Chapter 07 – Reporting and Analyzing Receivables
Problem 7-5A (75 minutes)
Part 1
2012
Dec. 16
Notes Receivable—D. Todd …………………………..
10,800
Accounts Receivable—D. Todd ……………….
10,800
To record note received on account.
31
Interest Receivable ……………………………………….
36
Interest Revenue …………………………………….
36
To record interest earned
[$10,800 x .08 x 15/360 = $36].
2013
Feb. 14
Cash …………………………………………………………….
10,944
Interest Revenue* ……………………………………
108
Interest Receivable ………………………………….
36
Notes Receivable—D. Todd……………………..
10,800
To record cash received on note with interest.
*[$10,800 x 0.08 x 45/360 = $108]
Mar. 2
Notes Receivable—Midnight Co ……………………
6,100
Accounts Receivable—Midnight Co. ………..
6,100
To record note received on account.
17
Notes Receivable—A. Privet …………………………
2,400
Accounts Receivable—A. Privet
2,400
To record note received on account.
Apr. 16
Accounts Receivable—A. Privet ……………………
2,414
Interest Revenue …………………………………….
14
Notes Receivable—A. Privet ……………………
2,400
To record receivable for dishonored
note plus interest [$2,400 x .07 x 30/360= $14].
June 2
Accounts Receivable—Midnight Co. ……………..
6,222
Interest Revenue* ……………………………………
122
Notes Receivable—Midnight Co ………………
6,100
To record receivable for dishonored note
*[$6,100 x 0.08 x 90/360 = $122]
Problem 7-5A (Concluded)
July 17
Cash …………………………………………………………….
6,286
Interest Revenue* …………………………………...
64
Accounts Receivable—Midnight Co. ………..
6,222
To record cash received on account
plus additional interest.
*[$6,222 x .08 x 46/360= $64 (rounded)]
Aug. 7
Notes Receivable—Mulan ……………………………..
7,450
Accounts Receivable—Mulan ………………….
7,450
To record note received on account.
Sept. 3
Notes Receivable—N. Carson ……………………….
2,100
Accounts Receivable—N. Carson…………….
2,100
To record note received on account.
Nov. 2
Cash …………………………………………………………….
2,135
Interest Revenue* …………………………………...
35
Notes Receivable—N. Carson ………………….
2,100
To record cash received on note plus interest
*($2,100 x .10 x 60/360 = $35).
5
Cash …………………………………………………………….
7,636
Interest Revenue* …………………………………...
186
Notes Receivable—Mulan………………………..
7,450
To record cash received on note plus
Interest. *($7,450 x .10 x 90/360 = $186)
Dec. 1
Allowance for Doubtful Accounts ………………….
2,414
Accounts Receivable—A. Privet ……………...
2,414
To record write-off of account.
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 because the business has committed a portion of its assets to
cover a specific portion of its liabilities, which means that if the business
dishonors its obligations under the loan, the creditor can claim the amount
of receivables identified in the pledge as collateral to cover the loan. This
arrangement must be disclosed to satisfy the full-disclosure principle.
Chapter 07 – Reporting and Analyzing Receivables
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Solutions Manual, Chapter 7
23
PROBLEM SET B
Problem 7-1B (30 minutes)
Accounts Receivable—M. Carpenter ………………….
3,700
Sales…………………………………………………………...
3,700
To record sales on credit.
Cost of Goods Sold ………………………………………….……..
2,000
Merchandise Inventory ………………………………..……..
2,000
To record cost of sales.
Cash ………………………………………………………………...
5,044
Credit Card Expense* ………………………………………..
156
Sales…………………………………………………………...
5,200
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.
Accounts Receivable—Aztec ……………………………..
1,225
Credit card expense* ………………………………………...
25
Sales…………………………………………………………...
1,250
To record credit card sales less fee. *($1,250 x .02)
Cost of Goods Sold ………………………………………….……..
900
Merchandise Inventory ………………………………..……..
900
To record cost of sales.
Cash ………………………………………………………………...
3,626
Sales Discounts* ……………………………………………….
74
Accounts Receivable—M. Carpenter …………….
3,700
To record cash received less discount.*($3,700 x .02)
Accounts Receivable—Aztec ……………………………..
3,175
Credit Card Expense*(rounded to nearest dollar) …..
65
Sales…………………………………………………………….
3,240
To record credit card sales less fee. *($3,240 x .02)
Cost of Goods Sold ………………………………………….……..
1,758
Merchandise Inventory ………………………………..……..
1,758
To record cost of sales.
No journal entry required.
Allowance for Doubtful Accounts ……………………...
498
Accounts Receivable—Craw Co. …………………..
498
To write off account due.
Cash ………………………………………………………………...
4,400
Accounts Receivable—Aztec ………………………..
4,400
To record cash rec’d from credit card co. ($1,225+$3,175)
Problem 7-2B (35 minutes)
2012
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.
b.
Cash ……………………………………………………………
482,300
Accounts Receivable ……………………………..
482,300
To record cash received on account.
c.
Allowance for Doubtful Accounts …………………
9,350
Accounts Receivable ……………………………..
9,350
To record write-off of accounts.
d.
Bad Debts Expense ……………………………………..
11,287
Allowance for Doubtful Accounts……………
11,287
To record estimated bad debts.*
Problem 7-3B (35 minutes)
Part 1
a. Expense is 2.5% of credit sales
Bad Debts Expense …………………………………….…
33,550
Allowance for Doubtful Accounts ………….…
33,550
To record estimated bad debts
[$1,342,000 x .025].
Bad Debts Expense ……………………………………..
35,505
Allowance for Doubtful Accts. ………………..
35,505
To record estimated bad debts
[($1,025,000 + $1,342,000) x .015].
Bad Debts Expense …………………………………….…
27,000
Allowance for Doubtful Accounts ………….…
27,000
To record estimated bad debts.*
* Estimated balance ($575,000 x 6%) …….
$ 34,500 credit
Unadjusted balance …………………………..
7,500 credit
Required adjustment …………………………
$ 27,000 credit
Part 2
Accounts receivable ………………………………
Less allowance for doubtful accounts ……
uncollectible accounts) ……………………….
credit
credit
credit
Accounts receivable ………………………………
Less allowance for doubtful accounts ……
$540,500
Problem 7-5B (75 minutes)
Part 1
2012
Nov. 1
Notes Receivable—S. Julian …………………………....
4,800
Accounts Receivable—S. Julian ………………....
4,800
To record note received on account.
Dec. 31
Interest Receivable …………………………………………..
64
Interest Revenue ………………………………………..
64
To record interest earned [$4,800 x .08 x 60/360].
2013
Jan. 30
Cash ………………………………………………………………..
4,896
Interest Revenue* ……………………………………....
32
Interest Receivable ……………………………………..
64
Notes Receivable—S. Julian ……………………....
4,800
To record cash received on note with interest.
*[$4,800 x .08 x 30/360]
Feb. 28
Notes Receivable—King Co ……………………………..
12,600
Accounts Receivable—King Co. ………………....
12,600
To record note received on account.
Mar. 1
Notes Receivable—M. Shelley ………………………....
6,200
Accounts Receivable—M. Shelley ……………....
6,200
To record note received on account.
30
Accounts Receivable—King Co ………………………..
12,684
Interest Revenue ………………………………………..
84
Notes Receivable—King Co ………………………..
12,600
To record receivable for dishonored note
plus interest [$12,600 x .08 x 30/360].
Apr. 30
Cash ………………………………………………………………..
6,324
Interest Revenue ………………………………………..
124
Notes Receivable—M. Shelley …………………....
6,200
To record cash received on note plus interest
($6,200 x .12 x 60/360 = $124).