets −$7,500 −$5,700
Net Income −$7,500 −$5,700
In this example, the amount of the adjustment is greater under the
percentage-of-receivables method. This means that both assets and net income will be
lower in 2012 under this method.