Accounting Chapter 9 Homework June Cash Accounts Receivable Park

Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 9

Chapter 9

Accounting for Receivables

QUESTIONS

1. When customers use credit cards, the selling companies can avoid having to directly

evaluate the credit standing of their customers. They also avoid the risk of bad debts and

2. Revenues and expenses usually are not matched under the direct write-off method because

3. The accounting constraint of materiality suggests that the requirements of accounting

4. Creditors prefer notes receivable to accounts receivable because the notes can be more

5. Writing off a bad debt against the Allowance account does not reduce the estimated

realizable value of a company’s accounts receivable because the write-off reduces the

6. The adjusted balances of Bad Debts Expense and Allowance for Doubtful Accounts are

virtually never equal because the expense amount reflects only the events of the current

7. Apple lists its accounts receivable as “Accounts receivable, less allowances of $82 and $86,

8. Google uses the allowance method to account for doubtful accounts as evidenced by the

receivables being reduced by an allowance of $296 million on the December 31, 2015,

578

9. Samsung titles its accounts receivable as “Trade Receivables.” Samsung reports its Trade

Receivables (in KRW millions) at ₩25,168,026 as of December 31, 2015.

10. Samsung titles its accounts receivable as “Trade Receivables” and it reports them as part of

current assets. There is no allowance listed on the face of the balance sheet.

QUICK STUDIES

Quick Study 9-1 (15 minutes)

1.

Cash …………………………………………………………………….

19,000

1,000

15,000

2.

Cash …………………………………………………………………….

4,800

3,000

579

Quick Study 9-2 (10 minutes)

Oct. 1

50,000

Quick Study 9-3 (10 minutes)

Oct. 30

Accounts Receivable—P.Moore …………………………..

50,000

Oct. 30

50,000

Quick Study 9-4 (15 minutes)

1. DW direct write-off method

580

Quick Study 9-5 (15 minutes)

1.

Allowance for Doubtful Accounts ………………………

800

2.

Mar. 9

Accounts Receivable—C. Green* ……………………….

300

Quick Study 9-6 (15 minutes)

1.

Bad Debts Expense …………………………………………

Quick Study 9-7 (15 minutes)

Bad Debts Expense …………………………………………

581

Quick Study 9-8 (15 minutes)

1. Maturity date is October 31, which is computed as follows:

Days in August ………………………………………………………. 31

2.

Quick Study 9-9 (10 minutes)

Oct. 31 Cash ………………………………………………………….. 6,180

Quick Study 9-10 (15 minutes)

Dec. 31 Interest Receivable …………………………………….. 50

Quick Study 9–11 (10 minutes)

May 1

Cash ……………………………………………………………..

121,875

Quick Study 9-12 (10 minutes)

Interpretation: An accounts receivable turnover of 5.9 implies that the

Quick Study 9-13 (10 minutes)

a. Both U.S. GAAP and IFRS have similar asset criteria that apply to

recognition of receivables. Further, receivables that arise from revenue–

generating activities are subject to broadly similar criteria for U.S. GAAP

Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 9

583

EXERCISES

Exercise 9-1 (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

ACCOUNTS RECEIVABLE LEDGER

Ski Shop

Welcome Enterprises

Zia Natara

Nov. 5

4,615

1,350

Nov. 13

832

209

2,713

7,328

623

Part 2

Vail Company

Schedule of Accounts Receivable

November 30, 2017

1,350

2,713

9,301

45,000

Cash …………………………………………………………………..

45,000

Accounts Receivable—Leer Co. ……………………..

45,000

Exercise 9-2 (20 minutes)

Apr. 8

Cash ……………………………………………………………….

8,064

8,400

6,000

Cash ……………………………………………………………….

5,460

5,600

3,500

Exercise 9-3 (10 minutes)

Apr. 30

Accounts Receivable ………………………………………

1,000

Accounts Receivable ………………………………………

Exercise 9-4 (15 minutes)

March 11

Bad Debts Expense …………………………………………….

45,000

Accounts Receivable—Leer Co. ……………………..

45,000

585

Exercise 9-5 (20 minutes)

Dec. 31

Bad Debts Expense ……………………………………………..

4,875

Allowance for Doubtful Accounts……………………

4,875

Allowance for Doubtful Accounts …………………………

580

Exercise 9-6 (15 minutes)

a.

Dec. 31

Bad Debts Expense ………………………………………………

685

Dec. 31

Bad Debts Expense ………………………………………………

1,391

Exercise 9-7 (30 minutes)

a. Computation of the estimated balance of the allowance for uncollectibles:

Not due:

$396,000 x 0.01 =

$ 3,960

Allowance for Doubtful Accounts …………….

13,650

Dec. 31

Bad Debts Expense ……………………………………….

26,650

Record estimated bad debts.*

Exercise 9-7 (Concluded)

b.

Dec. 31

Bad Debts Expense ……………………………………….

8,220

Allowance for Doubtful Accounts …………….

8,220

Record estimated bad debts.*

Dec. 31

Bad Debts Expense ……………………………………….

11,920

Allowance for Doubtful Accounts …………….

11,920

Exercise 9-8 (25 minutes)

a. Computation of the estimated balance of the allowance for uncollectibles:

b.

Dec. 31

Bad Debts Expense ……………………………………….

13,650

Dec. 31

Bad Debts Expense ………………………………………..

Allowance for Doubtful Accounts ……………..

12,000

Record estimated bad debts

c. Allowance is 6% of accounts receivable

Dec. 31

Bad Debts Expense ………………………………………..

Allowance for Doubtful Accounts ……………..

12,500

Exercise 9-9 (20 minutes)

Feb. 1

Allowance for Doubtful Accounts …………………………

6,800

Accounts Receivable—Oakley Co …………………..

900

Accounts Receivable—Brookes Co ………………..

900

Accounts Receivable—Oakley ………………………..

900

Exercise 9-10 (25 minutes)

a. Expense is 3.0% of credit sales

Dec. 31

Bad Debts Expense ………………………………………..

9,000

Allowance for Doubtful Accounts ……………..

9,000

Record estimated bad debts

5,000

Accounts Receivable-Tomas Co ……………….

17

2,000

2,015

Interest Revenue ………………………………………

15

Allowance for Doubtful Accounts …………………..

2,015

Cash ……………………………………………………………..

5,125

Interest Revenue ………………………………………

Exercise 9-11 (10 minutes)

2016

9,500

Interest Receivable ………………………………..

Interest Revenue ………………………………

38

Exercise 9-12 (15 minutes)

2017

Jan. 27

Cash ……………………………………………………………..

9,595

Interest Revenue* …………………………..…………

57

Interest Receivable …………………………………..

38

589

Exercise 9-13 (15 minutes)

Nov. 1

Notes Receivable—K. White ………………………..

6,000

Accounts Receivable—K. White ……………..

6,000

Record receipt of note on account.

[$6,000 x .08 x 60/360].

6,240

Notes Receivable—K. White …………………..

6,000

interest earned. *[$6,000 x .08 x 120/360]

Exercise 9-14 (20 minutes)

590

Exercise 9-15 (20 minutes)

July 4

Accounts Receivable ……………………………………..

7,245

5,000

5,859

591

Exercise 9-16 (15 minutes)

Year 2016 accounts receivable turnover:

Exercise 9-17 (25 minutes)

(¥ in millions)

a. Expense is 0.4% of total revenues

Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 9

592

PROBLEM SET A

Problem 9-1A (30 minutes)

June 4

Accounts Receivable—N. Morris ………………………..

650

Sales ……………………………………………………………

650

Record sales on credit.

400

Merchandise Inventory ………………………………………

400

207

Sales ……………………………………………………………

Record credit card sales less fee. *($6,900 x 0.03)

Merchandise Inventory ………………………………………

117

Sales ……………………………………………………………

Merchandise Inventory ………………………………………

Sales ……………………………………………………………

Merchandise Inventory ………………………………………

Record cost of sales.

429

650

Record cash received in payment of account.

Problem 9-2A (35 minutes)

Part 1

a. Expense is 1.5% of credit sales

Dec. 31

Bad Debts Expense ………………………………………..

85,230

Dec. 31

Bad Debts Expense ………………………………………..

75,870

c. Allowance is 5% of accounts receivable

Dec. 31

Bad Debts Expense ………………………………………..

80,085

Part 2

Current assets

Less allowance for doubtful accounts ………….

uncollectible accounts) …………………………..

Less allowance for doubtful accts. ……………….

594

Problem 9-3A (35 minutes)

Part 1

Calculation of the estimated balance of the allowance for uncollectibles

Not due:

$830,000 x .0125 =

$10,375

Part 2

Bad Debts Expense ……………………………………….

Part 3

Writing off the account receivable in 2018 will not directly affect year 2018

595

Problem 9-4A (35 minutes)

2016

a.

Accounts Receivable …………………………………..

1,345,434

Allowance for Doubtful Accounts …………………

c.

Bad Debts Expense ……………………………………..