Problem 5-8A (LO 5-7)
Requirement 1
December 1, 2018
Debit
Credit
Notes Receivable
90,000
Requirement 2
December 31, 2018
Debit
Credit
750
December 1, 2019
Cash
9,000
December 31, 2019
Interest Receivable (2019)
Problem 5-8A (concluded)
December 1, 2020
Cash
9,000
Interest Receivable (2019)
750
December 31, 2020
Interest Receivable (2020)
Interest Revenue
750
Requirement 3
December 1, 2021
Debit
Credit
Cash
99,000
Notes Receivable
Interest Receivable (2020)
750
Chapter 5 – Receivables and Sales
Problem 5-9A (LO 5-8)
Requirement 1
Walmart
Target
Average
365
365
365
Walmart has a higher receivables turnover ratio and a lower average collection period,
which means it collects cash more quickly from its customers. The receivables
Requirement 2
Including cash sales in the numerator of the receivables turnover ratio is the same as
suggesting that receivables turnover instantly (in other words, the average collection
period is zero). Therefore, companies that are more likely to have cash sales will show
PROBLEMS: SET B
Problem 5-1B (LO 5-1)
Revenue recognized in 2018
Problem 5-2B (LO 5-1, 5-2)
Requirement 1
June 10
Debit
Credit
No entry
June 12
No entry
June 13
No entry
June 16
June 19
No entry
June 20
June 30
Problem 5-2B (concluded)
Requirement 2
Data Recovery Services
Partial Income Statement
Total service revenues
$2,700
Requirement 3
June 25
Cash
1,852.2
Sales Discounts
37.8
Accounts Receivable
1,890
Chapter 5 – Receivables and Sales
Problem 5-3B (LO 5-3, 5-5)
Requirement 1
February 2, 2018
Debit
Credit
Accounts Receivable
38,000
Service Revenue
38,000
(Provide services on account)
July 23, 2018
Cash
27,000
Accounts Receivable
27,000
December 31, 2018
Allowance for Uncollectible Accounts
($11,000 x 25% = $2,750)
April 12, 2019
Accounts Receivable
51,000
Service Revenue
51,000
(Provide services on account)
June 28, 2019
Cash
6,000
Accounts Receivable
6,000
September 13, 2019
Allowance for Uncollectible Accounts
5,000
Accounts Receivable
5,000
(Write off actual bad debts)
Cash
45,000
Accounts Receivable
45,000
December 31, 2019
Bad Debt Expense
3,750
Allowance for Uncollectible Accounts
3,750
(Estimate future bad debts)
Problem 5-3B (concluded)
Requirement 2
Cash
Accounts Receivable
27,000
38,000
27,000
27,000
11,000
6,000
45,000
5,000
78,000
Allow. for Uncol. Accts.
Requirement 3
2018
2019
Total accounts receivable
$11,000
$6,000
Less: Allowance for uncollectible accounts
Problem 5-4B (LO 5-4, 5-5)
Requirement 1
Age group
Amount
receivable
Estimated
percent
uncollectible
Estimated
amount
uncollectible
Not yet due
$40,000
3%
$1,200
0-30 days past due
11,000
4%
440
More than 60 days past due
250
$60,000
Requirement 2
December 31, 2018
Debit
Credit
Bad Debt Expense
3,170
Requirement 3
April 3, 2019
Allowance for Uncollectible Accounts
500
Requirement 4
July 17, 2019
Accounts Receivable
100
July 17, 2019
Cash
100
Problem 5-5B (LO 5-3, 5-6)
Requirement 1
Letni should not use the direct write-off method. Even if no accounts are known to be
uncollectible at the time, Paul should estimate future bad debts and record those
Requirement 2
Requirement 3
Problem 5-6B (LO 5-3)
Requirement 1
Debit
Credit
Bad Debt Expense
330,000
Allowance for Uncollectible Accounts
330,000
Requirement 2
Revised operating income = $2,900,000 − $330,000 (bad debt expense)
= $2,570,000
Requirement 3
Revised operating income = $2,900,000 − $700,000 (bad debt expense)
= $2,200,000
Requirement 4
By managing operating income downward, Wanda is “saving” reported income for the
5-52 Financial Accounting, 3e
Problem 5-7B (LO 5-3, 5-5)
Requirement 1
Debit
Credit
Bad Debt Expense
7,000
Allowance for Uncollectible Accounts
7,000
Requirement 2
Previts underestimated uncollectible accounts by $80,500. Actual bad debts in the
Requirement 3
Previts should not prepare new financial statements for the first year. The fact that
actual bad debts in the second year turned out to be different than the amount
Chapter 5 – Receivables and Sales
Problem 5-8B (LO 5-7)
Requirement 1
April 15, 2018
Debit
Credit
Notes Receivable
110,000
Service Revenue
Requirement 2
December 31, 2018
Debit
Credit
9,350
9,350
April 15, 2019
Cash
13,200
Interest Receivable (2018)
9,350
Interest Revenue
3,850
December 31, 2019
Interest Receivable (2019)
9,350
Interest Revenue
9,350