Type
Solution Manual
Book Title
Financial Accounting Fundamentals 5th Edition
ISBN 13
978-0078025754

978-0078025754 Chapter 7 Solution Manual Part 1

March 26, 2020
Chapter 7
Accounting for Receivables
QUESTIONS
1. When customers use credit cards, the selling companies can avoid having to directly
evaluate the credit standing of their customers. They also avoid the risk of bad debts and
2. Revenues and expenses usually are not matched under the direct write-off method because
3. The accounting constraint of materiality suggests that the requirements of accounting
4. Creditors prefer notes receivable to accounts receivable because the notes can be more
5. Writing off a bad debt against the Allowance account does not reduce the estimated
realizable value of a company’s accounts receivable because the write-off reduces the
6. The adjusted balances of Bad Debts Expense and Allowance for Doubtful Accounts are
virtually never equal because the expense amount reflects only the events of the current
7. Apple lists its accounts receivable as “Accounts receivables, less allowances of $99 and $98,
8. Google uses the allowance method to account for doubtful accounts as evidenced by the
9. Samsung’s lists its accounts receivable as “Trade and other receivables.” Samsung reports
accounts receivable (in KRW millions) of 27,875,934.
10. Samsung lists its accounts receivable as “Trade and other receivables” in current assets.
QUICK STUDIES
Quick Study 7-1 (15 minutes)
1.
Cash ...............................................................................
19,000
Credit Card Expense* ...................................................
1,000
2.
Accounts ReceivableCredit Card Cos. ....................
4,800
Credit Card Expense* ...................................................
200
Sales .........................................................................
5,000
Quick Study 7-2 (10 minutes)
Quick Study 7-3 (10 minutes)
Oct. 30
Accounts ReceivableP.Moore ................................
50,000
Quick Study 7-4 (15 minutes)
1. direct write-off method
2. allowance method
Quick Study 7-5 (15 minutes)
1.
Jan. 31
Allowance for Doubtful Accounts ...........................
800
2.
Mar. 9
Accounts ReceivableC. Green* ............................
300
Allowance for Doubtful Accounts .....................
300
Quick Study 7-6 (15 minutes)
1.
Dec. 31
Bad Debts Expense ................................................
885
Allowance for Doubtful Accounts...................
885
2.
Desired balance in allowance = $1,485 (part 1)
Adjustment required = $1,485 cr. + $300 dr. = $1,785
Quick Study 7-7 (15 minutes)
Dec. 31
Bad Debts Expense ................................................
1,400
Quick Study 7-8 (15 minutes)
1. Maturity date is October 31, which is computed as follows:
Days in August ................................................................ 31
2.
Aug. 2 Notes ReceivableR. Albany .......................... 6,000
Quick Study 7-9 (10 minutes)
Oct. 31 Cash .................................................................... 6,180
Quick Study 7-10 (15 minutes)
Dec. 31 Interest Receivable ............................................ 50
Interest Revenue ......................................... 50
Quick Study 7-11 (10 minutes)
May 1
Cash .......................................................................
121,875
Quick Study 7-12 (10 minutes)
Accounts receivable turnover =
5.9 times per year. The 5.9 turnover is about 21% lower than the average
Quick Study 7-13 (10 minutes)
a. Both U.S. GAAP and IFRS have similar asset criteria that apply to
recognition of receivables. Further, receivables that arise from revenue-
generating activities are subject to broadly similar criteria for U.S. GAAP
Net sales
EXERCISES
Exercise 7-1 (25 minutes)
Part 1
GENERAL LEDGER
Accounts Receivable
Sales
Sales Returns and
Allowances
Nov. 5
4,615
Nov. 21
209
Nov. 5
4,615
Nov. 21
209
Bal.
9,301
ACCOUNTS RECEIVABLE LEDGER
Ski Shop
Welcome Enterprises
Zia Natara
Part 2
Vail Company
Schedule of Accounts Receivable
November 30, 2015
Exercise 7-2 (20 minutes)
Apr. 8
Cash .........................................................................
8,064
Credit Card Expense* .............................................
336
Sales ..................................................................
Exercise 7-3 (20 minutes)
March 11
Bad Debts Expense ....................................................
45,000
Accounts ReceivableLester Co. ......................
Exercise 7-4 (20 minutes)
Dec. 31
Bad Debts Expense .....................................................
4,875
Allowance for Doubtful Accounts........................
To record estimated bad debts expense
Exercise 7-5 (15 minutes)
a.
Dec. 31
Bad Debts Expense ......................................................
685
Allowance for Doubtful Accounts* .......................
Exercise 7-6 (30 minutes)
a. Computation of the estimated balance of the allowance for uncollectibles:
Exercise 7-6 (Concluded)
b.
Dec. 31
Bad Debts Expense ..............................................
8,220
Allowance for Doubtful Accounts ................
8,220
To record estimated bad debts.*
Exercise 7-7 (25 minutes)
a. Computation of the estimated balance of the allowance for uncollectibles:
$570,000 x 0.045 =
$25,650
credit
b.
Dec. 31
Bad Debts Expense ..............................................
13,650
Exercise 7-8 (20 minutes)
Feb. 1
Allowance for Doubtful Accounts ..............................
6,800
Accounts ReceivableOakley Co .......................
Exercise 7-9 (25 minutes)
a. Expense is 3.0% of credit sales
Dec. 31
Bad Debts Expense ...............................................
9,000
Allowance for Doubtful Accounts .................
9,000
Exercise 7-10 (10 minutes)
2014
Exercise 7-11 (15 minutes)
2015
Jan. 27
Cash .......................................................................
9,595
Interest Revenue* ............................................
57
Accounts ReceivableH. Cheng ..................
2,015
To write off account.
June 1
Cash .......................................................................
5,125
Interest Revenue .............................................
125
Exercise 7-12 (15 minutes)
Nov. 1
Notes ReceivableK. White .............................
6,000
Accounts ReceivableK. White .................
6,000
To record receipt of note on account.
Exercise 7-13 (20 minutes)
Mar. 21
Notes ReceivableT. Jackson ............................
9,500
Accounts ReceivableT. Jackson ................
9,500
Exercise 7-14 (20 minutes)
July 4
Accounts Receivable ............................................
7,245
Sales ................................................................
7,245
To record sales on credit.
Exercise 7-15 (15 minutes)
Year 2014 accounts receivable turnover:
= 8.8 times
Exercise 7-16 (25 minutes)
in millions)
a. Expense is 0.4% of total revenues
Dec. 31
Bad Debts Expense ...............................................
36,164
$335,280

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