Financial Reporting and Analysis (7th Ed.)
Chapter 8 Solutions
Receivables
Problems
Problems
P8-1. Determining balance sheet presentation and preparing journal
entries for various receivables transactions (LO 8-1, LO 8-4,
LO8-6)
Requirement 1:
Journal entries
1.
April 1
x .10)
CR Sales $ 50,000
DR Notes payable $ 65,000
CR Cash $ 65,000
DR Interest expense $ 3,250
CR Prepaid interest $ 3,250
6. DR Bad debt provision [ ($1,765,000 +
Accrued interest over 3-year loan term.
Date
Annual
Payment
Interest
Income (8%)
Receivable
Increase
Receivable
Balance
Requirement 2:
Balance sheet presentation at December 31, 2017
Notes receivable
Accounts receivable
Beginning balance $ 575,000 $ 17,775 exchange for note
Ending balance $ 419 ,025
Allowance for uncollectibles
P8-2. Determining balance sheet presentation and preparing journal
entries for various receivables transactions (LO 8-1, LO 8-4, LO
8-6)
Requirement 1:
Journal entries
Date
Annual
Payment
Interest
Income (10%)
Receivable
Increase
Receivable
Balance
4. DR Accounts receivable $395,000
Allowance for uncollectibles
$33,000 Beginning balance
Write-offs $29,750
3,250
31,750 Required adjustment
(plugged number)
$35 ,000 Required balance
Requirement 2:
Balance sheet presentation at October 31, 2015:
Accounts receivable
Beginning balance $379,000
Ending balance $333,750
Notes receivable
Sale by note $56,349
P8-3. Determining allowance for uncollectibles (LO 8-1)
Requirement 1:
Based on the aging schedule, the ending balance in the allowance
for
doubtful accounts is calculated as follows:
Expected Dollar
Age of Receivables
Amount
Bad Debts
Amount
The company needs to record an additional bad debt provision of
$600
($4,100 – $3,500) to increase the allowance balance to $4,100.
December 31, 2017
DR Bad debt provision $600
CR Allowance for uncollectibles
Cash Flow
Net from
Assets Liabilities Income Operations
Direction of effect – NE – NE
The journal entries for the other transactions are provided below:
January 1, 2018
March 1, 2018
DR Allowance for uncollectibles $800
CR Accounts receivable
40% of $2,000 is written-off as uncollectible.
Cash Flow
Net from
Assets Liabilities Income Operations
Direction of effect NE NE NE NE
Dollar amount of effect
May 7, 2018
CR Accounts receivable
$1,200
Cash Flow
Net from
Assets Liabilities Income Operations
Direction of effect NE NE NE +
Dollar amount of effect 1,200
Requirement 2:
Based on the aging schedule, the ending balance in the allowance
for
doubtful accounts is calculated as follows:
Expected
Dollar
Age of Receivables
Amount
Bad Debts
Amount
Since the company has a larger balance than what is required by
the
December 31, 2017
DR Allowance for uncollectibles $700
CR Bad debt provision
Cash Flow
Net From
Assets Liabilities Income Operations
Direction of effect + NE + NE
The other journal entries do not change from Requirement 1.
P8-4. Preparing journal entries, aging analysis and balance sheet
presentation (LO 8-1)
Requirement 1:
Accounts receivable
Requirement 2:
Oettinger Corporation
Accounts Receivable Aging Schedule
December 31, 2017
Accounts receivable Uncollectibles
Age Aging % Balance Percentage Amount
Allowance for uncollectibles
Requirement 3:
The journal entries affecting the allowance for uncollectible
accounts are:
CR Allowance for uncollectibles
$71,060
To adjust allowance for uncollectibles to required aging analysis
balance
Requirement 4:
Accounts receivable balance sheet presentation at December 31,
2017:
P8-5. Securitization (LO 8-7)
Requirement 1:
FASB ASC 860-10-40 on the subject of conditions for a sale of
financial assets states that a financial asset should be considered
sold if it is transferred and control is surrendered. Control is
deemed to be surrendered if transferred assets are isolated from
Requirement 2:
Requirement 3:
Assets
Liabilities and shareholders’ equity
securitization.
Requirement 4:
Assets
Liabilities and shareholders’ equity
Notes payable [$50 +
If the securitization did not qualify for “sale accounting,” it would be
treated as a collateralized borrowing, thus Eva’s reported debt
would increase:
P8-6. Analyzing accounts receivable (LO 8-2)
Allowance for doubtful accounts
Gross accounts receivable
Beginning balance
Journal entries for 2017