PA8–4 (continued)
Req. 1 (continued)
Total
0–30
31–60
61–90
> 90
Total Accounts Receivable
$ 18,000
$ 7,300
$ 8,480
$ 1,020
$ 1,200
Estimated Uncollectible (%)
× 2%
× 10%
× 20%
× 40%
Estimated Uncollectible ($)
$ 1,678
$ 146
$ 848
$ 204
$ 480
Assets
=
+
Stockholders’ Equity
Allowance for Doubtful
–478
Bad Debt Expense (+E)
–478
Accounts (+xA)
Req. 2
a.
Accounts Receivable
40,000
Service Revenue
40,000
b.
Bad Debt Expense
400
Allowance for Doubtful Accounts
400
c.
Cash
20,000
Accounts Receivable
20,000
d.
Allowance for Doubtful Accounts
100
Accounts Receivable
100
e.
Accounts Receivable
30,000
Service Revenue
30,000
f.
Bad Debt Expense
300
Allowance for Doubtful Accounts
300
g.
Note Receivable
2,400
Cash
2,400
PA8–4 (continued)
Req. 2 (continued)
h.
Accounts Receivable
100
Allowance for Doubtful Accounts
100
Cash
100
Accounts Receivable
100
i.
Interest Receivable
12
Interest Revenue
12
j.
Bad Debt Expense
478
Allowance for Doubtful Accounts
478
Req. 3
Req. 4
Web Wizard would report Bad Debt Expense before Income from Operations, and
Interest Revenue after Income from Operations.
WEB WIZARD, INC.
Partial Balance Sheet
At March 31
Assets
Current assets:
Accounts Receivable $ 18,000
Allowance for Doubtful Accounts (1,678)
Accounts Receivable, Net of Allowance
$ 16,322
Note Receivable
2,400
Interest Receivable
12
PA8–5
Req. 1
Coca-Cola
2012
Receivables
Turnover
Ratio
=
Net sales
=
$48,000
=
9.9
Average net
receivables
($4,760 + $ 4,920)/2
Days to collect
=
365
=
365
=
36.9 days
Receivables Turnover
9.9
2011
Receivables
Turnover
Ratio
=
Net sales
=
$46,500
=
9.9
Average net
receivables
($4,920 + $4,430)/2
Days to collect
=
365
=
365
=
36.9 days
Receivables Turnover
9.9
=
=
=
9.4
Days to collect
=
365
=
365
=
38.8 days
Receivables Turnover
Receivables
Ratio
=
Net sales
=
=
Days to collect
=
365
=
365
=
36.1 days
Receivables Turnover
8– 34 Solutions Manual
© 2016 by McGraw– Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO GROUP B PROBLEMS
PB8–1
Req. 1
Bad Debt Expense ……………………………………………………. 110
Allowance for Doubtful Accounts ……………………….. 110
($110 = $44,000 x 0.0025)
Req. 2
PB8–2
Req. 1
Allowance for Doubtful Accounts
100
Beg. balance
Write-offs
35
45
Bad debt exp.
110
End. balance
PB8–2 (continued)
Req. 2
(i)
Bad Debt Expense …………………………………………………………. 45
Allowance for Doubtful Accounts ……………………………. 45
(ii)
Allowance for Doubtful Accounts ……………………………………… 35
PB8–3
Req. 1
May 31, 2015 (note created)
Notes Receivable ……………………………………………. 100,000
Cash ………………………………………………………. 100,000
Req. 2
June 30, 2015 (end-of-quarter interest accrual)
Interest Receivable …………………………………………. 500
($100,000 x 6% x 2/12)
Dec. 31, 2015 (end–of-quarter interest accrual)
Interest Receivable …………………………………………. 500
Interest Revenue ……………………………………… 500
($500 = $100,000 x 6% x 1/12)
PB8–4
Req. 1
a.
Assets
=
+
Stockholders’ Equity
Accounts Receivable
+300,000
Service Revenue (+R)
+300,000
b.
Assets
=
+
Stockholders’ Equity
Allowance for Doubtful
–3,000
Bad Debt Expense (+E)
–3,000
Accounts (+xA)
Assets
=
+
Stockholders’ Equity
Cash
+250,000
Accounts Receivable
–250,000
Assets
=
+
Stockholders’ Equity
Accounts Receivable
–3,000
Allow. for Doubtful Accts. (–xA)
+3,000
Assets
=
+
Stockholders’ Equity
Accounts Receivable
+250,000
Service Revenue (+R)
+250,000
Assets
=
+
Stockholders’ Equity
Allowance for Doubtful
–2,500
Bad Debt Expense (+E)
–2,500
Accounts (+xA)
Assets
=
+
Stockholders’ Equity
Cash
–15,000
Note Receivable
+15,000
h.
Assets
=
+
Stockholders’ Equity
Accounts Receivable
+3,000
Allow. for Doubt. Accts. (+xA)
–3,000
Cash
+3,000
Accounts Receivable
–3,000
Assets
=
+
Stockholders’ Equity
Interest Receivable
+50
Interest Revenue (+R)
+50
PB8–4 (continued)
Req. 1 (continued)
Total
0–30
31–60
61–90
> 90
Total Accounts Receivable
$ 110,000
$ 47,000
$ 43,000
$ 10,000
$ 10,000
Estimated Uncollectible (%)
× 5%
× 10%
× 20%
× 40%
Estimated Uncollectible ($)
$ 12,650
$2,350
$ 4,300
$ 2,000
$ 4,000
Assets
=
+
Stockholders’ Equity
Allowance for Doubtful
–3,650
Bad Debt Expense (+E)
–3,650
Accounts (+xA)
Req. 2
a.
Accounts Receivable
300,000
Service Revenue
300,000
b.
Bad Debt Expense
3,000
Allowance for Doubtful Accounts
3,000
c.
Cash
250,000
Accounts Receivable
250,000
d.
Allowance for Doubtful Accounts
3,000
Accounts Receivable
3,000
e.
Accounts Receivable
250,000
Service Revenue
250,000
f.
Bad Debt Expense
2,500
Allowance for Doubtful Accounts
2,500
g.
Note Receivable
15,000
Cash
15,000
PB8–4 (continued)
Req. 2 (continued)
h.
Accounts Receivable
3,000
Allowance for Doubtful Accounts
3,000
Cash
3,000
Accounts Receivable
3,000
i.
Interest Receivable
50
Interest Revenue
50
j.
Bad Debt Expense
3,650
Allowance for Doubtful Accounts
3,650
PB8–5
Req. 1
J.M. Smucker
2013
Receivables
Turnover
Ratio
=
Net sales
=
$5,900
=
17.8
Average net
receivables
($314 + $348)/2
Days to collect
=
365
=
365
=
20.5 days
Receivables Turnover
17.8
Receivables Turnover
15.9
Average net
Receivables Turnover
13.6
Receivables Turnover
12.4