Chapter 05 – Receivables and Sales
Chapter 5
Receivables and Sales
EXERCISES
Exercise 5-1
May 7
Debit
Credit
Accounts Receivable
4,760
May 13
Cash
4,760
Exercise 5-2
May 1
Debit
Credit
Exercise 5-3
March 12
Debit
Credit
Accounts Receivable
25,800
March 20
Cash
Sales Discounts
1,032
Exercise 5-4
March 12
Debit
Credit
Accounts Receivable
25,800
March 31
Cash
25,800
Exercise 5-5
March 12
Debit
Credit
Service Fee Expense
25,800
March 31
Accounts Payable
25,800
Exercise 5-6
Requirement 1
April 25
Debit
Credit
Accounts Receivable
3,200
Service Revenue
3,200
(Provide services on account)
Requirement 2
April 27
Debit
Credit
Sales Allowances
Accounts Receivable
(Record sales allowance for credit sale)
April 30
Debit
Credit
Cash
Accounts Receivable
Exercise 5-7
Requirement 1
December 31, 2014
Debit
Credit
Total accounts receivable
Net realizable value
Exercise 5-8
Requirement 1
December 31, 2014
Debit
Credit
Bad Debt Expense
19,500
Requirement 2
Bad debt Expense
$19,500
Allowance for uncollectible accounts
Requirement 3
Total accounts receivable
$88,000
Less: Allowance for uncollectible accounts
Exercise 5-9
Requirement 1
December 31, 2014
Debit
Credit
Bad Debt Expense
18,600
Requirement 2
Bad debt Expense
$18,600
Allowance for uncollectible accounts
Requirement 3
Total accounts receivable
$112,000
Less: Allowance for uncollectible accounts
Net realizable value
Exercise 5-10
Requirement 1
Age Group
Amount
Receivable
Estimated
Percent
Uncollectible
Estimated
Amount
Uncollectible
Not yet due
$ 53,000
15%
$ 7,950
0-30 days past due
27,000
20%
5,400
31-90 days past due
15,000
60%
9,000
Requirement 2
December 31, 2014
Debit
Credit
Bad Debt Expense
25,500
Requirement 3
Total accounts receivable
$104,000
Less: Allowance for uncollectible accounts
Net realizable value
Exercise 5-11
Requirement 1
Age Group
Amount
Receivable
Estimated
Percent
Uncollectible
Estimated
Amount
Uncollectible
Not yet due
$ 69,500
10%
$ 6,950
0-60 days past due
20%
45%
Total
$173,700
Requirement 2
December 31, 2014
Debit
Credit
Bad Debt Expense
47,200
Requirement 3
Total accounts receivable
$173,700
Less: Allowance for uncollectible accounts
Net realizable value
Exercise 5-12
Credit sales
transaction cycle
Assets
Liabilities
Stockholders’
equity
Revenues
Expenses
1. Provide services on
account
I
NE
I
I
NE
NE
NE
I
3. Write off accounts as
uncollectible
NE
NE
NE
NE
previously written off
NE
NE
NE
NE
Exercise 5-13
Requirement 1
a.
Debit
Credit
Accounts Receivable
270,700
Service Revenue
270,700
(Provide service on account)
b.
Cash
140,200
(Collect cash on account)
c.
Bad Debt Expense
Allowance for Uncollectible Accounts
($32,625 = $155,500 × 25%)
d.
Allowance for Uncollectible Accounts
Accounts Receivable
(Write off actual bad debts)
Requirement 2
a.
Debit
Credit
Accounts Receivable
270,700
Service Revenue
270,700
(Provide services on account)
b.
Cash
Accounts Receivable
140,200
d.
Bad Debt Expense
Accounts Receivable
Exercise 5-13 (concluded)
Requirement 3
Bad Debt Expense
Allowance
Method
Direct Write-off
Method
2018:
$38,875
$0
Under the allowance method, we record bad debt expense in the period we estimate
them (2018) so net income would be lower under the allowance method in 2018.
Under the direct write-off method, we record bad debts when they actually occur
Exercise 5-14
a. April 1
Debit
Credit
Notes Receivable
8,000
Service Revenue
8,000
b. June 1
Notes Receivable
15,000
c. November 1
Notes Receivable
Exercise 5-15
March 1
Debit
Credit
Notes Receivable
18,600
Service Revenue
September 1
Cash
19,716
Interest Revenue
1,116
Exercise 5-16
March 1
Debit
Credit
Legal Fees Expense
18,600
September 1
Notes Payable
18,600
Exercise 5-17
Requirement 1
April 1, 2014
Debit
Credit
Notes Receivable
450,000
Cash
Requirement 2
December 31, 2014
Debit
Credit
Interest Receivable
27,000
Interest Revenue
27,000
Requirement 3
April 1, 2015
Debit
Credit
Cash
486,000
Notes Receivable
450,000
Interest Receivable
27,000
Exercise 5-18
Wal-Mart
Target
Costco
Receivables
Net Sales
$337,500
$93,600
$115,500
turnover ratio
=
Average
collection
=
365
365
365
365
Receivables
125
12
77
Exercise 5-19
Requirement 1
December 31, 2014
Debit
Credit
Bad Debt Expense
4,500
Requirement 2
December 31, 2014
Debit
Credit
Bad Debt Expense
5,700
Requirement 3
Percentage-of–
receivables
method
Percentage-of–
credit-sales
method
Total Assets
−$4,500
−$5,700
Net Income
−$4,500
−$5,700
Exercise 5-20
Requirement 1
December 31, 2014
Debit
Credit
Bad Debt Expense
7,500
Allowance for Uncollectible Accounts
7,500
Requirement 2
December 31, 2014
Debit
Credit
Bad Debt Expense
5,700
Allowance for Uncollectible Accounts
Requirement 3
Percentage-of–
receivables
method
Percentage-of–
credit-sales
method
Total Assets
−$7,500
−$5,700
Net Income
−$7,500
−$5,700