Problem 5-6A (LO 5-3)
Requirement 1
Debit Credit
Bad Debt Expense 59,000
Requirement 2
Revised operating income = $260,000 − $59,000 (bad debt expense)
Willie will not get his bonus because the revised operating income of $201,000 is
Requirement 3
Debit Credit
Bad Debt Expense 26,000
Revised operating income = $260,000 − $26,000 (bad debt expense)
Willie will get his bonus because the revised operating income of $234,000 is
Requirement 4
Using 6% instead of 9% to estimate future bad debts causes total assets to be
Problem 5-7A (LO 5-3, 5-5)
Requirement 1
December 31, 2015 Debit Credit
Bad Debt Expense 455,000
Requirement 2
Because actual bad debts in 2016 were only $300,000 when the company estimated
bad debts to be $455,000, total assets will be understated and total expenses will be
Requirement 3
Humanity International should not prepare new financial statements for 2015. The
fact that actual bad debts in 2016 turned out to be different than the amount
Problem 5-8A (LO 5-7)
Requirement 1
December 1, 2015 Debit Credit
Notes Receivable 90,000
Requirement 2
December 31, 2015 Debit Credit
Interest Receivable (2015) 750
December 1, 2016
Cash 9,000
Interest Receivable (2015) 750
December 31, 2016
Interest Receivable (2016) 750
Problem 5-8A (concluded)
December 1, 2017
Cash 9,000
Interest Receivable (2016) 750
December 31, 2017
Interest Receivable (2017) 750
Requirement 3
December 1, 2018 Debit Credit
Cash 99,000
Notes Receivable 90,000
Interest Receivable (2017) 750
Problem 5-9A (LO 5-8)
Requirement 1
Walmart Target
Receivables
turnover
ratio
=Net sales $443,854 $68,466
Average accounts
receivable
($5,089 + $5,937) / 2 ($6,153 + $5,927) / 2
Average
collection
period
=365 365 365
Receivables
turnover ratio
80.5 11.3
Walmart has a higher receivables turnover ratio and a lower average collection
period, which means it collects cash more quickly from its customers. The
receivables turnover ratio and average collection period for Tenet Healthcare in the
most recent year reported in the text are 7.7 times and 47.4 days. The receivables
Requirement 2
Including cash sales in the numerator of the receivables turnover ratio is the same
as suggesting that receivables turnover instantly (in other words, the average
collection period is zero). Therefore, companies that are more likely to have cash
sales will show a higher receivables turnover ratio and lower average collection
period compared to a company with similar net sales that consist of a higher
Problem 5-1B (LO 5-1)
Revenue recognized in 2015
Scenario 1: $900,000
PROBLEMS: SET B
Scenario 2: $68 (= $80 x 85%)
Scenario 3: $30,000
Scenario 4: $260,000
Problem 5-2B (LO 5-1, 5-2)
Requirement 1
June 10 Debit Credit
No entry
June 12
No entry
June 13
No entry
June 16
Accounts Receivable 2,700
June 19
No entry
June 20
Sales Allowances 810
June 30
Cash 1,890
Requirement 2
Total Service Revenues $2,700
Problem 5-2B (concluded)
Requirement 3
Data Recovery Services
Partial Income Statement
Total service revenues $2,700
Requirement 4
June 25
Cash 1,852.2
Sales Discounts 37.8
Total Service Revenues $2,700.00
Less: Sales Allowances 810.00
Problem 5-3B (LO 5-3, 5-5)
Requirement 1
February 2, 2015 Debit Credit
Accounts Receivable 38,000
July 23, 2015
Cash 27,000
December 31, 2015
Bad Debt Expense 2,750
April 12, 2016
Accounts Receivable 51,000
June 28, 2016
Cash 6,000
September 13, 2016
Allowance for Uncollectible Accounts 5,000
October 5, 2016
Cash 45,000
December 31, 2016
Bad Debt Expense 3,750
Problem 5-3B (concluded)
Requirement 2
Cash Accounts Receivable
27,000 38,000 27,000
Dec. 31, 2015 27,000 Dec. 31, 2015 11,000
Dec. 31, 2016 78,000 45,000
Dec. 31, 2016 6,000
Allow. for Uncol. Accts.
2,750 Dec. 31, 2015
Requirement 3
2015 2016
Total accounts receivable $11,000 $6,000