SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 8-1
The following entry should be prepared to increase the balance in the
Allowance for Doubtful Accounts from $6,100 credit to $15,500 credit (5% X
$310,000):
Bad Debt Expense …………………………………………….. 9,400
(To record estimate of uncollectible
accounts)
DO IT! 8-2
Cash …………………………………………………………………. 194,000
(To record sale of receivables to factor)
DO IT! 8-3
(b) The interest to be received at maturity is $186:
Cash …………………………………………………………… 6,386
DO IT! 8-4
(a)
Net credit sales
÷
Average net
accounts receivable
=
Accounts receivable
turnover
$1,300,000
÷
$101,000 + $107,000
=
12.5 times
2
(b)
Days in year
÷
Accounts receivable
turnover
=
Average collection
period in days
365
÷
12.5 times
=
29.2 days
SOLUTIONS TO EXERCISES
EXERCISE 8-1
March 1 Accounts Receivable—Dodson Company .. 5,000
3 Sales Returns and Allowances ……………….. 500
9 Cash …………………………………………………….. 4,410
Sales Discounts …………………………………….. 90
15 Accounts Receivable …………………………….. 400
31 Accounts Receivable …………………………….. 3
EXERCISE 8-2
(a) Jan. 6 Accounts Receivable—Pryor ………………….. 7,000
16 Cash ($7,000 – $140) ……………………………… 6,860
(b) Jan. 10 Accounts Receivable—Farley…………………. 9,000
Feb. 12 Cash …………………………………………………….. 5,000
Mar. 10 Accounts Receivable—Farley…………………. 40
Interest Revenue
EXERCISE 8-3
(a) Dec. 31 Bad Debt Expense ………………………… 1,400
(b) (1) Dec. 31 Bad Debt Expense
(2) Dec. 31 Bad Debt Expense ………………………… 8,900
(c) (1) Dec. 31 Bad Debt Expense
(2) Dec. 31 Bad Debt Expense ………………………… 6,800
EXERCISE 8-4
(a)
Accounts Receivable
Amount
%
Estimated Uncollectible
1–30 days
31–60 days
61–90 days
Over 90 days
$60,000
17,600
8,500
7,000
2.0
5.0
20.0
50.0
$1,200
880
1,700
3,500
$7,280
(b) Mar. 31 Bad Debt Expense ……………………………….. 6,080
Allowance for Doubtful Accounts
EXERCISE 8-5
Allowance for Doubtful Accounts …………………………….. 11,000
Accounts Receivable ………………………………………………. 1,800
Cash ………………………………………………………………………. 1,800
Bad Debt Expense …………………………………………………… 13,200
EXERCISE 8-6
December 31, 2015
Bad Debt Expense (2% X $450,000) ………………………….. 9,000
May 11, 2016
June 12, 2016
Accounts Receivable—Shoemaker …………………………... 1,100
Cash ………………………………………………………………………. 1,100
EXERCISE 8-7
(a) Mar. 3 Cash ($650,000 – $19,500) ………………….. 630,500
(b) May 10 Cash ($3,000 – $120) …………………………. 2,880
EXERCISE 8-8
(a) Apr. 2 Accounts Receivable—J. Elston ………… 1,500
May 3 Cash …………………………………………………. 500
June 1 Accounts Receivable—J. Elston ………… 10
(b) July 4 Cash …………………………………………………. 196
Service Charge Expense
EXERCISE 8-9
(a) Jan. 15 Accounts Receivable …………………………. 18,000
Sales Revenue ……………………………. 18,000
20 Cash ($4,500 – $90) ……………………………. 4,410
Feb. 10 Cash …………………………………………………. 10,000
15 Accounts Receivable ($8,000 X 1.5%) …. 120
EXERCISE 8-10
(a) 2015
Nov. 1 Notes Receivable …………………………………….. 30,000
Dec. 11 Notes Receivable …………………………………….. 6,750
16 Notes Receivable …………………………………….. 4,000
31 Interest Receivable ………………………………….. 545
*Calculation of interest revenue:
Lopez’s note: $30,000 X 10% X 2/12 = $500
(b) 2016
Nov. 1 Cash ……………………………………………………….. 33,000
Interest Receivable ……………………………. 500
*($30,000 X 10% X 10/12)
EXERCISE 8-11
2015
May 1 Notes Receivable ……………………………………… 9,000
Dec. 31 Interest Receivable …………………………………… 600
31 Interest Revenue ………………………………………. 600
EXERCISE 8-11 (Continued)
2016
May 1 Cash ……………………………………………………….. 9,900
EXERCISE 8-12
4/1/15 Notes Receivable …………………………………….. 30,000
7/1/15 Notes Receivable …………………………………….. 25,000
12/31/15 Interest Receivable ………………………………….. 2,700
Interest Receivable ………………………………….. 1,250
Interest Revenue
4/1/16 Cash ……………………………………………………….. 33,600
Accounts Receivable ……………………………….. 26,875
EXERCISE 8-13
(a) May 2 Notes Receivable …………………………..……. 9,000
(b) Nov. 2 Accounts Receivable—Chang
Inc.………………………………………………….. 9,405
(c) Nov. 2 Allowance for Doubtful Accounts …………. 9,000
EXERCISE 8-14
(a) Beginning accounts receivable ………………………………… $ 100,000
SOLUTIONS TO PROBLEMS
PROBLEM 8-1A
(a) 1. Accounts Receivable ………………………….. 3,700,000
2. Sales Returns and Allowances ……………. 50,000
3. Cash ………………………………………………….. 2,810,000
4. Allowance for Doubtful Accounts ………… 90,000
5. Accounts Receivable ………………………….. 29,000
Cash ………………………………………………….. 29,000
(b)
Accounts Receivable
Allowance for Doubtful Accounts
Bal. 960,000
(1) 3,700,000
(5) 29,000
(2) 50,000
(3) 2,810,000
(4) 90,000
(5) 29,000
(4) 90,000
Bal. 80,000
(5) 29,000
Bal. 1,710,000
Bal. 19,000