Chapter 5 – Receivables and Sales
Exercise 5-13 (LO 5-6)
Requirement 1
1.
Debit
Credit
Accounts Receivable
190,000
Service Revenue
190,000
(Provide service on account)
2.
Accounts Receivable
185,000
(Collect cash on account)
3.
Bad Debt Expense
4,650
Allowance for Uncollectible Accounts
4,650
($4,650 = $31,000 x 15%)
4.
Allowance for Uncollectible Accounts
8,000
Accounts Receivable
8,000
(Write off actual bad debts)
Requirement 2
1.
Debit
Credit
Accounts Receivable
190,000
Service Revenue
190,000
(Provide services on account)
2.
Cash
185,000
(Collect cash on account)
3.
4.
Bad Debt Expense
8,000
Accounts Receivable
8,000
(Write off actual bad debts)
5-22 Financial Accounting, 5e
Exercise 5-13 (concluded)
Requirement 3
Bad Debt Expense
Allowance
Method
2021:
$4,650
2022:
$0
Under the allowance method, we record bad debt expense in the period we estimate
Chapter 5 – Receivables and Sales
Exercise 5-14 (LO 5-7)
1. April 1
Debit
Credit
Notes Receivable
7,000
Service Revenue
7,000
(Provide services and accept note)
2. June 1
Notes Receivable
11,000
Cash
11,000
(Lend cash to vendor and accept note)
3. November 1
Notes Receivable
6,000
Accounts Receivable
6,000
Exercise 5-15 (LO 5-7)
March 1
Debit
Credit
Notes Receivable
11,000
Service Revenue
11,000
(Provide legal services and accept note)
September 1
Cash
11,495
Notes Receivable
11,000
(Interest revenue = $11,000 x 9% x 6/12)
5-24 Financial Accounting, 5e
Exercise 5-16 (LO 5-7)
March 1
Debit
Credit
Legal Fees Expense
11,000
Notes Payable
11,000
(Receive legal services and sign note)
September 1
Notes Payable
11,000
Interest Expense
Cash
11,495
(Interest expense = $11,000 x 9% x 6/12)
Chapter 5 – Receivables and Sales
Exercise 5-17 (LO 5-7)
Requirement 1
April 1, 2021
Debit
Credit
Notes Receivable
600,000
Cash
600,000
(Lend cash to supplier and accept note)
Requirement 2
December 31, 2021
Debit
Credit
Interest Receivable
49,500
Interest Revenue
(Interest revenue = $600,000 x 11% x 9/12)
Requirement 3
April 1, 2022
Debit
Credit
Cash
666,000
Notes Receivable
Interest Receivable
Interest Revenue
(Interest revenue = $600,000 x 11% x 3/12)
Exercise 5-18 (LO 5-8)
WalCo
TarMart
CostGet
Receivables
turnover
ratio
=
Net sales
$322,427
$67,878
$68,963
Average
accounts
($1,815 +
$2,762) /2
($6,166 +
$6,694) /2
($629 +
$665) /2
Exercise 5-19 (LO 5-9)
Requirement 1
December 31, 2021
Debit
Credit
Bad Debt Expense
Allowance for Uncollectible Accounts
(Estimate future bad debts)
[$5,500 = ($55,000 x 12%) − $1,100]
Requirement 2
December 31, 2021
Debit
Credit
Bad Debt Expense
7,800
Allowance for Uncollectible Accounts
7,800
(Estimate future bad debts)
($7,800 = $260,000 x 3%)
Requirement 3
Percentage of
receivables
method
5-28 Financial Accounting, 5e
Exercise 5-20 (LO 5-9)
Requirement 1
December 31, 2021
Debit
Credit
Requirement 2
December 31, 2021
Debit
Credit
Requirement 3
Percentage of
receivables
method
Total assets
−$7,700
Net income
−$7,700
Chapter 5 – Receivables and Sales
Exercise 5-21 (LO 5-1, 5-4, 5-5, 5-7, 5-9)
Requirement 1
January 2
Debit
Credit
Cash
35,100
Service Revenue
35,100
(Provide services for cash)
January 6
Debit
Credit
Accounts Receivable
72,400
Service Revenue
72,400
(Provide services on account)
January 15
Debit
Credit
Allowance for Uncollectible Accounts
Accounts Receivable
(Write off uncollectible accounts)
January 20
Debit
Credit
Salaries Expense
31,400
Cash
31,400
(Pay for salaries)
January 22
Debit
Credit
Cash
70,000
Accounts Receivable
70,000
January 25
Debit
Credit
Accounts Payable
Cash
(Pay cash on account)
January 30
Debit
Credit
Utilities Expense
13,700
Cash
13,700
(Pay for utilities)
Exercise 5-21 (continued)
Requirement 2
(a) January 31
Debit
Credit
Bad Debt Expense
1,100
Allowance for Uncollectible Accounts
1,100
(b) January 31
Debit
Credit
Supplies Expense
1,800
Supplies
1,800
(Adjust supplies)
($1,800 = $2,500−$700)
(c) January 31
Debit
Credit
Interest Receivable
Interest Revenue
Salaries Expense
33,500
Salaries Payable
33,500
Chapter 5 – Receivables and Sales
Exercise 5-21 (continued)
Requirement 3
3D Family Fireworks
Adjusted Trial Balance
January 31, 2021
Accounts
Debit
Credit
Cash
$ 78,400
Accounts Receivable
15,000
Interest Receivable
100
Supplies
Notes Receivable
20,000
Land
77,000
Allowance for Uncollectible Accounts
$ 1,500
Accounts Payable
Salaries Payable
Common Stock
Retained Earnings
Service Revenue
Interest Revenue
Salaries Expense
64,900
Utilities Expense
Bad Debt Expense
Totals
$272,700
5-32 Financial Accounting, 5e
Exercise 5-21 (continued)
Requirement 3 (continued)
Accounts
Ending
Balance
Beginning balance in bold, entries during
January in blue, and adjusting entries in red.
Cash
78,400
=
23,900+35,100+70,000−31,400−5,500−13,700
Accounts Receivable
15,000
=
13,600+72,400−1,000−70,000
Interest Receivable
100
=
100
Notes Receivable
20,000
=
Land
77,000
=
Accounts Payable
=
7,200−5,500
Salaries Payable
33,500
=
33,500
Retained Earnings
32,400
=
Service Revenue
=
Interest Revenue
100
=
100
Supplies Expense
=
1,800
Salaries Expense
64,900
=
Bad Debt Expense
=
Chapter 5 – Receivables and Sales
Exercise 5-21 (continued)
Requirement 4
3D Family Fireworks
Income Statement
For the year ended January 31, 2021
Revenues:
Service revenue
$107,500
Interest revenue
100
Expenses:
Supplies expense
Salaries expense
Utilities expense
Bad debt expense
Net income
$ 26,100
Requirement 5
3D Family Fireworks
Balance Sheet
January 31, 2021
Assets
Liabilities
Cash
$ 78,400
Accounts payable
$ 1,700
Accounts receivable
$15,000
Salaries payable
33,500
Less: Allowance
(1,500)
13,500
Total current liabilities
35,200
Interest receivable
Supplies
Total current assets
Common stock
Notes receivable
Retained earnings
58,500
*
Land
Total assets
$189,700
$189,700
Exercise 5-21 (concluded)
Requirement 6
January 31, 2021
Debit
Credit
Service Revenue
107,500
Interest Revenue
100
107,600
64,900
13,700
Requirement 7
(a) The receivables turnover ratio is:
Receivables
Turnover
Ratio
=
Net credit sales
=
$72,400
=
5.1
Average accounts
receivable
($13,600 + $15,000) / 2
A ratio of 5.1 suggests that credit sales are about five times the average balance of
(b) The ratio at the end of January is:
Allowance for Uncollectible
Exercise 5-22 (LO 5-1, 5-2, 5-4, 5-5, 5-7)
Requirement 1
1.
Debit
Credit
Accounts Receivable
7,000
Service Revenue
7,000
(Provide services on account)
2.
Debit
Credit
Cash
4,900
Sales Discounts
Accounts Receivable
5,000
3.
Debit
Credit
Allowance for Uncollectible Accounts
Accounts Receivable
Requirement 2
(a) December 31
Debit
Credit
Bad Debt Expense
3,500
Allowance for Uncollectible Accounts
3,500
Interest Receivable
Interest Revenue
Exercise 5-22 (continued)
Requirement 3
Pop’s Fireworks
Adjusted Trial Balance
December 31, 2021
Accounts
Debit
Credit
Cash
$ 26,100
Accounts Receivable
42,000
Interest Receivable
Supplies
Notes Receivable
Land
85,000
Accounts Payable
Common Stock
Service Revenue
Sales Discounts
Interest Revenue
Utilities Expense
Bad Debt Expense
Chapter 5 – Receivables and Sales
Exercise 5-22 (continued)
Requirement 3 (continued)
Accounts
Ending
Balance
Given balance in bold, entries
during the year in blue, and
adjusting entries in red.
Cash
$26,100
=
21,200+4,900
Accounts Receivable
42,000
=
41,500+7,000−5,000−1,500
Allowance for Uncollectible Accounts
4,200
=
2,200−1,500+3,500
Interest Receivable
200
=
200
Supplies
=
Notes Receivable
=
Land
85,000
=
85,000
Accounts Payable
=
12,300
Common Stock
=
106,000
Retained Earnings
=
Service Revenue
131,800
=
124,800+7,000
Sales Discounts
=
Interest Revenue
=
200
Salaries Expense
70,900
=
70,900
Utilities Expense
=
24,200
Supplies Expense
=
15,700
Bad Debt Expense
=
5-38 Financial Accounting, 5e
Exercise 5-22 (continued)
Requirement 4
Pop’s Fireworks
Income Statement
For the year ended December 31, 2021
Revenues:
Service revenue
$131,800
Sales Discounts
(100)
Expenses:
Salaries Expense
Supplies Expense
Bad debt expense
Net income
Requirement 5
Pop’s Fireworks
Balance Sheet
December 31, 2021
Assets
Liabilities
Cash
$ 26,100
Accounts payable
$ 12,300
Accounts receivable
$42,000
Less: Allowance
(4,200)
37,800
Total current liabilities
12,300
Interest receivable
Supplies
Notes receivable
Retained earnings
*
Land
= $45,700
Chapter 5 – Receivables and Sales
Exercise 5-22 (concluded)
Requirement 6
January 31, 2021
Debit
Credit
Service Revenue
131,800
Interest Revenue
200
(Close revenue accounts)
Retained Earnings
(Close expense accounts)
Requirement 7
(a) Bad Debt Expense = $3,500
PROBLEMS: SET A
Problem 5-1A (LO 5-1)
Revenue recognized in 2021
Scenario 1:
$11,000
Scenario 2:
Scenario 3:
Scenario 4: