Problem 7–4
Requirement 1
To record accounts receivable written off during the year 2018:
………………………………………………..Accounts receivable
To record collection of account receivable previously written off:
………………………..Allowance for uncollectible accounts
………………………………………………..Accounts receivable
Requirement 2
(a)
December 31, 2018
………………………..Allowance for uncollectible accounts
(b)
December 31, 2018
……………..Allowance for uncollectible accounts (below)
Problem 7–4 (continued)
Accounts receivable analysis:
Beginning balance $ 462,000
Add: Credit sales 1,750,000
Allowance for uncollectible accounts analysis:
Beginning balance $30,000
Add: Collection of receivable previously written off 3,000
(c)
December 31, 2018
……………..Allowance for uncollectible accounts (below)
Required allowance:
Age Group Amount
Percent
Uncollectible
Estimated
Allowance
0–60 days $225,550 4% $ 9,022
Problem 7–4 (concluded)
Allowance for uncollectible accounts analysis:
Beginning balance $30,000
Add: Collection of receivable previously written off 3,000
Requirement 3
Accounts receivable – Year-end allowance
(a) $347,000 – [(2,000) + 52,500] = $296,500
Problem 7–5
Requirement 1
($ in thousands)
2015 2014
Requirement 2
Allowance for Uncollectible Accounts
__________________________________________
($ in thousands)
Write-offs 160,200
Avon had $160,200 thousand of bad debt write-offs during 2015.
Requirement 3
Allowance for sales returns
__________________________________________
($ in thousands)
Avon had $2,700 thousand of estimated sales returns during 2015.
Problem 7–5 (concluded)
Requirement 4
Gross Accounts Receivable
__________________________________________
($ in thousands)
_________________
Problem 7–6
Requirement 1
Note 3 is a 6-month note, with three months remaining. Therefore,
$5,000 represents one-half of the total discount of $10,000.
$10,000 ÷ $200,000 = 5% x 12/6 = 10% discount rate.
Requirement 2
Total accrued interest receivable $16,000
Less: Interest accrued on note 1:
$6,000 ÷ $150,000 = 4% x 12/6 = 8%
Requirement 3
Problem 7–7
Requirement 1
Alternative a:
To record the borrowing of $500,000 and signing of a note payable:
July 1, 2018
………………………………………………………….Note payable
Alternative b:
To record the transfer of receivables:
July 1, 2018
Requirement 2
Alternative a:
July, 2018
July 31, 2018
……………………………………………………………………..Cash
Problem 7–7 (concluded)
Alternative b:
$550 of accounts receivable are now held by the bank, and presumably the
during July.
July 31, 2018
………………………………………………..Accounts receivable
Requirement 3
Alternative a. – Note disclosure is required for the assignment of accounts
receivable as collateral for the $500,000 note.
Alternative b. – No disclosure is required since the transfer of receivables
was made without recourse.
Problem 7–8
Cash (90% x $800,000)………………………………………………. 720,000
Problem 7–9
WALKEN COMPANY
Balance Sheet
December 31, 2018
Current Assets
aWalken would net the €40,000 and (€5000) cash balances, yielding a balance of
€35,000.
bNet accounts receivable would be affected as follows:
Beginning balance: € 25,000
cThe receivables factored with Dependable don’t qualify for sales treatment, as
substantially all risks and rewards of ownership are retained by Walken.