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7/27/2019 Wagers ACC 101 Answers to Practice 8 - Receivables
http://slidepdf.com/reader/full/wagers-acc-101-answers-to-practice-8-receivables 1/3
ACC 101 - WAGERS
ANSWERS TO EXTRA PRACTICE
PROBLEMS FOR CHAPTER 8
PRACTICE PROBLEM: UNCOLLECTIBLE ACCOUNTS RECEIVABLE
Beginning balances for the year 2013 are as follows for Acme Company, which uses theallowance method:
Accounts Receivable $800,000Allowance for Doubtful Accounts (credit balance) $10,000
Requirement 1: On July 31, 2013, record the journal entry to write off a $7,000receivable of Mr. Jones that cannot be collected.
Allowance for Doubtful Accounts 7,000Accounts Receivable, Mr. Jones 7,000
Requirement 2: On October 31, 2013, record the journal entry to record therecovery of a $2,000 receivable from Mr. Jones (the receivable that was writtenoff in the previous entry.)
Accounts Receivable, Mr. Jones 2,000
Allowance for Doubtful Accounts 2,000Cash 2,000Accounts Receivable, Mr. Jones 2,000
Requirement 3: As of December 31, 2013, record the journal entry to estimate BadDebt Expense. Year-end receivables are categorized as follows:
Amount % Uncoll. Amount Uncoll.Current $500,000 .05% $2501-30 days past due 200,000 1% 2,000
More than 30 days past due 93,000 6% 5,580$793,000 $7,830
7/27/2019 Wagers ACC 101 Answers to Practice 8 - Receivables
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ACC 101 – WagersAnswers to Extra Practice Problems for Chapter 8Page 2 of 3
PRACTICE PROBLEM: UNCOLLECTIBLE ACCOUNTS RECEIVABLE(continued)
• Notice that the current balance in Accounts Receivable (after entries fromRequirements 1 and 3 are posted) is now $793,000, which equals the total above.
ACCOUNTS RECEIVABLEBeginning balance 800,000
7,000 Write-offRecovery 2,000
2,000 Recovery
Ending balance 793,000
• Current balance in Allowance account (after entries from Requirements 1 and 2 arerecorded)
ALLOWANCE FOR DOUBTFUL ACCOUNTS10,000 Beginning balance
Write-off 7,0002,000 Recovery
5,000 Ending balance
• Desired ending balance in Allowance account (from aging schedule) = $7,830
ALLOWANCE FOR DOUBTFUL ACCOUNTS
5,000 Balance (from above)
2,830 Adjustment required
7,830 Desired ending balance
• Journal entry:
Bad Debt Expense 2,830Allowance for Doubtful Accounts 2,830
7/27/2019 Wagers ACC 101 Answers to Practice 8 - Receivables
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ACC 101 – WagersAnswers to Extra Practice Problems for Chapter 8Page 3 of 3
PRACTICE PROBLEM: NOTE RECEIVABLE
Requirement 1: Prepare the journal entries required as follows:
Nov 1, 2015 We receive a $100,000, 30-day, 20% promissory note in settlement of anopen account receivable (from Broke Bob, who can’t pay us)
Note Receivable 100,000Accounts Receivable 100,000
Dec 1, 2015 Broke Bob pays us the amount he owes
Cash 101,666.67Note Receivable 100,000.00Interest Income ($100,000 * 20% * 30/360) 1,666.67
Dec 26, 2015 We make a $200,000 loan to Honest Al and receive a 60-day, 16%promissory note
Note Receivable 200,000Cash 200,000
Dec 31, 2015 We record any adjusting entries required
Interest Receivable 444.44Interest Income ($200,000 * 16% * 5/360) 444.44
Feb 24, 2016 Honest Al isn’t so honest – he doesn’t pay us!
Accounts Receivable 205,333.33Note Receivable 200,000.00Interest Receivable 444.44
Interest Income ($200,000 * 16% * 55/360) 4,888.89
Mar 31, 2016 Honest Al files for bankruptcy and we write off his account as uncollectible(assume we use the allowance method)
Allowance for Doubtful Accounts 205,333.33Accounts Receivable 205,333.33