7-21
E7-17
June 30 Notes Receivable (Barney) 5,000
Sales 5,000
July 15 Notes Receivable ( Dillon) 6,000
Accounts Receivable 6,000
a$5,000 x 0.11 x 90/360
b$5,137.50 x 0.12 x (90 – 30)/360
7-22
E7-18
2010
Jan.
2
Petty Cash
Cash
600.00
600.00
E7-19
1. Balance from bank statement $ 1,342.50
Add: Deposit in transit $329.42
2. GENTRY CORPORATION
Bank Reconciliation
August 31, 2010
Balance from bank statement $ 1,342.50
E7-19 (continued)
3. 2010
Aug. 31 Cash 625.00
E7-20
1. SUN CORPORATION
Bank Reconciliation
July 31, 2010
Balance from bank statement $ 1,980.20
2. 2010
July 31 Cash 195.50
7-24
E7-21
1. ODUM CORPORATION
Bank Reconciliation
March 31, 2010
Balance from bank statement $17,924.55
Add: Undeposited cash $ 724.50
Deposit in transit 951.75 1,676.25
2. 2010
Mar. 31 Cash 2,025.00
Notes Receivable 2,000.00
7-25
E7-22
1. The Accounts Receivable debit of $1,520.24 is probably an NSF check.
2. Bank Reconciliation
June 30, 2010
Balance from bank statement $ 6,607.94
3. This discrepancy indicates that the amount of cash in the bank is $1,065.04 less than
the balance per bank calculated in Requirement 2 ($6,607.94 – $5,542.90). This
7-26
SOLUTIONS TO PROBLEMS
P7-1
1. Cash on hand (undeposited sales receipts) $ 1,020
5. Reconciled balance in Second National Bank
7. Customer’s postdated check–accounts
receivable
8. Employee travel advances–prepaid expenses
P7-2
Note to Instructor: This problem only asks for the 2011 bad debt expense. At the
1. Estimated bad debt percentage based on credit sales: 3.7%*
2008 2009 2010 Total
Actual bad debts $ 3,300a $ 5,700b $ 7,800c $ 16,800
P7-2 (continued)
2. Estimated percentage of allowance for doubtful accounts based on year-end
accounts receivable: 8.1%#
2008 2009 2010 Total
Outstanding receivables
(year–end) $9,500
a $16,900c $25,700e $52,100
3. (a) Bad debt expense based on an estimated percentage of credit sales:
$235,000 x 0.037 = $8,695, or approximately $8,700
(b) Bad debt expense based on allowance for doubtful accounts estimated as a
P7-3
1. (1) Accounts Receivable 874,600
Sales 874,600
P7-3 (continued)
1. (continued)
(5) Notes Receivable 72,000
Accounts Receivable 72,000
(9) Accounts Receivable 500
Allowance for Doubtful Accounts 500
2.
Accounts Receivable Allowance for Doubtful Accounts
6/30/09
bal. 224,000
(2)
841,000
(3) 13,800
6/30/09
bal. 14,100
P7-3 (continued)
2. (continued)
Accounts receivable $169,800
Less: Allowance for doubtful accounts (13,919) $155,881
P7-4
May 1 Notes Receivable (Leigh) 6,000
Accounts Receivable (or Sales) 6,000
Leigh* Gable#
Face value of note $6,000.00 $9,000.00
Interest to maturity 180.00a 300.00d
a$6,000 x 0.12 x 90/360
7-30
P7-4 (continued)
Aug. 10 Notes Payable 10,000
Cash 10,000
P7-5
1. (a) Allowance for doubtful accounts
1. Allowance for Doubtful Accounts 7,900
(b) Allowance for sales returns and allowances
3. Sales Returns and Allowances 5,096
P7-5 (continued)
1. (continued)
(c) Accounts receivable
5. Accounts Receivable 372,400
2.
Accounts Receivable Allowance for Doubtful Accounts
The two account balances–Allowance for Doubtful Accounts, $7,000; and Allowance
for Sales Returns and Allowances, $3,916–will be subtracted from the Accounts
Receivable balance of $177,520 on the 2011 ending balance sheet to arrive at the
estimated amount of accounts receivable to be collected of $166,604.
P7-6
1(a) a. Accounts Receivable 70,000
7-32
P7-6 (continued)
1(a) (continued)
d. Sales Returns and Allowances 1,500
Accounts Receivable 1,500
1(b) a. Accounts Receivable ($70,000 x 0.98) 68,600
Sales 68,600
2(a) $4,500 ($70,000 – $46,000 – $18,000 – $1,500)
1. 2011
During Accounts Receivable 2,017,800
the Sales 2,017,800
Age
Amount
Estimated
Percentage
Uncollectible
Estimated
Amount
Uncollectible
Under 30 days
$169,250
0.008
$ 1,354
2.
Accounts Receivable Allowance for Doubtful Accounts
9/30/10
bal. 331,750
1,956,00
16,200
9/30/10
bal. 16,700
Net credit sales $2,017,800
3. Receivables turnover =
Aver. net accts. rec.
=
[($331,750 – $16,700) + $360,271] ÷ 2
7-34
P7-8
1. (a) Bad Debt Expense 16,898
Allowance for Doubtful Accounts
[($680,000 + $527,000) x 0.014] 16,898
2. The income statement approach, in which a percentage of sales is used, results in
a matching of current expenses with current sales. However, this approach does
not necessarily result in reporting accounts receivable at their net realizable value
P7-9
1. Oct. 9 Notes Receivable (Weedon) 5,000
Accounts Receivable (or Sales) 5,000
7-35
P7-9 (continued)
1. (continued)
*Face value of note $5,000.00
Interest to maturity ($5,000 x 0.12 x 60/360) 100.00
Nov. 11 Cash (see calculations below*) 5,996.25
Loss from Discounting of Note 53.75
Notes Receivable (Black) 6,000.00
Interest Revenue 50.00
Dec. 1 Notes Receivable (Lambert) 9,000
Accounts Receivable (or Sales) 9,000
10 Cash (see calculations below*) 5,995.39
Loss from Discounting of Note 41.28
P7-9 (continued)
1. (continued)
2. Notes receivable (see Note 1) $17,000
P7-10
1. Cash 238,000
Assignment Service Charge Expense 2,000
Note Payable ($400,000 x 0.80) 240,000
2. Current Assets:*
Accounts receivable assigned $75,000
P7-11
Accounts Receivable 100,000
Sales 100,000
Cash [($70,000 x 0.90) – $8,400] 54,600
Cash 28,149
Sales Discounts Taken 551b
Accounts Receivable 28,700a
P7-12
1. Cash [($56,100 x 0.8) – $5,610] 39,270
Receivable from Factor ($56,100 x 0.2) 11,220
P7-12 (continued)
1. (continued)
2. The Accounts Receivable Assigned, Receivable From Factor, and Note Payable
accounts would be reported on Lazard’s balance sheet and the Factoring Expense
and Interest Expense accounts would be reported on its income statement as
follows. Detailed information about Lazard’s factoring and assignment agreements
would also be disclosed in the notes to its financial statements.
P7-13 (AICPA adapted solution)
1. June 30 Receivable from Officers 8,500
Advances to Employees 1,411
7-39
P7-13 (continued)
2. June 30 Allowance for Doubtful Accounts 1,187
P7-14 (AICPA adapted solution)
1. Adjusting journal entry:
Bad Debts Recovered 600
2. Supporting computations
The provision for bad accounts for 2010 should be based on the experience for the
years 2006 to 2008 inclusive, since complete data for these 3 years are now
available.
P7-14 (continued)
2. (continued)
Estimated bad accounts (2.50%) $ 15,000
Less:
P7-15 (AICPA adapted solution)
1. HARRIS CORPORATION
Analysis of Changes in the
Allowance for Doubtful Accounts
For the Year Ended December 31, 2010
Balance at January 1, 2010 $130,000
Schedule 1: Computation of Allowance for Doubtful Accounts
at December 31, 2010
Aging category Balance Percent Doubtful accounts