Title: Problem 9-2B
QA_Ori:
2013
e. Accounts Receivable………………………………………. 870,220
Sales………………………………………………………. 870,220
f. Cash…………………………………………………………….. 990,800
g. Allowance for Doubtful Accounts……………………… 11,090
h. Bad Debts Expense……………………………………….. 9,773
*Beginning receivables…..…………………….. $ 193,670
Credit sales…..………….……………….……….. 870,220
Collections….……………….…………………….. (990,800)
Title: Problem 9-3B
QA_Ori:
Part 1
a. Expense is 2.5% of credit sales
Dec. 31 Bad Debts Expense……………………………………….. 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
** See computations in Part 1c.
Title: Problem 9-4B
QA_Ori:
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
Dec. 31 Bad Debts Expense……………………………………… 31,390
*.Unadjusted balance……….….….………..$ 3,400 debit
Part 3
Writing off the account receivable in 2014 will not directly affect Year 2014 net
income. The entry to write off an account involves a debit to Allowance for
Title: Problem 9-5B
Part 1
QA_Ori:
Nov. 1 Notes Receivable—S. Julian………………………………. 4,800
Dec. 31 Interest Receivable……………………………………………. 64
2013
Jan. 30 Cash………………………………………………………………… 4,896
Feb. 28 Notes Receivable—King Co……………………………….. 12,600
Mar. 1 Notes Receivable—M. Shelley……………………………. 6,200
30 Accounts Receivable—King Co…………………………… 12,684
Interest Revenue………………………………………….. 84
Apr. 30 Cash………………………………………………………………… 6,324
Interest Revenue………………………………………….. 124
Title: Problem 9-5B
QA_Ori:
Part 1
June 15 Notes Receivable—R. Solon…………………………….. 2,000
June 21 Notes Receivable—J. Felton…………………………….. 9,500
Aug. 14 Cash……………………………………………………………… 2,034
Interest Revenue*………………………………………. 34
Sept. 19 Cash……………………………………………………………… 9,690
Interest Revenue*………………………………………. 190
Nov. 30 Allowance for Doubtful Accounts……………………….. 12,684
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 requirement
Title: Serial Problem — SP 9, Success Systems
QA_Ori:
1. a. Bad debts expense is recorded as 1% of total revenues:
2014
1. b. Bad debts expense is recorded as 2% of accounts receivable:
2014
Instructor note: It might help to stress that the beginning balance for the Allowance for Doubtful
Accounts is zero, which is unusual and exists because this is the first period that the company applies
the allowance method.
2. Allowance Balance as of 3/31/14…………………. $454 Cr.
2014
3. Many small business owners use the direct write-off method of recording bad
debts expense. The direct method is a simple and straightforward method of
Title: Question: Reporting in Action
Title: Question 1
QA_Ori: Polaris’s receivables at December 31, 2011, are $115,302 thousand.
Title: Question 2
QA_Ori:
Accounts receivable turnover for 2011 ($ thousands)
Title: Question 3
This time period is about ~15 days because Polaris typically sells its products
Title: Question 4
QA_Ori:
Liquid assets as a percent of current liabilities ($ thousands)
Comments: Current liabilities are obligations that are due to be paid or
liquidated within one year or one operating cycle of the business, whichever is
longer. Typically, cash provided from the operations of the business during the
Title: Question 5
QA_Ori: Note 1 to Polaris’s financial statements describes its significant
Title: Question 6
QA_Ori: Solution depends on the financial statement information obtained.
Title: Comparative Analysis
Title: Question 1
QA_Ori:
Accounts Receivable Turnover ($ thousands)
Polaris (Current Year):
Polaris (Prior Year):
Arctic Cat (Current Year): = 17.55 times
Arctic Cat (Prior Year): = 13.36 times
Title: Question 2
QA_Ori:
Average Collection Period (or “Average Days’ Sales Uncollected”)
Interpretation: The average collection period for Polaris is shorter than Arctic
1. Both companies appear reasonably efficient in collecting accounts
receivable. Arctic Cat collects them over a longer period of time in both