FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-19A
(10-15 min.)
Requirements
Solution:
Req. 1
Beg. Bal. 97,000 Beg. Bal. 13,000
Req. 2
BALANCE SHEET
Accounts receivable 74,000$
1. Set up T-accounts and start with the beginning balances for these T-accounts:
■ Accounts Receivable, $97,000
■ Allowance for Uncollectible Accounts, $13,000 Post the
following 2016 transactions to the T-accounts:
a. Service revenue of $702,000, all on account
b. Collections on account, $716,000
c. Write-offs of uncollectible accounts, $9,000
d. Uncollectible-account expense (allowance method), $7,000
2. What are the ending balances of Accounts Receivable and Allowance for Uncollectible
Accounts?
3. Show how Bronson and Moore will report accounts receivable on its balance sheet at December 31, 2016.
Accounts Receivable
Allowance for Uncollectible Accounts
Chapter 5: Short-Term Investments and Receivables Page 21 of 87
Service revenue Collections 716,000 Uncollectible –
on account 702,000 Write-offs 9,000 Write-offs 9,000 account expense 7,000
End. Bal. 74,000 End. Bal. 11,000
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-20A
(15-20 min.)
Solution:
DATE DEBIT CREDIT
2016
BALANCE SHEET
Current assets:
*$830 + $11,000 = $11,830
Journal
ACCOUNT TITLES AND EXPLANATION
Make the year-end entry to record Doubtful-Account Expense. Show how
Accounts Receivable and Allowance for Doubtful Accounts are reported on the
balance sheet at December 31, 2016.
Chapter 5: Short-Term Investments and Receivables Page 22 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-21A
(15 min.)
Requirements
Solution:
Req. 1
DATE DEBIT CREDIT
July Accounts Receivable 198,000
Sales Revenue 198,000
Req. 2
35,000 169,000 3,252
1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible account
expense by the allowance method during July. Explanations are not required.
2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible
Accounts, and Net Accounts Receivable at July 31. How much does Paisley Party
Planners expect to collect?
3. Show how Paisley Party Planners will report accounts receivable and net sales on its
July 31 balance sheet and income statement for the month ended July 31
Journal
ACCOUNT TITLES AND EXPLANATION
Accounts Receivable
Allowance for Uncollectible Accounts
Chapter 5: Short-Term Investments and Receivables Page 23 of 87
July Cash 169,000
Accounts Receivable 169,000
July Uncollectible-Account Expense 7920
Allowance for Uncollectible Accounts
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
BALANCE SHEET (Partial)
Current assets:
Accounts receivable 61,110$
Chapter 5: Short-Term Investments and Receivables Page 24 of 87
INCOME STATEMENT (Partial)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-22A
(15-30 min.)
Requirements
Solution:
Req. 1
Req. 2
DATE DEBIT CREDIT
Dec. 31 Doubtful-Account Expense 4,700
1. Based on the aging of Accounts Receivable, is the unadjusted balance of the
allowance
account adequate? Too high? Too low?
2. Make the entry required by the aging schedule. Prepare a T-account for the
allowance.
3. Show how Turf Trimmers will report Accounts Receivable on its December 31
ACCOUNT TITLES AND EXPLANATION
Journal
The credit balance at December 31 in Allowance for Doubtful Accounts should be
$23,400. The current balance is $18,700. Thus, the balance of the allowance account is
too low.
Chapter 5: Short-Term Investments and Receivables Page 25 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
BALANCE SHEET
Current assets:
Cash $ XX
Short-term investments XX
Chapter 5: Short-Term Investments and Receivables Page 26 of 87
Accounts receivable, net of allowance
for doubtful accounts of $23,400 326,600*
*Another way to report accounts receivable is
Accounts receivable $ 350,000
Less: Allowance for doubtful accounts (23,400) 326,600
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-23A
(10-15 min.)
Requirement
Solution:
DATE DEBIT CREDIT
March Accounts Receivable 4,100
Service Revenue 4,100
Journal
ACCOUNT TITLES AND EXPLANATION
1. Journalize service revenue (all on account), bad-debt expense, sales returns and
allowances, and write-offs during March. Include explanations.
Chapter 5: Short-Term Investments and Receivables Page 27 of 87
Accounts Receivable 143
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-24A
(10-15 min.)
Solution:
DATE DEBIT CREDIT
Oct. 1 Note Receivable — Carroll Fadal .……….. 11,000
Cash……………………………………….. 11,000
Journal
ACCOUNT TITLES AND EXPLANATION
Record the following note receivable transactions in the journal of Celtic Services. How
much interest revenue did Celtic earn this year? Use a 365-day year for interest
computations, and round interest amounts to the nearest dollar. Celtic Services has a
December 31 fiscal year-end.
Chapter 5: Short-Term Investments and Receivables Page 28 of 87
Dec. 6 Note Receivable — Fairway Masters…….. 9,000
Accounts Receivable – Warren, Inc..… 4,000
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-25A
(10-15 min.)
Requirements
Solution:
Req. 1
(a)
(b)
=
=
net 30 days.
Req. 2
Quick
(acid-test)
=
Cash and
cash equiv.
=
$ 727,000
+
Marketable
securites
+
Net current
receivables
One day’s
=
Sales
revenue
1. Compute Marshall’s (a) quick (acid-test) ratio and (b) days’ sales outstanding for
2016. Evaluate each ratio value as strong or weak. All sales are on account with
terms of net 30 days.
2. Recommend two ways for Marshall to speed up its cash flow from receivables.
Marshall could speed up cash flows from receivables by offering discounts for early
payments or increasing penalties for late payments.
=
$ 1,992
Chapter 5: Short-Term Investments and Receivables Page 29 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-26A
(10-15 min.)
Requirements
Solution:
Req. 1
Average collection period: Millions of dollars
Req. 2
1. Compute Stark’s days’ sales in receivables or days’ sales outstanding
(DSO) during 2017.
2. Is Stark’s DSO long or short? Viflex Networks takes 39 days to collect its
average level of receivables. Donahue Freight, the overnight shipper, takes 33
days. What causes Stark’s collection period to be so different?
Chapter 5: Short-Term Investments and Receivables Page 30 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-27B
(10-15 min.)
Requirements
Solution:
Req. 1
Req. 2
Dec. 15 Investment in Trading Securities ($1,000 × $46) 46,000
Cash 46,000
Dec. 31 Investment in Trading Securities
Unrealized Gain on Trading Securities 23,000
Req. 3
BALANCE SHEET (partial)
Current assets:
1. What type of investment is this to Northern? Give the reason for your answer.
2. Record Northern’s purchase of the Twister stock on December 15 and the
adjustment to market value on December 31.
3. Show how Northern would report this investment on its balance sheet at December
31 and any gain or loss on its income statement for the year ended December 31,
2016.
4. Suppose Northern did not intend to treat the Twister stock as a trading security,
but still intended to treat it as a short-term investment. How do your answers for parts
1–3 change? Follow Exhibit 5-2.
Chapter 5: Short-Term Investments and Receivables Page 31 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 4
1. This is an available-for-sale security because it is not a trading security.
2. Dec. 15 Investment in AFSS 46,000
Cash 46,000
Chapter 5: Short-Term Investments and Receivables Page 32 of 87
Unrealized Gain on Investment in AFSS (OCI) 23,000
3. BALANCE SHEET (partial)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-28B
(15-20 min.)
Requirements
Solution:
Req. 1
DATE DEBIT CREDIT
Nov. 2 Accounts Receivable—Maxine Holder 980
Sales Revenue ($1,000 x .98) 980
1. Record the foregoing transactions in the journal of Wolford Interiors. (You do
not need to make the cost of sales, estimated refunds, or cost of estimated
returns journal entries; assume that these entries will be made by the company
when it makes its other adjusting entries at period end.)
2. Prepare a computation of net sales for the month of November.
Journal
ACCOUNT TITLES AND EXPLANATION
Chapter 5: Short-Term Investments and Receivables Page 33 of 87
Sales Revenue ($2,600 x .97) 2,522
Req. 2
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-29A
(10-15 min.)
Requirements
Solution:
Req. 1
Beg. Bal. 303,000 Beg. Bal. 26,000
Req. 2
BALANCE SHEET
Accounts receivable 242,000$
Accounts receivable, net 210,000$
1. Set up T-accounts and start with the beginning balances for these T-accounts:
■ Accounts Receivable, $303,000
■ Allowance for Uncollectible Accounts, $26,000
Post the following 2016 transactions to the T-accounts:
a. Service revenue of $1,978,000, all on account
b. Collections on account, $2,010,000
c. Write-offs of uncollectible accounts, $29,000
d. Uncollectible-account expense (allowance method), $35,000
2. What are the ending balances of Accounts Receivable and Allowance for Uncollectible Accounts?
3. Show how Laksmana and Li will report accounts receivable on its balance sheet at
December 31, 2016.
Accounts Receivable
Allowance for Uncollectible Accounts
Chapter 5: Short-Term Investments and Receivables Page 34 of 87
Service revenue Collections 2,010,000 Uncollectible –
on account 1,978,000 Write-offs 29,000
End. Bal. 242,000 End. Bal. 32,000
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-30B
(10-15 min.)
Solution:
DATE DEBIT CREDIT
2016
BALANCE SHEET
Current assets:
Accounts receivable, net of allowance
for doubtful accounts of $12,840* $76,160**
*$840 + $12,000 = $12,840
Make the December 31 entry to record Doubtful-Account Expense. Show how
the Accounts Receivable and the Allowance for Doubtful Accounts are reported
on the balance sheet at December 31, 2016.
Journal
ACCOUNT TITLES AND EXPLANATION
Chapter 5: Short-Term Investments and Receivables Page 35 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-31B
(15 min.)
Requirements
Solution:
Req. 1
DATE DEBIT CREDIT
July Accounts Receivable 200,000
Sales Revenue 200,000
Req. 2
43,000 169,000 2,493
1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible-account
expense by the allowance method during July. Explanations are not required.
2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible
Accounts, and Net Accounts Receivable at July 31. How much does Maloney expect to
collect?
3. Show how Maloney Party Planners will report Accounts Receivable and net sales on
its July 31 balance sheet and income statement for the month ended July 31.
Journal
ACCOUNT TITLES AND EXPLANATION
Accounts Receivable
Allowance for Uncollectible Accounts
Chapter 5: Short-Term Investments and Receivables Page 36 of 87
July Cash 169,000
Accounts Receivable 169,000
July Allowance for Uncollectible Accounts 2,910
July Uncollectible-Account Expense
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
BALANCE SHEET (Partial)
Current assets:
Accounts receivable 71,090$
Chapter 5: Short-Term Investments and Receivables Page 37 of 87
INCOME STATEMENT (Partial)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-32B
(15-30 min.)
Requirements
Solution:
Req. 1
1-30
31-60 61-90 Over 90 Total
days days days days balance
$ 130,000 $ 100,000 $ 60,000 $ 30,000
Req. 2
DATE DEBIT CREDIT
Dec. 31 Doubtful-Account Expense 5,520
22,200
Journal
ACCOUNT TITLES AND EXPLANATION
Allowance for Doubtful Accounts
1. Based on the aging of Accounts Receivable, is the unadjusted balance of the
allowance
account adequate? Too high? Too low?
2. Make the entry required by the aging schedule. Prepare a T-account for the
allowance.
3. Show how Foley Distribution Service will report Accounts Receivable on its December
The credit balance at December 31 in Allowance for Doubtful Accounts should be
$27,720. The current balance is $22,200. Thus, the balance of the allowance account is
too low.
Chapter 5: Short-Term Investments and Receivables Page 38 of 87
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
BALANCE SHEET
Current assets:
Cash $ XX
Chapter 5: Short-Term Investments and Receivables Page 39 of 87
Short-term investments XX
Accounts receivable, net of allowance
*Another way to report accounts receivable is
Accounts receivable 320,000$
Less: Allowance for doubtful accounts (27,720) 292,280
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E5-33B
(10-15 min.)
Requirement
Solution:
DATE DEBIT CREDIT
May Accounts Receivable 4,100
Service Revenue 4,100
1. Journalize service revenue (all on account), bad-debt expense, sales returns and
allowances, and write-offs during May. Include explanations.
Journal
ACCOUNT TITLES AND EXPLANATION
Chapter 5: Short-Term Investments and Receivables Page 40 of 87
Accounts Receivable 126