PROBLEM 8-2A (Continued)
(d)
$2,500,000 – $50,000
($563,000* + $763,000**) ÷2=$2,450,000
$663,000 =3.7 times
PROBLEM 8-3A
(a) Dec. 31 Bad Debt Expense ……………………………….. 34,400
Allowance for Doubtful Accounts
($42,400 – $8,000) ……………………….. 34,400
(a) & (b)
Bad Debt Expense Allowance for Doubtful Accounts
12/31 34,400 2013 12/31 Bal. 8,000
(b) 2014
(1) Mar. 1 Allowance for Doubtful Accounts ……. 600
Accounts Receivable ……………….. 600
(2) May 1 Accounts Receivable ………………………. 600
Allowance for Doubtful
PROBLEM 8-4A
(a) $37,000.
(b) $30,600 [($840,000 X 4%) – $3,000].
PROBLEM 8-5A
(a) Dec. 31 Bad Debt Expense ($10,200 – $1,500) …… 8,700
Allowance for Doubtful Accounts …… 8,700
(b) Dec. 31 Bad Debt Expense ($10,200 + $1,500) …… 11,700
Allowance for Doubtful Accounts …… 11,700
PROBLEM 8-6A
Jan. 5 Accounts Receivable—Ross Company ……… 4,000
Sales Revenue ……………………………………. 4,000
Feb. 2 Notes Receivable ……………………………………… 4,000
Accounts Receivable—Ross Company .. 4,000
Apr. 5 Notes Receivable. …………………………………….. 5,200
Accounts Receivable—Meachum Co …… 5,200
12 Cash ($12,000 + $200) ……………………………….. 12,200
Notes Receivable ……………………………….. 12,000
Interest Revenue
($12,000 X 10% X 2/12) ……………………… 200
June 2 Cash ($4,000 + $120) …………………………………. 4,120
PROBLEM 8-7A
Transaction
Current
Ratio
(2:1)
A
ccounts
Receivable
Turnover
(10X)
Average
Collection
Period
(36.5 days)
1. Recorded cash sale. I NE NE
2. Recorded bad debts
PROBLEM 8-8A
(a) July 5 Accounts Receivable ………………………….. 4,500
Sales Revenue ………………………………. 4,500
14 Cash ($600 – $18) ……………………………….. 582
Service Charge Expense ($600 X 3%) ….. 18
Sales Revenue ………………………………. 600
20 Cash …………………………………………………. 6,120
Notes Receivable …………………………… 6,000
31 Interest Receivable ……………………………. 50
Interest Revenue
($10,000 X 6% X 1/12) ………………….. 50
(b)
Notes Receivable Interest Receivable
Accounts Receivable
PROBLEM 8-8A (Continued)
KOLTON COMPANY
Balance Sheet (Partial)
July 31, 201X
(c) Current assets
Notes receivable ………………………………………… $10,000
PROBLEM 8-9A
Nike Adidas
Accounts receivable
a2,873.7 – 78.4
Average collection period 365
SOLUTIONS TO PROBLEMS—SET B
PROBLEM 8-1B
(a) Total estimated bad debts
Number of Days Outstanding
Total 0–30 31–60 61–90 91–120 Over 120
Accounts
(b) Bad Debt Expense ………………………………………… 18,190
Allowance for Doubtful Accounts
[$25,190 – $7,000] ………………………………… 18,190
(c) Allowance for Doubtful Accounts ………………….. 2,600
Accounts Receivable ……………………………… 2,600
(e) When an allowance account is used, an adjusting journal entry is made
at the end of each accounting period. This entry satisfies the expense
PROBLEM 8-2B
(a) 1. Accounts Receivable ……………………………. 3,600,000
Sales Revenue ……………………………….. 3,600,000
2. Sales Returns and Allowances ………………. 150,000
Accounts Receivable ……………………… 150,000
3. Cash …………………………………………………….. 3,100,000
Cash …………………………………………………….. 28,000
Accounts Receivable ……………………… 28,000
(b) Accounts Receivable Allowance for Doubtful Accounts
Bal. 960,000 (2) 150,000 (4) 92,000 Bal. 78,000
(c) Balance needed …………………………………………….. $140,000
Balance before adjustment [see (b)] ………………. (14,000)
Adjustment required ……………………………………… $126,000
PROBLEM 8-2B (Continued)
(d)
$3,600,000 – $150,000
($882,000* + $1,078,000**) ÷2=$3,450, 000
$980,000 =3.5 times
*$960,000 – $78,000
PROBLEM 8-3B
(a) Dec. 31 Bad Debt Expense …………………………….. 24,480
Allowance for Doubtful Accounts
(a) & (b)
Bad Debt Expense Allowance for Doubtful Accounts
12/31 24,480 2013 12/31 Bal. 9,000
(b) 2014
(1) Feb. 1 Allowance for Doubtful Accounts …… 900
Accounts Receivable ……………… 900
(2) July 1 Accounts Receivable …………………….. 900
Allowance for Doubtful
PROBLEM 8-4B
(a) $15,000.
(b) $16,300 [($500,000 X 4%) – $3,700].
PROBLEM 8-5B
(a) Dec. 31 Bad Debt Expense ($7,600 – $2,800) ……. 4,800
(b) Dec. 31 Bad Debt Expense ($7,600 + $2,500) ……. 10,100
Allowance for Doubtful
Accounts ……………………………….. 10,100
(c) Allowance for Doubtful Accounts ………………………. 750
(e) The advantages of the allowance method over the direct write-off
method are:
(1) It attempts to match bad debt expense related to uncollectible
PROBLEM 8-6B
Jan. 5 Accounts Receivable—Flynn Company ……… 10,000
Sales Revenue ……………………………………. 10,000
20 Notes Receivable ………………………………………. 10,000
Accounts Receivable—
30 Cash ($12,000 + $360) ……………………………….. 12,360
Notes Receivable ………………………………… 12,000
Interest Revenue
($12,000 X 9% X 4/12) ……………………….. 360
PROBLEM 8-7B
Transaction
Current
Ratio
(2:1)
Accounts
Receivable
Turnover
(10X)
Average Col-
lection Period
(36.5 days)
1. Recorded sales on account. I D I
PROBLEM 8-8B
(a) Oct. 7 Accounts Receivable ……………………… 4,600
Sales Revenue ………………………….. 4,600
12 Cash ($600 – $18) …………………………… 582
Service Charge Expense
($600 X 3%) ………………………………….. 18
Sales Revenue ………………………….. 600
(b)
Notes Receivable Interest Receivable
10/1 Bal. 22,800 10/15 10,000 10/31 49
PROBLEM 8-8B (Continued)
DURHAN COMPANY
Balance Sheet (Partial)
October 31, 2014
(c) Current assets
Notes receivable ……………………………………………… $ 9,800
PROBLEM 8-9B
Redbird Sportswear Carwright Company
Accounts receivable turnover ab
$1, 200
($286.6 + $299.8 )/2 $1, 350
($204.0c+ $188.1d)/2
b
$307.2 – $ 7.4
c $216.5 – $12.5
d $202.9 – $14.8