CHAPTER 9
Accounting for Receivables
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
A
Problems
1. Explain how companies
recognize accounts
receivable.
1, 2, 3
1, 2
1
1A, 6A, 7A
3. Explain how companies
recognize notes
receivable.
12, 13, 14,
9, 10, 11
3
6A, 7A
4. Describe how companies
value notes receivable,
record their disposition,
and present and analyze
receivables.
17, 18, 19, 20
3, 12
4
1A, 6A, 7A
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Prepare journal entries related to bad debt expense.
Simple
15–20
2A
Compute bad debt amounts.
Moderate
20–25
Journalize transactions related to bad debts.
5A
Journalize entries to record transactions related to bad debts.
Moderate
20–30
6A
Prepare entries for various notes receivable transactions.
Moderate
40–50
Prepare entries for various receivable transactions.
WEYGANDT ACCOUNTING PRINCIPLES 12E
CHAPTER 9
ACCOUNTING FOR RECEIVABLES
Number
LO
BT
Difficulty
Time (min.)
BE1
1
C
Simple
1–2
BE2
1
AP
Simple
5–7
BE3
2, 4
AN
Simple
4–6
BE4
2
AP
Simple
4–6
BE5
2
AP
Simple
4–6
BE6
2
AP
Simple
2–4
BE7
2
AN
Simple
4–6
BE8
2
AP
Simple
6–8
BE9
3
AP
Simple
8–10
BE10
3
AP
Moderate
8–10
BE11
3
AP
Simple
2–4
BE12
4
AP
Simple
4–6
DI1
1
AP
Simple
2–4
DI2
2
AP
Simple
4–6
DI3
3
AP
Simple
6–8
DI4
4
AN
Simple
4–6
EX1
1
AP
Simple
8–10
EX2
1
AP
Simple
8–10
EX3
2
AN
Simple
8–10
EX4
2
AN
Simple
6–8
EX5
2
AP
Simple
6–8
EX6
2
AP
Simple
6–8
EX7
2
AP
Simple
4–6
EX8
2
AP
Simple
6–8
EX9
2
AP
Simple
6–8
EX10
3
AN
Simple
8–10
EX11
3
AN
Simple
6–8
EX12
AP
Moderate
EX13
AP
Simple
8–10
ACCOUNTING FOR RECEIVABLES (Continued)
Number
LO
BT
Difficulty
Time (min.)
P1A
1, 2, 4
AN
Simple
15–20
P2A
2
AN
Moderate
20–25
P3A
2
AN
Moderate
20–30
P4A
2
AN
Moderate
20–30
P5A
2
AN
Moderate
20–30
P6A
AN
Moderate
40–50
P7A
AP
50–60
2
Moderate
20–25
4
10–15
4
Simple
10–15
2
AP
10–15
2
AN
Moderate
20–30
2
Simple
10–15
2
10–15
AP
Moderate
10–15
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Explain how companies recognize
accounts receivable.
Q9-2
Q9-1 BE9-1
Q9-3
BE9-2
DI9-1
E9-1
E9-2
P9–7A
P9–7B
P9–1A
P9–6A
2. Describe how companies value
accounts receivable and record their
disposition.
Q9-8
Q9-9
Q9-4
Q9-5
Q9-6
Q9–10
Q9–11
BE9-4
BE9-5
BE9-6
BE9-8
DI9-2
E9-5
E9-7
E9-6
E9-8
E9-9
P9–7A
Q9-7
BE9-3
BE9-7
E9-3
E9-4
P9–1A
P9–2A
P9–3A
P9–4A
P9–5A
P9–6A
ANSWERS TO QUESTIONS
1. Accounts receivable are amounts owed by customers on account. They result from the sale of goods
and services. Notes receivable represent claims that are evidenced by formal instruments of credit.
2. Other receivables include nontrade receivables such as interest receivable, loans to company officers,
advances to employees, and income taxes refundable.
3. Accounts Receivable ………………………………………………………………………………… 40
Interest Revenue ……………………………………………………………………………….. 40
4. The essential features of the allowance method of accounting for bad debts are:
(1) Uncollectible accounts receivable are estimated and matched against revenue in the same
accounting period in which the revenue occurred.
5. Roger Holloway should realize that the decrease in cash realizable value occurs when estimated
uncollectibles are recognized in an adjusting entry. The write-off of an uncollectible account reduces
both accounts receivable and the allowance for doubtful accounts by the same amount. Thus, cash
realizable value does not change.
6. The two bases of estimating uncollectibles are: (1) percentage-of-sales and (2) percentage-of–
receivables. The percentage–of–sales basis establishes a percentage relationship between the amount
of credit sales and expected losses from uncollectible accounts. This method emphasizes the matching
of expenses with revenues. Under the percentage-of-receivables basis, the balance in the allowance
for doubtful accounts is derived from an analysis of individual customer accounts. This method
emphasizes cash realizable value.
8. Under the direct write-off method, bad debt losses are not estimated and no allowance account is used.
When an account is determined to be uncollectible, the loss is debited to Bad Debt Expense. The
direct write-off method makes no attempt to match bad debt expense to sales revenues or to show the
cash realizable value of the receivables in the balance sheet.
Questions Chapter 9 (Continued)
(3) The issuer undertakes the collection process and absorbs any losses from uncollectible accounts.
(4) The retailer receives cash more quickly from the credit card issuer than it would from individual
customers.
11. Cash …………………………………………………………………………………………. 776,000
Service Charge Expense (3% X $800,000) ……………………………………… 24,000
Accounts Receivable ……………………………………………………………. 800,000
12. A promissory note gives the holder a stronger legal claim than one on an accounts receivable. As a
result, it is easier to sell to another party. Promissory notes are negotiable instruments, which
means they can be transferred to another party by endorsement. The holder of a promissory note also
can earn interest.
13. The maturity date of a promissory note may be stated in one of three ways: (1) on demand, (2) on
a stated date, and (3) at the end of a stated period of time.
18. Each of the major types of receivables should be identified in the balance sheet or in the notes to the
financial statements. Both the gross amount of receivables and the allowance for doubtful accounts
should be reported. If collectible within a year or the operating cycle, whichever is longer, these
receivables are reported as current assets immediately below short-term investments.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 9-1
(a) Accounts receivable.
BRIEF EXERCISE 9-2
(a) Accounts Receivable …………………………..……….. 17,200
Sales Revenue ………………………………………. 17,200
(b) Sales Returns and Allowances ……………………… 3,800
Accounts Receivable …………………………….. 3,800
BRIEF EXERCISE 9-3
(a) Bad Debt Expense ……………………………………….. 31,000
Allowance for Doubtful Accounts …………… 31,000
BRIEF EXERCISE 9-4
(a) Allowance for Doubtful Accounts ………………………. 6,200
Accounts Receivable—Gray ……………………….. 6,200
(b)
(1)
Before Write-Off
(2)
After Write-Off
Accounts receivable
$700,000
$693,800
BRIEF EXERCISE 9-5
Accounts Receivable—Gray ……………………………………… 6,200
Allowance for Doubtful Accounts ………………………. 6,200
BRIEF EXERCISE 9-6
Bad Debt Expense [($800,000 – $40,000) X 2%] ………….. 15,200
Allowance for Doubtful Accounts ………………………. 15,200
BRIEF EXERCISE 9-7
BRIEF EXERCISE 9-8
(a) Cash ($175 – $7)………………………………………………… 168
Service Charge Expense ($175 X 4%) …………………. 7
BRIEF EXERCISE 9-9
Interest
Maturity Date
(a)
$800
August 9
BRIEF EXERCISE 9-10
Maturity Date
Annual Interest Rate
Total Interest
(c)
September 7
(a)
May 31
6%
$6,000
BRIEF EXERCISE 9-11
Jan. 10 Accounts Receivable …………………………..…… 15,600
Sales Revenue ………………………………….. 15,600
BRIEF EXERCISE 9-12
Accounts Receivable Turnover Ratio:
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 9-1
March 1
Accounts Receivable—Amelia ………………….
28,000
Sales Revenue …………………………………
(To record sales on account.)
28,000
Sales Discounts ($27,000 .01) ………………..
DO IT! 9-2
The following entry should be prepared to increase the balance in the
Allowance for Doubtful Accounts from $6,100 credit to $15,500 credit (5% X
$310,000):
DO IT! 9-3
(a) The maturity date is September 30. When the life of a note is expressed
in terms of months, you find the date it matures by counting the months
from the date of issue. When a note is drawn on the last day of a month,
it matures on the last day of a subsequent month.
(b) The interest to be received at maturity is $186:
Face X Rate X Time = Interest
$6,200 X 9% X 4/12 = $186
DO IT! 9-4
(a)
Net credit sales
÷
Average net
accounts receivable
=
Accounts receivable
turnover
$1,300,000
÷
$101,000 + $107,000
=
12.5 times
2
(b)
Days in year
÷
Accounts receivable
turnover
=
Average collection
period in days
÷
SOLUTIONS TO EXERCISES
EXERCISE 9-1
March 1 Accounts Receivable—Dodson Company .. 5,000
Sales Revenue ……………………………….. 5,000
3 Sales Returns and Allowances ……………….. 500
Accounts Receivable—Dodson
Company ……………………………………… 500
EXERCISE 9-2
(a) Jan. 6 Accounts Receivable—Pryor ………………….. 7,000
Sales Revenue …………………………..…… 7,000
16 Cash ($7,000 – $140) ……………………………… 6,860
Sales Discounts (2% X $7,000) ……………….. 140
Accounts Receivable—Pryor …………… 7,000
EXERCISE 9-3
(a) Dec. 31 Bad Debt Expense ………………………… 1,400
Accounts Receivable—L. Dole ……. 1,400
(b) (1) Dec. 31 Bad Debt Expense
[($840,000 – $20,000) X 1%] ………… 8,200
Allowance for Doubtful
Accounts ……………………………. 8,200
EXERCISE 9-4
(a)
Accounts Receivable
Amount
%
Estimated Uncollectible
1–30 days
31–60 days
$60,000
17,600
2.0
5.0
$1,200
880
EXERCISE 9-5
Allowance for Doubtful Accounts …………………………….. 11,000
Accounts Receivable …………………………..……………. 11,000
EXERCISE 9-6
December 31, 2017
Bad Debt Expense (2% X $450,000) ………………………….. 9,000
Allowance for Doubtful Accounts ……………………… 9,000
May 11, 2018
EXERCISE 9-7
(a) Mar. 3 Cash ($650,000 – $19,500) ………………….. 630,500
Service Charge Expense
(3% X $650,000) ……………………………… 19,500
Accounts Receivable ………………….. 650,000
EXERCISE 9-8
(a) Apr. 2 Accounts Receivable—J. Elston ………… 1,500
Sales Revenue ……………………………. 1,500
May 3 Cash …………………………………………………. 500
Accounts Receivable—
J. Elston …………………………………. 500
EXERCISE 9-9
Jan. 15 Accounts Receivable …………………………. 18,000
Sales Revenue ……………………………. 18,000
20 Cash ($4,500 – $90) ……………………………. 4,410
Service Charge Expense
EXERCISE 9-10
(a) 2017
Nov. 1 Notes Receivable …………………………………….. 30,000
Cash ………………………………………………… 30,000
Dec. 11 Notes Receivable …………………………………….. 6,750
Sales Revenue ………………………………….. 6,750
(b) 2018
Nov. 1 Cash ……………………………………………………….. 33,000
Interest Receivable ……………………………. 500
EXERCISE 9-11
2017
May 1 Notes Receivable ……………………………………… 9,000
Accounts Receivable—
Chamber………………………………………… 9,000
EXERCISE 9-11 (Continued)
2018
May 1 Cash ……………………………………………………….. 9,900
Notes Receivable ………………………………. 9,000
EXERCISE 9-12
4/1/17 Notes Receivable …………………………………….. 30,000
Accounts Receivable—Goodwin ………… 30,000
7/1/17 Notes Receivable …………………………………….. 25,000
Cash ………………………………………………… 25,000
12/31/17 Interest Receivable ………………………………….. 2,700
Interest Revenue
($30,000 X 12% X 9/12) …………………… 2,700
EXERCISE 9-13
(a) May 2 Notes Receivable ………………………………… 9,000
Cash ……………………………………………. 9,000
(b) Nov. 2 Accounts Receivable—Chang
Inc.………………………………………………….. 9,405
Notes Receivable ………………………….. 9,000
Interest Revenue
EXERCISE 9-14
(a) Beginning accounts receivable …………………………..……. $ 100,000
Net credit sales ……………………………………………………….. 1,000,000
SOLUTIONS TO PROBLEMS
PROBLEM 9-1A
(a) 1. Accounts Receivable ………………………….. 3,700,000
Sales Revenue …………………………….. 3,700,000
2. Sales Returns and Allowances ……………. 50,000
Accounts Receivable …………………… 50,000
(b)
Accounts Receivable
Allowance for Doubtful Accounts
Bal. 960,000
(1) 3,700,000
(2) 50,000
(3) 2,810,000
(4) 90,000
Bal. 80,000
(5) 29,000