Chapter 5 – Receivables and Sales
Problem 5-2A (LO 5-1, 5-2)
Requirement 1
May 2
Debit
Credit
No entry
May 7
Accounts Receivable
1,200
(Provide guided tour on account)
May 9
No entry
May 15
Sales Allowances
Accounts Receivable
(Sales allowance for services on account)
May 20
Cash
789.60
Sales Discounts
50.40
Accounts Receivable
840
(Receive cash on account)
(Sales discount = $840 x 6%)
Requirement 2
Outdoor Expo
Partial Income Statement
5-42 Financial Accounting, 5e
Problem 5-3A (LO 5-3, 5-4, 5-5)
Requirement 1
June 12, 2021
Debit
Credit
Accounts Receivable
41,000
Service Revenue
41,000
(Provide services on account)
September 17, 2021
Cash
25,000
Accounts Receivable
25,000
December 31, 2021
Allowance for Uncollectible Accounts
($16,000 x 45% = $7,200)
March 4, 2022
Accounts Receivable
56,000
Service Revenue
56,000
(Provide services on account)
May 20, 2022
Cash
10,000
Accounts Receivable
10,000
(Receive cash on account)
July 2, 2022
Allowance for Uncollectible Accounts
Accounts Receivable
(Write off actual bad debts)
Cash
45,000
Accounts Receivable
45,000
(Receive cash on account)
December 31, 2022
Bad Debt Expense
Allowance for Uncollectible Accounts
Chapter 5 – Receivables and Sales
Problem 5-3A (concluded)
Requirement 2
Cash
Accounts Receivable
25,000
41,000
25,000
25,000
10,000
45,000
80,000
Allow. for Uncol. Accts.
7,200
Dec. 31, 2021
Requirement 3
2021
2022
Total accounts receivable
$16,000
$11,000
Less: Allowance for uncollectible accounts
5-44 Financial Accounting, 5e
Problem 5-4A (LO 5-4, 5-5)
Requirement 1
Age group
Amount
receivable
Estimated
percent
uncollectible
Estimated
amount
uncollectible
Not yet due
$40,000
4%
$ 1,600
0-90 days past due
More than 180 days past due
Requirement 2
December 31, 2021
Debit
Credit
Bad Debt Expense
12,950
Requirement 3
July 19, 2022
Allowance for Uncollectible Accounts
8,000
Requirement 4
September 30, 2022
Accounts Receivable
8,000
Cash
8,000
Chapter 5 – Receivables and Sales
Problem 5-5A (LO 5-3, 5-6)
Requirement 1
Arnold should not use the direct write-off method. Even if no accounts are known to
Requirement 2
Allowance for uncollectible accounts = $170,000 x 70% = $119,000.
Requirement 3
Problem 5-6A (LO 5-5)
Requirement 1
Debit
Credit
Bad Debt Expense
59,000
Allowance for Uncollectible Accounts
59,000
Requirement 2
Revised operating income = $260,000 − $59,000 (bad debt expense)
Requirement 3
Debit
Credit
Bad Debt Expense
26,000
Allowance for Uncollectible Accounts
26,000
Requirement 4
Using 6% instead of 9% to estimate future bad debts causes total assets to be
Chapter 5 – Receivables and Sales
Problem 5-7A (LO 5-3, 5-4)
Requirement 1
December 31, 2021
Debit
Credit
Bad Debt Expense
455,000
Requirement 2
Because actual bad debts in 2022 were only $300,000 when the company estimated
Requirement 3
Humanity International should not prepare new financial statements for 2021. The fact
5-48 Financial Accounting, 5e
Problem 5-8A (LO 5-7)
Requirement 1
December 1, 2021
Debit
Credit
Notes Receivable
Service Revenue
(Provide services in exchange for a note)
Requirement 2
December 31, 2021
Debit
Credit
Interest Receivable (2021)
Interest Revenue
(Adjust interest receivable)
(Interest revenue = $90,000 x 10% x 1/12)
December 1, 2022
Cash
9,000
Interest Receivable (2021)
750
Interest Revenue
8,250
(Receive annual interest)
(Interest revenue = $90,000 x 10% x 11/12)
December 31, 2022
Interest Receivable (2022)
Interest Revenue
750
(Adjust interest receivable)
(Interest revenue = $90,000 x 10% x 1/12)
Chapter 5 – Receivables and Sales
Problem 5-8A (concluded)
December 1, 2023
Cash
9,000
Interest Receivable (2022)
750
December 31, 2023
Interest Receivable (2023)
750
Interest Revenue
750
Requirement 3
December 1, 2024
Debit
Credit
Cash
99,000
Notes Receivable
90,000
Interest Receivable (2021)
750
5-50 Financial Accounting, 5e
Problem 5-9A (LO 5-8)
Requirement 1
Walmart
Target
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
turnover ratio and average collection period for Tenet Healthcare in the most recent
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
Chapter 5 – Receivables and Sales
PROBLEMS: SET B
Problem 5-1B (LO 5-1)
Revenue recognized in 2021
Scenario 1:
$900,000
Scenario 2:
Scenario 3:
Scenario 4:
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
Accounts Receivable
Service Revenue
June 19
No entry
June 20
Sales Allowances
810
Accounts Receivable
810
(Sales allowance for services on account)
June 30
Cash
Accounts Receivable
Chapter 5 – Receivables and Sales
Problem 5-2B (concluded)
Requirement 2
Data Recovery Services
Partial Income Statement
Requirement 3
June 25
Cash
1,852.2
Sales Discounts
37.8
5-54 Financial Accounting, 5e
Problem 5-3B (LO 5-3, 5-4, 5-5)
Requirement 1
February 2, 2021
Debit
Credit
Accounts Receivable
38,000
Service Revenue
38,000
(Provide services on account)
July 23, 2021
Cash
27,000
Accounts Receivable
27,000
December 31, 2021
Allowance for Uncollectible Accounts
($11,000 x 25% = $2,750)
April 12, 2022
Accounts Receivable
51,000
Service Revenue
51,000
(Provide services on account)
June 28, 2022
Cash
6,000
Accounts Receivable
6,000
September 13, 2022
Allowance for Uncollectible Accounts
5,000
Accounts Receivable
5,000
(Write off actual bad debts)
Cash
45,000
Accounts Receivable
45,000
December 31, 2022
Bad Debt Expense
3,750
Allowance for Uncollectible Accounts
3,750
(Estimate future bad debts)
[($6,000 x 25%) + $2,250 = $3,750]
Chapter 5 – Receivables and Sales
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
Requirement 3
2021
2022
Total accounts receivable
$11,000
$6,000
Less: Allowance for uncollectible accounts
5-56 Financial Accounting, 5e
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
4%
More than 60 days past due
$60,000
Requirement 2
December 31, 2021
Debit
Credit
Bad Debt Expense
3,170
Requirement 3
April 3, 2022
Allowance for Uncollectible Accounts
500
Requirement 4
July 17, 2022
Accounts Receivable
100
July 17, 2022
Cash
100
Chapter 5 – Receivables and Sales
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
Problem 5-6B (LO 5-5)
Requirement 1
Debit
Credit
Bad Debt Expense
330,000
Allowance for Uncollectible Accounts
330,000
(Estimate future bad debts)
($11,000,000 x 4% − $110,000 = $330,000)
Requirement 2
Revised operating income = $2,900,000 − $330,000 (bad debt expense)
Requirement 3
Revised operating income = $2,900,000 − $700,000 (bad debt expense)
= $2,200,000
Chapter 5 – Receivables and Sales
Problem 5-7B (LO 5-3, 5-4)
Requirement 1
Debit
Credit
Bad Debt Expense
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