Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Chapter 7
Accounting for Receivables
QUICK STUDIES
Quick Study 7-1 (15 minutes)
1.
Cash …………………………………………………………………….
19,000
Credit Card Expense* ……………………………………………
1,000
Cost of Goods Sold ………………………………………………
15,000
2.
Cash …………………………………………………………………….
4,800
Credit Card Expense* ……………………………………………
200
Cost of Goods Sold ………………………………………………
3,000
Quick Study 7-2 (10 minutes)
Oct. 1
Bad Debts Expense …………………………………………..
50,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Quick Study 7-3 (10 minutes)
Oct. 30
Accounts Receivable—P.Moore …………………………..
50,000
Oct. 30
50,000
Quick Study 7-4 (15 minutes)
1. Direct write-off method
Quick Study 7-5 (10 minutes)
a.
Bad Debts Expense ……………………………………………..
7,000
Allowance for Doubtful Accounts …………………………
7,000
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Quick Study 7-6 (15 minutes)
1.
Allowance for Doubtful Accounts ………………………
800
Accounts Receivable—C. Green …………………..
800
2.
Mar. 9
Accounts Receivable—C. Green* ……………………….
300
Allowance for Doubtful Accounts …………………
300
300
Accounts Receivable—C. Green …………………..
300
Quick Study 7-7 (10 minutes)
1.
Before Write-Off
2.
After Write-Off
Accounts receivable …………………………………..
$50,000
$49,700
Realizable value of accounts receivable ……..
$48,000
Quick Study 7-8 (15 minutes)
1.
Dec. 31
Bad Debts Expense …………………………………………
Allowance for Doubtful Accounts……………….
Adjustment required = $1,485 cr. + $300 dr. = $1,785
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Quick Study 7-9 (10 minutes)
Dec. 31
Bad Debts Expense ………………………………………..
Quick Study 7-10 (20 minutes)
1. Estimated balance of allowance for doubtful accounts:
Not due:
$80,000 x 0.01 =
$ 800
2.
Dec. 31
Bad Debts Expense ……………………………………….
1,680
1,680
Quick Study 7-11 (10 minutes)
Principal of Note
Annual Interest Rate
Time Period
Interest
$10,000
8%
90 days
$ 200*
$40,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Quick Study 7-12 (20 minutes)
1. Maturity date is April 30, which is computed as follows:
Days in March ………………………………………………………… 31
Minus the date of the note ………………………………………. 1
2. Maturity date is August 13, which is computed as follows:
Days in May ……………………………………………………………. 31
Minus the date of the note ………………………………………. 15
3. Maturity date is December 4, which is computed as follows:
Days in October ……………………………………………………… 31
Minus the date of the note ………………………………………. 20
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Quick Study 7-13 (15 minutes)
1. Maturity date is October 31, which is computed as follows:
Days in August ………………………………………………………. 31
2.
Quick Study 7-14 (10 minutes)
Oct. 31 Cash ………………………………………………………….. 6,180
Quick Study 7-15 (15 minutes)
1.
Dec. 31 Interest Receivable …………………………………….. 50
2. Maturity date
Jan. 15 Cash ………………………………………………………….. 10,075
Interest Receivable ………………………………. 50
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Quick Study 7-16 (10 minutes)
Quick Study 7-17 (10 minutes)
April 1
Notes Receivable—Travis ………………………………
5,000
Accounts Receivable—Travis …………………..
5,000
Accounts Receivable—Travis ………………………..
Notes Receivable—Travis …………………………
5,000
Quick Study 7-18 (10 minutes)
May 1
Cash ………………………………………………………………
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
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Quick Study 7-19 (15 minutes)
FAIR TRADER CO.
Income Statement
For Year Ended December 31
Revenues
Sales …………………………………………………… $50,000
Interest revenue …………………………………… 3,000
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Quick Study 7-20 (15 minutes)
BENNETT CO.
Balance Sheet
December 31
Assets
Current assets
Cash ……………………………………………………………… $12,000
Accounts receivable (net of $500 allowance) …….. 9,500
Liabilities
Current liabilities
Accounts payable ………………………………………….. $ 2,500
Long-term liabilities
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Quick Study 7-21 (10 minutes)
b. Dixon
Interpretation: Dixon has an accounts receivable turnover that is
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
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EXERCISES
Exercise 7-1 (25 minutes)
Part 1
GENERAL LEDGER
Accounts Receivable
Sales
Sales Returns and
Allowances
Nov. 5
4,615
Nov. 21
209
Nov. 5
4,615
Nov. 21
209
1,350
1,350
2,713
2,713
9,301
ACCOUNTS RECEIVABLE LEDGER
Ski Shop
Welcome Inc.
Zia Co.
Nov. 5
4,615
Nov. 10
1,350
Nov. 13
832
Nov. 21
209
2,713
7,328
623
Part 2
Vail Company
Schedule of Accounts Receivable
November 30
Ski Shop ………………………………………………………………………
$7,328
Welcome Inc. ……………………………………………………………….
Comparison: The total of the Schedule of Accounts Receivable ($9,301) is
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
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Exercise 7-2 (20 minutes)
Apr. 8
Cash ……………………………………………………………….
8,064
Credit Card Expense* …………………………..………….
336
Sales …………………………………………………………
8,400
Record credit card sales less 4% fee. *($8,400 x 0.04)
Cost of Goods Sold …………………………………………
6,000
Merchandise Inventory ………………………………
6,000
Record cost of sales.
Cash ……………………………………………………………….
5,460
Credit Card Expense* …………………………..………….
140
Record credit card sales less 2.5% fee. *($5,600 x .025)
Cost of Goods Sold …………………………………………
3,500
Merchandise Inventory ………………………………
3,500
Record cost of sales.
Exercise 7-3 (10 minutes)
Accounts Receivable
Beginning balance
4,000
Credit sales
20,000
Exercise 7-4 (15 minutes)
March 11
Bad Debts Expense …………………………………………….
45,000
Accounts Receivable—Leer Co. ……………………..
45,000
Write off an account.
Accounts Receivable—Leer Co. …………………………..
45,000
Bad Debts Expense ……………………………………….
45,000
Reinstate an account previously written off.
Cash …………………………………………………………………..
45,000
Accounts Receivable—Leer Co. ……………………..
45,000
Record cash received on account.
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Exercise 7-5 (20 minutes)
a.
Feb. 1
Allowance for Doubtful Accounts …………………………
6,800
Accounts Receivable—Oakley Co …………………..
900
Accounts Receivable—Brookes Co ………………..
5,900
Write off specific accounts.
Accounts Receivable—Oakley …………………………..
900
Reinstate an account.
Accounts Receivable—Oakley ………………………..
900
Record cash received on account.
Exercise 7-6 (15 minutes)
a.
Dec. 31
Bad Debts Expense ………………………………………..
1,500
Allowance for Doubtful Accounts ……………..
1,500
Record estimated bad debts.
b.
CLOUDBOX
Balance Sheet
December 31
Assets
Current assets
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Exercise 7-7 (15 minutes)
We can use the following T-account to determine Bad Debts Expense.
Allowance for Doubtful Accounts
Beginning Balance
$350
Write–Offs
$200
Exercise 7-8 (20 minutes)
Assets
=
Liabilities
+
Equity
a.
Accounts
Receivable
+20,000
Revenue
+20,000
Assets
=
Liabilities
+
Equity
+
Accounts
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
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Exercise 7-9 (20 minutes)
a.
May 3
Bad Debts Expense …………………………………………….
2,000
Accounts Receivable—Joey Co. …………………….
2,000
Write off an account.
May 21
Accounts Receivable—Joey Co. ………………………….
2,000
Bad Debts Expense ……………………………………….
2,000
May 21
2,000
Accounts Receivable—Joey Co. …………………….
2,000
b.
May 3
Allowance for Doubtful Accounts ………………………..
2,000
Accounts Receivable—Joey Co. …………………….
2,000
Write off an account.
May 21
Accounts Receivable—Joey Co. ………………………….
2,000
Allowance for Doubtful Accounts …………………..
2,000
May 21
2,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Exercise 7-10 (20 minutes)
Dec. 31
Bad Debts Expense ……………………………………………..
4,875
Allowance for Doubtful Accounts……………………
4,875
Record estimated bad debts expense
(0.01 x $487,500).
Allowance for Doubtful Accounts …………………………
Write off an account.
Accounts Receivable—P. Park …………………………..
Reinstate an account.
Record cash received on account.
Exercise 7-11 (15 minutes)
Assets
Liabilities
Equity
December 31 …………………………..
Decrease
No effect
Decrease
No effect
Exercise 7-12 (15 minutes)
Dec. 31
Bad Debts Expense …………………………………………
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Exercise 7-13 (15 minutes)
a.
Dec. 31
Bad Debts Expense ………………………………………………
685
Allowance for Doubtful Accounts* …………………..
685
Record estimated bad debts expense.
Dec. 31
Allowance for Doubtful Accounts** ………………….
Record estimated bad debts expense.
Exercise 7-14 (30 minutes)
a. Computation of the estimated balance of the allowance for uncollectibles:
Not due:
$396,000 x 0.01 =
$ 3,960
b.
Dec. 31
Bad Debts Expense ……………………………………….
8,220
Allowance for Doubtful Accounts …………….
8,220
Record estimated bad debts.*
Dec. 31
Bad Debts Expense ……………………………………….
Allowance for Doubtful Accounts …………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Exercise 7-15 (25 minutes)
a. Computation of the estimated balance of the allowance for uncollectibles:
$570,000 x 0.045 =
$25,650
credit
b.
Dec. 31
Bad Debts Expense ……………………………………….
Allowance for Doubtful Accounts …………….
Dec. 31
Bad Debts Expense ……………………………………….
Allowance for Doubtful Accounts …………….
Exercise 7-16 (30 minutes)
1.
Customer
Not Yet
Due
1 to 30
Days Past
Due
31 to 60
Days Past
Due
61 to 90
Days Past
Due
Over 90
Days Past
Due
BCC Company …………………………..
$4,000
Lannister Co. …………………………..
$1,000
Mike Properties …………………………..
Ted Reeves …………………………..
Jen Steffens …………………………..
2.
Dec. 31
Bad Debts Expense ……………………………………….
770
Allowance for Doubtful Accounts …………….
770
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 7
Exercise 7-17 (25 minutes)
1. Expense is 3.0% of credit sales
Dec. 31
Bad Debts Expense ………………………………………..
9,000
Allowance for Doubtful Accounts ……………..
2. Expense is 1.0% of total sales
Dec. 31
Bad Debts Expense ………………………………………..
12,000
Allowance for Doubtful Accounts ……………..
12,000
3. Allowance is 6% of accounts receivable
Dec. 31
Bad Debts Expense ………………………………………..
12,500
Allowance for Doubtful Accounts ……………..
12,500
Exercise 7-18 (10 minutes)
Dec. 13
Notes Receivable—M. Lee……………………………..
Accounts Receivable—M. Lee ………………….
9,500
Dec. 31
Interest Receivable ……………………………………….
Interest Revenue ……………………………………..
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Exercise 7-19 (15 minutes)
Jan. 27
Cash ……………………………………………………………..
Interest Revenue* …………………………..…………
57
Interest Receivable …………………………………..
38
Notes Receivable—M. Lee ………………………..
9,500
Record cash received on note plus interest.
* $9,500 x 0.08 x (45–18)/360 = $57
Notes Receivable—Tomas Co. ……………………….
Accounts Receivable-Tomas Co ……………….
5,000
17
Notes Receivable—H. Cheng ………………………….
Accounts Receivable—H. Cheng ………………
2,000
Apr. 16
Accounts Receivable—H. Cheng ……………………
Interest Revenue ………………………………………
15
Notes Receivable—H. Cheng …………………….
2,000
Record receivable for dishonored
note plus interest [$2,000 x 0.09 x 30/360].
Allowance for Doubtful Accounts …………………..
Accounts Receivable—H. Cheng ………………
2,015
Cash ……………………………………………………………..
Interest Revenue ………………………………………
Notes Receivable—Tomas Co …………………..
5,000
Record cash received on note with