CHAPTER 9 Receivables
Ex. 9-27 (Concluded)
c. The accounts receivable turnover indicates a decrease in the efficiency of collecting
accounts receivable by decreasing from 12.58 to 12.22, an unfavorable change. The
Ex. 9-28
a. and b.
Sales………………………………
Accounts receivable……………
…
Average accts. receivable……
…
Accts. receivable turnover……
…
The days’ sales in receivables could also be computed by dividing 365 days by the
accounts receivable turnover as follows:
Year 2: 7.7 (365 days ÷ 47.20)
Year 1: 7.9 (365 days ÷ 46.01)
c. The accounts receivable turnover indicates an increase in the efficiency of collecting
accounts receivable by increasing from 46.01 to 47.20, a favorable change. The
[($78 + $87) ÷ 2]
46.01
$4,036 $3,796
Year 2 Year 1
$93 $78
($4,036 ÷ $85.5) ($3,796 ÷ $82.5)
47.20
$ 82.5$ 85.5
[($93 + $78) ÷ 2]
CHAPTER 9 Receivables
Ex. 9-29
a. The average accounts receivable turnover ratios are as follows:
b. American Eagle Outfitters has the higher average accounts receivable turnover
ratio.
c. American Eagle Outfitters operates a specialty retail chain of stores that sells
directly to individual consumers. Many of these consumers (retail customers) pay
using MasterCard or VISA, which is recorded as cash sales. In contrast, Campbell
Soup manufactures foods that are sold to food wholesalers, grocery store chains,
CHAPTER 9 Receivables
Prob. 9-1A
1. and 2.
Jan. 29 10,200 Jan. 1 Balance 102,380
Aug. 9 22,380 Apr. 18 7,560
Dec. 31 Adjusting Entry 121,280
3. $2,626,670 ($2,740,000 – $113,330)
4. a. $124,500 ($24,900,000 × 0.005)
Allowance for Doubtful Accounts
Bad Debt Expense
PROBLEMS
CHAPTER 9 Receivables
Prob. 9-1A (Concluded)
2. Jan. 29 Cash 6,800
Allowance for Doubtful Accounts 10,200
Accounts Receivable—Jankovich Co. 17,000
18 Cash 7,560
Accounts Receivable—Vince Karm 7,560
Aug. 9 Allowance for Doubtful Accounts 22,380
Accounts Receivable—Golden Stallion Co. 22,380
7 Cash 13,220
Accounts Receivable—Wiley Co. 13,220
Dec. 31 Allowance for Doubtful Accounts 98,530
Accounts Receivable—Claire Moon Inc. 22,860
Accounts Receivable—Jet Set Co. 15,320
Accounts Receivable—Randall Distributors 41,460
Accounts Receivable—Harmonic Audio 18,890
Prob. 9-2A
1.
Due Date
Adams Sports & Flies May 22, 20Y6 223 days (9 + 30 + 31 + 31 + 30 + 31 + 30 + 31)
Blue Dun Flies Oct. 10, 20Y6 82 days (21 + 30 + 31)
Cicada Fish Co. Sept. 29, 20Y6 93 days (1 + 31 + 30 + 31)
Deschutes Sports Oct. 20, 20Y6 72 days (11 + 30 + 31)
Green River Sports Nov. 7, 20Y6 54 days (23 + 31)
Number of Days Past DueCustomer
CHAPTER 9 Receivables
Prob. 9-2A (Concluded)
2. and 3.
Not
Past Over
Customer Balance Due 1–30 31–60 120
AAA Outfitters 20,000 20,000
Brown Trout Fly Shop 7,500 7,500
Blue Dun Flies 4,900
Cicada Fish Co. 8,400
Deschutes Sports 7,000
Green River Sports 3,500 3,500
Smith River Co. 2,400 2,400
Western Trout Company 6,800 6,800
4. Bad Debt Expense
Allowance for Doubtful Accounts
Uncollectible accounts estimate
($121,000 + $3,600).
5. On the balance sheet, assets would be overstated by $124,600 because the
allowance for doubtful accounts would be understated by $124,600. In addition,
124,600
8,400
124,600
7,000
4,900
December 31, 20Y6
Aging of Receivables Schedule
61–90
Days Past Due
91–120
CHAPTER 9 Receivables
Prob. 9-3A
1.
Increase Balance of
Expense Expense (Decrease) Allowance
Actually Based on in Amount Account,
Reported Estimate of Expense End of Year
$ 4,500 $ 9,000 $4,500 $ 4,500
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 the basis of 1% of sales. The total write-off of receivables originating in
the first year amounted to $8,500 ($4,500 + $3,000 + $1,000), as compared to bad
Bad Debt Expense
Year
1st
CHAPTER 9 Receivables
Prob. 9-4A
1.
Note
1. $500
2. 360
3. 840
2. Nov. 17 Accounts Receivable 42,840
Notes Receivable 42,000
Interest Revenue 840
3. Dec. 31 Interest Receivable 154
Interest Revenue 154
4. Jan. 28 Cash 27,270
Notes Receivable 27,000
Interest Receivable 144
Interest Revenue 126
($27,000 × 6% × 28 ÷ 360).
29 Cash 72,300
Notes Receivable 72,000
Apr. 20
Due Date
(a)
June 22
Nov. 17
Interest Due at Maturity
(b)
($80,000 × 5% × 45 ÷ 360)
($24,000 × 9% × 60 ÷ 360)
($42,000 × 6% × 120 ÷ 360)
CHAPTER 9 Receivables
Prob. 9-5A
Apr. 10 Notes Receivable 144,000
Accounts Receivable 144,000
Aug. 22 Notes Receivable 150,000
Accounts Receivable 150,000
Sept. 12 Cash 276,300
Notes Receivable 270,000
Interest Revenue 6,300
Oct. 6 Cash 150,750
Notes Receivable 150,000
Interest Revenue 750
18 Notes Receivable 120,000
Accounts Receivable 120,000
CHAPTER 9 Receivables
Prob. 9-6A
Jan. 3 Notes Receivable 18,000
Cash 18,000
Feb. 10 Accounts Receivable—Bradford & Co. 24,000
Sales 24,000
13 Cost of Merchandise Sold 54,000
Merchandise Inventory 54,000
Mar. 12 Notes Receivable 24,000
Accounts Receivable—Bradford & Co. 24,000
May 11 Cash 24,280
Notes Receivable 24,000
Interest Revenue 280
($24,000 × 7% × 60 ÷ 360).
13 Accounts Receivable—Dry Creek Co. 60,900
Notes Receivable 60,000
Interest Revenue 900
($60,000 × 9% × 60 ÷ 360).
CHAPTER 9 Receivables
Prob. 9-6A (Concluded)
Aug. 1 Cash 18,540
Notes Receivable 18,000
Interest Revenue 540
($18,000 × 9% × 120 ÷ 360).
15 Cash 13,500
Accounts Receivable—Halloran Co. 13,500
Prob. 9-1B
1. and 2.
Apr. 3 12,750 Jan. 1 Balance 50,000
July 16 16,500 19 2,660
Dec. 31 Adjusting Entry 56,590
3. $2,290,000 ($2,350,000 – $60,000)
4. a. $79,000 ($15,800,000 × 0.005)
Allowance for Doubtful Accounts
Bad Debt Expense
CHAPTER 9 Receivables
Prob. 9-1B (Concluded)
2. Jan. 19 Accounts Receivable—Arlene Gurley 2,660
Allowance for Doubtful Accounts 2,660
July 16 Cash 5,500
Allowance for Doubtful Accounts 16,500
Accounts Receivable—Hayden Co. 22,000
Nov. 23 Accounts Receivable—Harry Carr 4,000
Allowance for Doubtful Accounts 4,000
23 Cash 4,000
Accounts Receivable—Harry Carr 4,000
CHAPTER 9 Receivables
Prob. 9-2B
1.
Customer
Arcade Beauty
Creative Images
Excel Hair Products
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
Creative Images 8,500 8,500
Excel Hair Products 7,500 7,500
First Class Hair Care 6,600 6,600
Golden Images 3,600 3,600
Oh That Hair 1,400 1,400
July 3, 20Y1
Days Past Due
Due Date
Aug. 17, 20Y1
Number of Days Past Due
136 days (14 + 30 + 31 + 30 + 31)
December 31, 20Y1
Aging of Receivables Schedule
62 days (1 + 30 + 31)
181 days (28 + 31 + 30 + 31 + 30 + 31)
Oct. 30, 20Y1