《21版会计学》习题部分第8章.pdf

Chapter 8 Receivables333 Without a statement limiting responsibility, the endorser of a note is committed to paying the note if the maker defaults. This potential liability is called a contin- gent liability. Thus, the endorser of a note that has been discounted has a con- tingent liability until the due date. If the maker pays the promised amount at maturity, the contingent liability is removed without any action on the part of the endorser. If, on the other hand, the maker dishonors the note and the endorser is notified ac- cording to legal requirements, the endorsers liability becomes an actual one. When a discounted note receivable is dishonored, the bank notifies the endorser and asks for payment. In some cases, the bank may charge a protest fee for noti- fying the endorser that a note has been dishonored. The entire amount paid to the bank by the endorser, including the interest and protest fee, should be debited to the account receivable of the maker. For example, assume that the $1,800, 90-day, 12% note discounted on May 3 is dishonored at maturity by the maker, Pryor paid the bank the amount due on the note, plus a protest fee of $200. Aug. 30. Received the amount due on the dishonored note plus interest for 30 days at 12% on the total amount charged to Rhodes Company on July 31. EXERCISE 8-23 Days sales in receivables Objective 9 a. 2002: 20.7 days EXERCISE 8-24 Accounts receivable turnover and days sales in receivables Objective 9 a. 2002: 108.2 APPENDIX EXERCISE 8-25 Discounting notes receivable a. $20,300 APPENDIX EXERCISE 8-26 Entries for receipt and discounting of note receivable and dishonored notes 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 343 Chapter 8 Receivables344 The following transactions, adjusting entries, and closing entries were completed by Elko Contractors Co. during the year ended December 31, 2006: Mar. 15. Received 60% of the $18,500 balance owed by Bimba Co., a bankrupt business, and wrote off the remainder as uncollectible. Apr. 16. Reinstated the account of Tom Miner, which had been written off in the preceding year as uncollectible. Journalized the receipt of $5,782 cash in full payment of Miners account. July 20. Wrote off the $5,500 balance owed by Martz Co., which has no assets. Oct. 31. Reinstated the account of Two Bit Saloon Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $6,100 cash in full payment of the account. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Asche Co., $950; Dorsch Co., $4,600; Krebs Distributors, $2,500; J. J. Levi, $1,200. 31. Based on an analysis of the $535,750 of accounts receivable, it was esti- mated that $13,700 will be uncollectible. Journalized the adjusting entry. 31. Journalized the entry to close the appropriate account to Income Summary. Instructions 1. Post the January 1 credit balance of $12,050 to Allowance for Doubtful Accounts. 2. Journalize the transactions and the adjusting and closing entries. Post each entry that affects the following three selected accounts and determine the new balances: 115Allowance for Doubtful Accounts 313Income Summary 718Uncollectible Accounts Expense 3. Determine the expected net realizable value of the accounts receivable as of December 31. 4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of 1/2 of 1% of the net sales of $3,100,000 for the year, determine the following: a. Uncollectible accounts expense for the year. b. Balance in the allowance account after the adjustment of December 31. c. Expected net realizable value of the accounts receivable as of December 31. Blue Ribbon Flies Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Blue Ribbon Flies prepared the partially completed aging-of-receivables schedule as of the end of business on December 31, 2006, shown at the top of the following page. The following accounts were unintentionally omitted from the aging schedule. CustomerDue DateBalance Able Sports estimating allowance for doubtful accounts Objective 4 3. $65,212 P P roblems Series A 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 344 Chapter 8 Receivables345 Blue Ribbon Flies Company has a past history of uncollectible accounts by age cat- egory, as follows: Percentage Age ClassUncollectible Not past due1% 130 days past due4 3160 days past due8 6190 days past due25 91120 days past due40 Over 120 days past due80 Instructions 1. Determine the number of days past due for each of the preceding accounts. 2. Complete the aging-of-receivables schedule. 3. Estimate the allowance for doubtful accounts, based on the aging-of-receivables schedule. 4. Assume that the allowance for doubtful accounts for Blue Ribbon Flies Company has a debit balance of $2,800 before adjustment on December 31, 2006. Journal- ize the adjusting entry for uncollectible accounts. Kiohertz Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording uncollectible accounts expense has been used during the entire period. Because of substantial increases in sales volume and amount of uncollectible accounts, the firm is consid- ering changing to the allowance method. Information is requested as to the effect that an annual provision of 3/4% of sales would have had on the amount of un- collectible accounts expense reported for each of the past four years. It is also con- sidered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Uncollectible Year of Origin of Accounts Accounts Receivable Written Off Written as Uncollectible YearSalesOff1st2nd3rd4th 1st$850,000$3,500$3,500 2nd960,0003,2501,900$1,350 3rd1,200,0006,3008004,500$1,000 4th1,800,0008,4001,8002,550$4,050 BalanceCustomer Not Past Due Days Past Due 1303160619091120 Alpha Fishery Brown Trout Sports 5,000 6,400 5,000 6,400 Over 120 Zinger Sports Subtotals 2,900 580,000248,600 2,900 147,25098,75033,30029,95022,150 PROBLEM 8-3A Compare two methods of accounting for uncollectible receivables Objectives 4, 5 1. Year 4: Balance of allowance account, end of year, $14,625. 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 345 Chapter 8 Receivables346 Instructions 1. Assemble the desired data, using the following column headings: Uncollectible Accounts Expense Balance of ExpenseExpenseIncrease (Decrease)Allowance ActuallyBased onin AmountAccount, YearReportedEstimateof ExpenseEnd of Year 2.Experience during the first four years of operations indicated that the re- ceivables were either collected within two years or had to be written off as un- collectible. Does the estimate of 3/4% of sales appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years? Explain. Matrix Co. wholesales bathroom fixtures. During the current fiscal year, Matrix Co. received the following notes. FaceInterest DateAmountTermRate 1.March 7$24,00060 days6% 2.June 1816,80030 days9% 3.Aug. 3010,200120 days6% 4.Oct. 3127,00060 days9% 5.Nov. 1912,00060 days6% 6.Dec. 2316,00030 days9% Instructions 1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number. 2. Journalize the entry to record the dishonor of Note (3) on its due date. 3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. 4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. The following data relate to notes receivable and interest for Clyde Park Optic Co., a cable manufacturer and supplier. (All notes are dated as of the day they are received.) June 4. Received an $18,800, 9%, 60-day note on account. July 15. Received a $27,000, 10%, 120-day note on account. Aug. 3. Received $19,082 on note of June 4. Sept. 1. Received a $24,000, 9%, 60-day note on account. Oct. 31. Received $24,360 on note of September 1. Nov. 5. Received a $9,600, 7%, 30-day note on account. 12. Received $27,900 on note of July 15. 30. Received a $15,000, 10%, 30-day note on account. Dec. 5. Received $9,656 on note of November 5. 30. Received $15,125 on note of November 30. Instructions Journalize entries to record the transactions. The following were selected from among the transactions completed by Rimrock Co. during the current year. Rimrock Co. sells and installs home and business se- curity systems. Jan. 10. Loaned $12,000 cash to Brenda Norby, receiving a 90-day, 8% note. Feb.4. Sold merchandise on account to Emerson and Son, $24,000. The cost of the merchandise sold was $14,400. PROBLEM 8-4A Details of notes receivable and related entries Objectives 6, 7 1. Note 2: Due date, July 18; Interest due at maturity, $126. PROBLEM 8-5A Notes receivable entries Objective 7 PROBLEM 8-6A Sales and notes receivable transactions Objective 7 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 346 Chapter 8 Receivables347 Feb. 12. Sold merchandise on account to Gwyn Co., $25,000. The cost of mer- chandise sold was $15,000. Mar.6. Accepted a 60-day, 6% note for $24,000 from Emerson and Son on account. 14. Accepted a 60-day, 12% note for $25,000 from Gwyn Co. on account. Apr. 10. Received the interest due from Brenda Norby and a new 90-day, 9% note as a renewal of the loan of January 10. (Record both the debit and the credit to the notes receivable account.) May5. Received from Emerson and Son the amount due on the note of March 6. 13. Gwyn Co. dishonored its note dated March 14. June 12. Received from Gwyn Co. the amount owed on the dishonored note, plus interest for 30 days at 12% computed on the maturity value of the note. July9. Received from Brenda Norby the amount due on her note of April 10. Aug. 24. Sold merchandise on account to Haggerty Co., $10,200. The cost of the merchandise sold was $6,000. Sept. 3. Received from Haggerty Co. the amount of the invoice of August 24, less 1% discount. Instructions Journalize the transactions. Round to the nearest dollar. The following transactions, adjusting entries, and closing entries were completed by The Eagle Rock Gallery during the year ended December 31, 2006: Feb. 24. Reinstated the account of Dina Ibis, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1,025 cash in full payment of Ibiss account. Mar. 29. Wrote off the $7,500 balance owed by Hoxsey Co., which is bankrupt. July 10. Received 40% of the $12,000 balance owed by Foust Co., a bankrupt business, and wrote off the remainder as uncollectible. Sept. 8. Reinstated the account of Louis Sabo, which had been written off two years earlier as uncollectible. Recorded the receipt of $1,200 cash in full payment. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Emery Co., $8,050; Darigold Co., $6,260; Zheng Furniture, $3,775; Carey Wenzel, $2,820. 31. Based on an analysis of the $887,550 of accounts receivable, it was esti- mated that $30,500 will be uncollectible. Journalized the adjusting entry. 31. Journalized the entry to close the appropriate account to Income Summary. Instructions 1. Post the January 1 credit balance of $28,500 to Allowance for Doubtful Accounts. 2. Journalize the transactions and the adjusting and closing entries. Post each entry that affects the following three selected accounts and determine the new balances: 115Allowance for Doubtful Accounts 313Income Summary 718Uncollectible Accounts Expense 3. Determine the expected net realizable value of the accounts receivable as of December 31. 4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on PROBLEM 8-1B Entries related to uncollectible accounts Objective 4 3. $857,050 P P roblems Series B 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 347 Chapter 8 Receivables348 an estimated expense of 1/4 of 1% of the net sales of $12,750,000 for the year, determine the following: a. Uncollectible accounts expense for the year. b. Balance in the allowance account after the adjustment of December 31. c. Expected net realizable value of the accounts receivable as of December 31. Vanity Wigs Company supplies wigs and hair care products to beauty salons through- out California and the Pacific Northwest. The accounts receivable clerk for Vanity Wigs prepared the following partially completed aging-of-receivables schedule as of the end of business on December 31, 2006: PROBLEM 8-2B Aging of receivables; estimating allowance for doubtful accounts Objective 4 3. $54,473 The following accounts were unintentionally omitted from the aging schedule. CustomerDue DateBalance Allisons Uniquely YoursJuly 6, 20061,000 Western DesignsAug. 10, 20062,500 TreatsSept. 6, 20061,800 Nicoles Beauty StoreSept. 29, 20064,000 Ginburg SupremeOct. 10, 20061,500 Jeremys Hair ProductsOct. 20, 2006600 Hairys Hair CareOct. 31, 20062,000 Southern ImagesNov. 18, 20061,200 Lopezs Blond BombsNov. 23, 20061,800 Josset RitzNov. 30, 20063,500 Cool DesignsDec. 4, 20061,000 Buttram ImagesJan. 3, 20075,200 Vanity Wigs has a past history of uncollectible accounts by age category, as follows: Percentage Age ClassUncollectible Not past due1% 130 days past due4 3160 days past due6 6190 days past due15 91120 days past due30 Over 120 days past due70 Instructions 1. Determine the number of days past due for each of the preceding accounts. 2. Complete the aging-of-receivables schedule. 3. Estimate the allowance for doubtful accounts, based on the aging-of-receivables schedule. 4. Assume that the allowance for doubtful accounts for Vanity Wigs has a credit bal- ance of $8,350 before adjustment on December 31, 2006. Journalize the adjust- ing entry for uncollectible accounts. BalanceCustomer Not Past Due Days Past Due 1303160619091120 Adams Beauty Barkell Wigs 8,000 7,500 8,000 7,500 Over 120 Zimmers Beauty Subtotals 2,900 880,000498,600 2,900 197,25088,75043,30029,95022,150 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 348 Chapter 8 Receivables349 Blue Goose Company, which operates a chain of 50 electronics supply stores, has just completed its fourth year of operations. The direct write-off method of record- ing uncollectible accounts expense has been used during the entire period. Because of substantial increases in sales volume and amount of uncollectible accounts, the firm is considering changing to the allowance method. Information is requested as to the effect that an annual provision of 1/2% of sales would have had on the amount of uncollectible accounts expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Uncollectible Year of Origin of Accounts Accounts Receivable Written Off Written as Uncollectible YearSalesOff1st2nd3rd4th 1st$650,000$1,000$1,000 2nd920,0002,650750$1,900 3rd1,050,0006,2001,8001,400$3,000 4th2,250,0009,1501,9002,950$4,300 Instructions 1. Assemble the desired data, using the following column headings: Uncollectible Accounts Expense Balance of ExpenseExpenseIncrease (Decrease)Allowance ActuallyBased onin AmountAccount, YearReportedEstimateof ExpenseEnd of Year 2.Experience during the first four years of operations indicated that the re- ceivables were either collected within two years or had to be written off as un- collectible. Does the estimate of 1/2% of sales appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years? Explain. Incubate Co. produces advertising videos. During the last six months of the current fiscal year, Incubate Co. received the following notes. FaceInterest DateAmountTermRate 1.May 23$18,00045 days8% 2.July 1020,00060 days9% 3.Aug. 836,00090 days6% 4.Sept. 1620,00090 days7% 5.Nov. 2318,00060 days9% 6.Dec. 1848,00060 days12% Instructions 1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number. 2. Journalize the entry to record the dishonor of Note (3) on its due date. 3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. 4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January and February. The following data relate to notes receivable and interest for Sciatic Co., a financial services company. (All notes are dated as of the day they are received.) PROBLEM 8-3B Compare two methods of accounting for uncollectible receivables Objectives 4, 5 1. Year 4: Balance of allowance account, end of year, $5,350 PROBLEM 8-4B Details of notes receivable and related entries Objectives 6, 7 1. Note 2: Due date, Sept. 8; Interest due at maturity, $300 PROBLEM 8-5B Notes receivable entries Objective 7 66124_c08_317-353.qxd 11/10/03 10:17 PM Page 349 Chapter 8 Receivables350 Mar.3. Received a $14,000, 9%, 60-day note on account. 21. Received a $9,500, 8%, 90-day note on account. May2. Received $14,210 on note of March 3. 16. Received a $40,000, 7%, 90-day note on account. 31. Received a $6,000, 8%, 30-day note on account. June 19. Received $9,690 on note of March 21. 30. Received $6,040 on note of May 31. July1. Received a $12,000, 12%, 30-day note on account. 31. Received $12,120 on note of July 1. Aug. 14. Received $40,700 on note of May 16. Instructions Journalize the entries to record the transactions. The following were selected from among the transactions completed during the cur- rent year by Westphal Co., an appliance wholesale company: Jan.6.