Type
Solution Manual
Book Title
N/A
ISBN 13
N/A

978-0078025754 Chapter 7 Solution Manual Part 2

March 26, 2020
PROBLEM SET A
Problem 7-1A (30 minutes)
June 4
Accounts ReceivableN. Morris .............................
650
Sales .....................................................................
650
To record sales on credit.
4
Cost of Goods Sold .........................................................
400
To record credit card sales less fee. *($6,900 x .03)
5
Cost of Goods Sold .........................................................
4,200
Merchandise Inventory .............................................
4,200
To record cost of sales.
6
Accounts ReceivableAccess ................................
5,733
To record cost of sales.
8
Accounts ReceivableAccess ................................
4,263
Credit card expense* .................................................
87
Sales .....................................................................
4,350
To record credit card sales less fee. *($4,350 x .02)
Accounts ReceivableA. McKee .......................
429
To write off account due.
17
Cash ............................................................................
9,996
Accounts ReceivableAccess ..........................
9,996
To record cash received from credit card co. ($5,733+$4,263)
Problem 7-2A (35 minutes)
Part 1
a. Expense is 1.5% of credit sales
Dec. 31
Bad Debts Expense ...............................................
Allowance for Doubtful Accounts .................
85,230
To record estimated bad debts
[($1,905,000 + $5,682,000) x .01].
c. Allowance is 5% of accounts receivable
Dec. 31
Bad Debts Expense ...............................................
Allowance for Doubtful Accounts .................
80,085
To record estimated bad debts.*
Current assets
Accounts receivable ...........................................
$1,270,100
Less allowance for doubtful accounts .............
(68,650)*
$1,201,450
Or:
Accounts receivable (net of $68,650*
uncollectible accounts) ................................
$1,201,450
** See computations in Part 1c.
Problem 7-3A (35 minutes)
Part 1
Calculation of the estimated balance of the allowance for uncollectibles
Not due:
$830,000 x .0125 =
$10,375
Part 2
Part 3
Writing off the account receivable in 2016 will not directly affect year 2016
net income. The entry to write off an account involves a debit to Allowance
Problem 7-4A (35 minutes)
2014
a.
Accounts Receivable .........................................
1,345,434
Sales ..............................................................
1,345,434
To record sales on account.
Cost of Goods Sold ......................................................
975,000
Merchandise Inventory ................................
975,000
To record cost of sales.
To record estimated bad debts.*
*Beginning receivables ......................
$ 0
Credit sales .......................................
1,345,434
Collections ........................................
(669,200)
** rounded to nearest dollar
Problem 7-4A (Concluded)
2015
e.
Accounts Receivable ..............................................
1,525,634
Sales ................................................................
1,525,634
To record sales on account.
To record write-off of accounts.
*Beginning receivables ............................
$ 657,934
Credit sales ..............................................
1,525,634
** rounded to nearest dollar
Problem 7-5A (75 minutes)
Part 1
2014
Dec. 16
Notes ReceivableD. Todd ................................
10,800
Accounts ReceivableD. Todd ...................
10,800
To record note received on account.
2015
Feb. 14
Cash ......................................................................
10,944
Interest Revenue* ..........................................
108
Interest Receivable ........................................
36
Notes ReceivableD. Todd..........................
10,800
To record cash received on note with interest.
*[$10,800 x 0.08 x 45/360 = $108]
Problem 7-5A (Concluded)
July 16
Cash ......................................................................
6,286
Interest Revenue* ..........................................
64
Accounts ReceivableMidnight Co. ...........
6,222
To record cash received on account
Sept. 3
Notes ReceivableN. Carson ............................
2,100
Accounts ReceivableN. Carson................
2,100
To record note received on account.
Nov. 2
Cash ......................................................................
2,135
Interest Revenue* ..........................................
35
Notes ReceivableN. Carson ......................
2,100
To record cash received on note plus interest
*($2,100 x .10 x 60/360 = $35).
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
PROBLEM SET B
Problem 7-1B (30 minutes)
Aug. 4
Accounts ReceivableM. Carpenter ......................
3,700
Sales.....................................................................
3,700
To record sales on credit.
Cost of Goods Sold .........................................................
2,000
To record credit card sales less fee. *($5,200 x .03)
Cost of Goods Sold .........................................................
2,800
Merchandise Inventory ..............................................
2,800
To record cost of sales.
11
Accounts ReceivableAztec ...................................
1,225
To record cost of sales.
14
Cash ...........................................................................
3,626
Sales Discounts* .......................................................
74
Accounts ReceivableM. Carpenter ................
3,700
To record cash received less discount.*($3,700 x .02)
Merchandise Inventory ..............................................
1,758
To record cost of sales.
18
No journal entry required.
22
Allowance for Doubtful Accounts ...........................
498
Accounts ReceivableCraw Co. .......................
498
Problem 7-2B (35 minutes)
Part 1
a. Expense is 2.5% of credit sales
Dec. 31
Bad Debts Expense ..............................................
33,550
Allowance for Doubtful Accounts ................
33,550
To record estimated bad debts
[($1,025,000 + $1,342,000) x .015].
c. Allowance is 6% of accounts receivable
Dec. 31
Bad Debts Expense ..............................................
27,000
Allowance for Doubtful Accounts ................
27,000
To record estimated bad debts.*
Current assets
Accounts receivable ....................................
$575,000
Less allowance for doubtful accounts ......
(41,050)*
$533,950
Or:
Accounts receivable (net of $41,050*
uncollectible accounts) ............................
$533,950
* Adjustment to the allowance ....................
$33,550
credit
Unadjusted allowance balance .................
7,500
credit
Adjusted balance .......................................
$41,050
credit
Part 3
Problem 7-3B (35 minutes)
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
Part 3
Writing off the account receivable in 2016 will not directly affect Year 2016
net income. The entry to write off an account involves a debit to Allowance
Problem 7-4B (35 minutes)
2014
a.
Accounts Receivable .........................................
685,350
Sales ..............................................................
685,350
To record sales on account.
Cost of Goods Sold ......................................................
500,000
Merchandise Inventory ..........................................
500,000
To record cost of sales.
*Beginning receivables .....................
$ 0
Credit sales ......................................
685,350
Collections .......................................
(482,300)
** Rounded to nearest dollar
Problem 7-4B (Concluded)
2015
e.
Accounts Receivable ..........................................
870,220
Sales ...............................................................
870,220
To record sales on account.
Cost of Goods Sold ......................................................
650,000
Merchandise Inventory ..........................................
650,000
To record cost of sales.
*Beginning receivables ...........................
$ 193,670
Credit sales ............................................
870,220

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