CHAPTER 8 Receivables
Prob. 8–2B
1.
Customer
Arcade Beauty
2. and 3.
Not
Past Over
Customer Balance Due 1–30 31–60 61–90 91–120 120
ABC Beauty 15,000 15,000
Angel Wigs 8,000 8,000
Zodiac Beauty 3,000 3,000
Subtotals 875,000 415,000 210,000 112,000 55,000 18,000 65,000
Arcade Beauty 10,000 10,000
Days Past Due
Due Date
Aug. 17, 2015
Number of Days Past Due
136 days (14 + 30 + 31 + 30 + 31)
December 31, 2015
Aging of Receivables Schedule
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CHAPTER 8 Receivables
Prob. 8–2B (Concluded)
4. Bad Debt Expense 115,860
5. On the balance sheet, assets would be overstated by $115,860 because the
allowance for doubtful accounts would be understated by $115,860. In addition,
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CHAPTER 8 Receivables
Prob. 8–3B
1.
Increase Balance of
Expense Expense (Decrease) Allowance
2. Yes. The actual write-offs of accounts originating in the first two years are
reasonably close to the expense that would have been charged to those years on
Bad Debt Expense
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CHAPTER 8 Receivables
Prob. 8–4B
1.
Note
2. 525
4. 200
6. Feb. 8 240
2. Oct. 10 Accounts Receivable 48,600
3. Dec. 31 Interest Receivable 452
Interest Revenue 452
4. Jan. 14 Cash 36,480
Notes Receivable 36,000
Interest Receivable 368
Interest Due at Maturity
(b)
($24,000 × 60 ÷ 360 × 6%)
($60,000 × 45 ÷ 360 × 7%)
($16,000 × 75 ÷ 360 × 6%)
Due Date
(a)
Apr. 23
Nov. 6
8-37
CHAPTER 8 Receivables
Prob. 8–5B
Mar. 8 Notes Receivable 33,000
Accounts Receivable 33,000
31 Notes Receivable 80,000
Accounts Receivable 80,000
May 7 Cash 33,275
June 11 Notes Receivable 36,000
Accounts Receivable 36,000
29 Cash 81,400
Notes Receivable 80,000
Interest Revenue 1,400
Dec. 2 Cash 49,440
Notes Receivable 48,000
Interest Revenue 1,440
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CHAPTER 8 Receivables
Prob. 8–6B
Jan. 21 Accounts Receivable—Black Tie Co. 28,000
Sales 28,000
15 Cost of Merchandise Sold 10,600
Merchandise Inventory 10,600
21 Notes Receivable 18,000
Cash 18,000
25 Cash 17,523
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CHAPTER 8 Receivables
Prob. 8–6B (Concluded)
Sept. 22 Cost of Merchandise Sold 12,000
Merchandise Inventory 12,000
Oct. 14 Notes Receivable 20,000
Accounts Receivable—Wycoff Co. 20,000
Nov. 13 Accounts Receivable—Wycoff Co. 20,100
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CHAPTER 8 Receivables
CP 8–1
By computing interest using a 365-day year for depository accounts (liabilities),
CP 8–2
1. a.
Addition to Allowance
2. a. The estimate of 1/2 of 1% of credit sales may be too large because the allowance
for doubtful accounts has steadily increased each year. The increasing balance
of the allowance for doubtful accounts may also be due to the failure to write
CASES & PROJECTS
Accounts Written
b.
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CHAPTER 8 Receivables
CP 8–2 (Concluded)
b. The balance of Allowance for Doubtful Accounts that should exist at
December 31, 2016, can only be determined after all attempts have been
made to collect the receivables on hand at December 31, 2016. However,
the account balances at December 31, 2016, could be analyzed, perhaps
CP 8–3
1. and 2.
Sales……………………………
3. The accounts receivable turnover indicates a decrease in the efficiency of
collecting accounts receivable by decreasing from 22.8 to 21.9, an unfavorable
Year 2 Year 1
$50,705 $49,747
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CHAPTER 8 Receivables
CP 8–3 (Concluded)
4. We assumed that the percentage of credit sales to total sales remains constant
from one period to the next and no major changes in operations occurred
CP 8–4
1. Year 2: 8.9 {$156,508 ÷ [($21,275 + $13,731) ÷ 2]}
3. The accounts receivable turnover indicates an increase in the efficiency of
collecting accounts receivable by increasing from 8.6 to 8.9, a favorable
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CHAPTER 8 Receivables
CP 8–5
1. and 2.
Sales…………………………………
3. The accounts receivable turnover indicates an increase in the efficiency of
collecting accounts receivable by increasing from 64.1 to 65.4, a favorable
4. Costco’s accounts receivable turnover would normally be higher than that of a
typical manufacturing company such as H.J. Heinz Company. This is because
Year 2 Year 1
$99,137 $88,915
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CHAPTER 8 Receivables
CP 8–6
1. Note to Instructors: The turnover ratios will vary over time. Recently, the
various turnover ratios (rounded to one decimal place) were as follows:
Alcoa Inc. ……………………………
…
12.9
AutoZone, Inc. ………………………
…
56.8
Barnes & Noble, Inc. ………………
…
45.9
Caterpillar ……………………………
…
3.3
Based on the above, the companies can be categorized as follows:
Alcoa Inc. AutoZone, Inc.
Caterpillar Barnes & Noble, Inc.
2. The companies with accounts receivable turnover ratios above 15 are all
companies selling primarily to individual consumers. In contrast, companies with
Below 15 Above 15
Accounts Receivable Turnover Ratio
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…
…