Summary Business Accounting

Accounting 25th Edition Solution




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CHAPTER 9
RECEIVABLES

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, DISCUSSION QUESTIONS

1. Receivables are normally classified as (1) accounts receivable, (2) notes receivable, or
(3) other receivables.
2. Dan’s Hardware should use the direct write-off method because it is a small business that has
a relatively small number and volume of accounts receivable.
3. Contra asset, credit balance
4. The accounts receivable and allowance for doubtful accounts may be reported at a net amount
of $661,500 ($673,400 – $11,900) in the Current Assets section of the balance sheet. In this
case, the amount of the allowance for doubtful accounts should be shown separately in a note
to the financial statements or in parentheses on the balance sheet. Alternatively, the accounts
receivable may be shown at the gross amount of $673,400 less the amount of the allowance
for doubtful accounts of $11,900, thus yielding net accounts receivable of
$661,500.
5. (1) The percentage rate used is excessive in relationship to the accounts written off as
uncollectible; hence, the balance in the allowance is excessive.
(2) A substantial volume of old uncollectible accounts is still being carried in the accounts
receivable account.
6. An estimate based on analysis of receivables provides the most accurate estimate of the
current net realizable value.
7. a. Sailfish Company
b. Notes Receivable
8. The interest will amount to $5,100 ($85,000 × 6%) only if the note is payable one year from
the date it was created. The usual practice is to state the interest rate in terms of an annual
rate, rather than in terms of the period covered by the note.
9. Debit Accounts Receivable for $243,600
Credit Notes Receivable for $240,000
Credit Interest Revenue for $3,600
10. Cash 245,427
Accounts Receivable [$240,000 + ($240,000 × 6% × 90/360)] 243,600
Interest Revenue 1,827
($243,600 × 30/360 × 9% = $1,827).




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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

, CHAPTER 9 Receivables


PRACTICE EXERCISES
PE 9–1A
Feb. 12 Cash 800
Bad Debt Expense 2,400
Accounts Receivable—Leo Jorgenson 3,200

May 3 Accounts Receivable—Leo Jorgenson 2,400
Bad Debt Expense 2,400

3 Cash 2,400
Accounts Receivable—Leo Jorgenson 2,400


PE 9–1B
Oct. 2 Cash 600
Bad Debt Expense 1,350
Accounts Receivable—Rachel Elpel 1,950

Dec. 20 Accounts Receivable—Rachel Elpel 1,350
Bad Debt Expense 1,350

20 Cash 1,350
Accounts Receivable—Rachel Elpel 1,350


PE 9–2A
Feb. 12 Cash 800
Allowance for Doubtful Accounts 2,400
Accounts Receivable—Leo Jorgenson 3,200

May 3 Accounts Receivable—Leo Jorgenson 2,400
Allowance for Doubtful Accounts 2,400

3 Cash 2,400
Accounts Receivable—Leo Jorgenson 2,400




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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

, CHAPTER 9 Receivables


PE 9–2B
Oct. 2 Cash 600
Allowance for Doubtful Accounts 1,350
Accounts Receivable—Rachel Elpel 1,950

Dec. 20 Accounts Receivable—Rachel Elpel 1,350
Allowance for Doubtful Accounts 1,350

20 Cash 1,350
Accounts Receivable—Rachel Elpel 1,350


PE 9–3A
a. $55,500 ($7,400,000 × 0.0075)
b. Adjusted Balance
Accounts Receivable…………………………………………………… $685,000
Allowance for Doubtful Accounts ($9,000 + $55,500)…………… 64,500
Bad Debt Expense……………………………………………………… 55,500
c. Net realizable value ($685,000 – $64,500)………………………… $620,500



PE 9–3B
a. $231,500 ($46,300,000 × 0.0050)
b. Adjusted Balance
Accounts Receivable…………………………………………………… $3,460,000
Allowance for Doubtful Accounts ($231,500 – $12,500)………… 219,000
Bad Debt Expense……………………………………………………… 231,500
c. Net realizable value ($3,460,000 – $219,000)……………………… $3,241,000




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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.