×11 /×/=
2.
3.
0
100
Days remaining in May (31 – 31)
Days in June
Principal
31
30
Days in July
Interest at maturity:
$3,856.44
Time =
Since interest income on these notes receivable will not be paid until maturity, the
cash flow impact on June 30 is zero.
Interest*
Rate of
Interest
Interest
*Rounded
Maturity value: $61,627.40
Maturity Value
Interest*
P3. Notes Receivable Calculations (Concluded)
Principal
$60,000
××
Rate of
Interest Time =
May 31, accepted $60,000, 90-day, 11% note receivable
Maturity date:
+
36590
August 29
×
×
$1,627.40
=
$1,627.40
Principal
*Rounded
Date of
Note
Accrued interest income as of June 30
9-19
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1.
Principal
×
P4. Notes Receivable Calculations
Maturity date: March 16
earned irrespective of when the cash is paid.
accrual accounting, which calls for recording interest in the period in which it is
Rate of
Interest ×Time
= Interest*
*Rounded
9-20
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2. a.
×
b.
‒
‒
4,300
Accounts Receivable
Bal.
= Net Credit Sales 1.6 percent
$231,748
Uncollectible Accounts Expense
Uncollectible Accounts Expense
Allowance for Uncollectible Accounts
Accounts Receivable, Net
Percentage of net sales method:
=
P5. Methods of Estimating Uncollectible Accounts and Receivables Analysis
$20,000
=
Alternate Problems
Accounts receivable aging method:
=
$20,000
= $4,300
$254,000
$15,700
$20,000
=
9-21
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
3. –
4.
to estimate uncollectible accounts is to consider the portion of the accounts receiv-
Underlying the percentage of net sales method is the assumption that the best way
to estimate uncollectible accounts is to consider a portion of every sales dollar to
be an amount that will not be collected. This is known as an income statement
approach.
Underlying the accounts receivable aging method is the assumption that the best way
Because the percentage of net sales method and the accounts receivable aging
in this case has a credit balance.
able now existing that may not be collected. This is a balance sheet approach.
P5. Methods of Estimating Uncollectible Accounts and Receivables Analysis (Concluded)
Receivables Turnover =
***Rounded
$1,195,000
$73,000
9-22
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1.
1–30 31–60 61–90 Over
Not Yet Days Days Days 90 Days
Total Due Past Due Past Due Past Due Past Due
2.
Customer
P6. Accounts Receivable Aging Method
Account
Flossmoor Company
Aging Analysis of Accounts Receivable
December 31, 2014
Balance
Accounts Receivable
9-23
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3.
Percentage Allowance for
Considered Uncollectible
Amount Uncollectible Accounts*
5.
P6. Accounts Receivable Aging Method (Concluded)
Estimates play an important role in applying the aging analysis method. Businesses
Flossmoor Company
December 31, 2014
Estimated Uncollectible Accounts
9-24
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
P7. Notes Receivable Calculations
Principal
=+
Maturity Value
Interest
September 30Maturity date:
9-25
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
2.
3.
Date of
Note
Since interest income on these notes receivable will not be received until maturity,
Interest*
P7. Notes Receivable Calculations (Concluded)
Accrued interest income as of August 31
Rate of
Interest TimePrincipal ×=
October 28Maturity date:
July 30, accepted $90,000, 90-day, 11% note receivable
*Rounded
*Rounded
×
9-26
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
4.
–=
6.
Interest at maturity: $117.53
Adjusting entry: $113.62
Zero cash will be received in 2014 because the interest is due at the date of maturity.
*Differences in calculations due to rounding.
P8. Notes Receivable Calculations
January 2Maturity date:
Rate of
Interest
×TimePrincipal ×
=Interest*
Rate of
Interest
Principal ×
Interest*
×Time =
$117.53 $113.62 $3.91
or:
9-27
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.