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E8-18 Accounting for uncollectible accounts using the allowance method (percent-of-sales)
and reporting receivables on the balance sheet
Learning Objectives 1, 3
2. AR, Dec. 31 $54,700
Requirements
1. Journalize Hilltop’s transactions that occurred during 2018. The company uses the allowance
method.
2. Post Hilltop’s transactions to the Accounts Receivable and Allowance for Bad Debts
T-accounts.
3. Journalize Hilltop’s adjustment to record bad debts expense assuming Hilltop estimates bad
debts as 3% of credit sales. Post the adjustment to the appropriate T-accounts.
4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018,
balance sheet.
SOLUTION
Requirement 1
E8-18, cont.
Requirement 3
Requirement 4
E8-19 Accounting for uncollectible accounts using the allowance method
(percent-of-receivables) and reporting receivables on the balance sheet
Learning Objectives 1, 3
3. Bad Debts Expense $4,770
Requirements
1. Journalize Hilltop’s transactions that occurred during 2018. The company uses the allowance
method.
2. Post Hilltop’s transactions to the Accounts Receivable and Allowance for Bad Debts
T-accounts.
3. Journalize Hilltop’s adjustment to record bad debts expense assuming Hilltop estimates bad
debts as 10% of accounts receivable. Post the adjustment to the appropriate T-accounts.
4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018,
balance sheet.
SOLUTION
Requirement 1
E8-19, cont.
Requirement 3
E8-20 Accounting for uncollectible accounts using the allowance method
(aging-of-receivables) and reporting receivables on the balance sheet
Learning Objective 3
2. Allowance CR Bal. $25,360
At December 31, 2018, the Accounts Receivable balance of GPS Technology is $200,000. The
Allowance for Bad Debts account has a $24,110 debit balance. GPS Technology prepares the
following aging schedule for its accounts receivable:
Age of Accounts
1–30
Days
31–60
Days
61–90
Days
Over 90
Days
Accounts Receivable $ 65,000 $ 50,000 $ 40,000 $ 45,000
Estimated percent
uncollectible
0.4% 3.0% 5.0% 48.0%
Requirements
1. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show
the T-account for the Allowance for Bad Debts at December 31, 2018.
2. Show how GPS Technology will report its net accounts receivable on its December 31, 2018,
balance sheet.
SOLUTION
Requirement 1
E8-21 Journalizing transactions using the direct write-off method versus the allowance
method
Learning Objectives 1, 2, 3
During August 2018, Lima Company recorded the following:
• Sales of $133,300 ($122,000 on account; $11,300 for cash). Ignore Cost of Goods Sold.
• Collections on account, $106,400.
• Write-offs of uncollectible receivables, $990.
• Recovery of receivable previously written off, $800.
Requirements
1. Journalize Lima’s transactions during August 2018, assuming Lima uses the direct write-off
method.
2. Journalize Lima’s transactions during August 2018, assuming Lima uses the allowance
method.
SOLUTION
Requirement 1
E8-21, cont.
Requirement 2
E8-22 Journalizing credit sales, note receivable transactions, and accruing interest
Learning Objectives 1, 4
Endurance Running Shoes reports the following:
2018
May 6 Recorded credit sales of $102,000. Ignore Cost of Goods Sold.
Jul. 1 Loaned $18,000 to Jerry Paul, an executive with the company, on a one-year, 7%
note.
Dec.
31
Accrued interest revenue on the Paul note.
2019
Jul. 1 Collected the maturity value of the Paul note.
Journalize all entries required for Endurance Running Shoes.
SOLUTION
E8-23 Journalizing note receivable transactions including a dishonored note
Learning Objective 4
On September 30, 2018, Team Bank loaned $94,000 to Kendall Warner on a one-year, 6% note.
Team’s fiscal year ends on December 31.
Requirements
1. Journalize all entries for Team Bank related to the note for 2018 and 2019.
2. Which party has a
a. note receivable?
b. note payable?
c. interest revenue?
d. interest expense?
3. Suppose that Kendall Warner defaulted on the note. What entry would Team record for the
dishonored note?
SOLUTION
Requirement 1
