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Receivables Chapter 8 Exercises
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Accounting for Bad Debts Expense
In-Class Exercises (Form groups and work exercises): Exercise No Page E Percent-of-Sales Method E Percent-of-Receivables Method E Aging-of-Receivables Method (Use the format, as reflected on the next chart, to complete these exercises)
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Accounting for Bad Debts Expense
General Journal Date Description Debit Credit Exercises E8-17, E8-18, and E8-19
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Percent-of-Sales Method
In-Class Exercise: Exercise No Page E Percent-of-Sales Method
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Percent-of-Sales Method
Exercise E8-17 (Percent-of-Sales Method) At January 1, 2016, Hilly Mountain Flagpoles had the following: Accounts Receivable of $31, Allowance for Bad Debts of $3,000 (credit balance). During the year, Hilly Mountain Flagpoles recorded the following: (a) Sales of $174,000 ($157,000 on account; $17,000 for cash). (b) Collections on account, $131,000. (c) Write-offs of uncollectible receivables, $2,200. Requirements: (1) Journalized Hilly’s transactions that occurred during (2) Post transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts. (3) Journalize Hilly’s adjustment for bad debts expense assuming Hilly estimates bad debts as 4% of credit sales. Post adjustment to the appropriate T-accounts. (4) Show how Hilly will report net accounts receivable on its December 31, 2016, balance sheet.
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Percent-of-Sales Method
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Percent-of-Sales Method
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Percent-of-Sales Method
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Percent-of-Sales Method
Net Realizable Value
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Percent-of-Sales Method
End of Exercise
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Percent-of-Receivables Method
In-Class Exercise): Exercise No Page E Percent-of-Receivables Method
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Percent-of-Receivables Method
Exercise E8-18 (Percent-of-Receivables Method) At January 1, 2015, Hilly Mountain Flagpoles had the following: Accounts Receivable of $31, Allowance for Bad Debts of $3,000 (credit balance). During the year, Hilly Mountain Flagpoles recorded the following: (a) Sales of $174,000 ($157,000 on account; $17,000 for cash). (b) Collections on account, $131,000. (c) Write-offs of uncollectible receivables, $2,200. Requirements: (1) Journalized Hilly’s transactions that occurred during (2) Post transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts. (3) Journalize Hilly’s adjustment for bad debts expense assuming Hilly estimates bad debts as 3% of accounts receivable. Post adjustment to the appropriate T-accounts. (4) Show how Hilly will report net accounts receivable on its December 31, 2016, balance sheet.
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Percent-of-Receivables Method Journal entries are the same as Ex E8-17
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Percent-of-Receivables Method
Account balances are the same ad Ex E8-17
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Percent-of-Receivables Method
($54,800 x 3%)…….……………$ 1,644 Allowance account balance… (800) Required adjustment………….. $
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Percent-of-Receivables Method
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Percent-of-Receivables Method
Net Realizable Value
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Percent-of-Receivables Method
End of Exercise
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Aging-of-Receivables Method
In-Class Exercise: Exercise No Page E Aging-of-Receivables Method
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Aging-of-Receivables Method
Exercise E8-19 (Aging-of-Receivables Method) At December 31, 2016, the Accounts Receivable balance of TM Manufacturer is $230, The Allowance for Bad Debts Account has a $24,000 debit balance. TM Manufacturer prepares the following aging schedule for its accounts receivable: Age of Accounts Total to to to Over Accounts receivable…..$230, $75, $80, $35, $40,000 Percent uncollectible… % % % % Requirements: (1) Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Allowance for Bad Debts at December 31, 2016. (2) Show how TM Manufacturer will report its net accounts receivable on its December 31, , balance sheet.
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Aging-of-Receivables Method
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Aging-of-Receivables Method
Net Realizable Value
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Aging-of-Receivables Method
End of Exercise
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Accounting for Notes Receivable
In-Class Exercise (Form groups and work exercise): Exercise No Page E Notes Receivable Transactions (Use the format, as reflected on the next chart, to complete this exercise)
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Accounting for Notes Receivable
General Journal Date Description Debit Credit Exercise E8-23 (Page 461)
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Notes Receivable Exercise E8-23
The following transactions occurred during 2016 and 2017 for Mediterranean Importers. The company ends its accounting year on April 30. 2016 Feb Loaned $20,000 cash to Candice Smith on a one-year, 6% note. Apr Sold goods to Green Masters, receiving a 90-day, 9% note for $10,000. (Ignore cost of goods sold) Apr. 30 Made a single entry to accrue interest revenue on both notes. ??? Collected the maturity value of the Green Masters note. 2017 Feb Collected the maturity value of the Smith note. Requirements: (1) Journalize all required entries. (2) Make sure to determine the missing maturity date (???).
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Notes Receivable Accrued interest earned on the two notes.
Smith – $20,000 x .06 x 90/360 = $300 Masters – $10,000 x .09 x 24/360 = $ Total $360
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Calculating Master’s Note Maturity Date
The Green Masters 90-day note, issued on April 6, 2016, matures on July 5, 2016. The maturity date is computed as follows: Number of days in April……...…………..30 Less date of note……...…………………..(6) Cum. Days held in April………………………… Days in May..….…………………………… Days in June………..……………………… Days held in July…(Due Date)…..………
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Notes Receivable Accrued interest earned on the two notes.
Smith – $20,000 x .06 x 90/360 = $300 Masters – $10,000 x .09 x 24/360 = $ 60 $10,000 x .09 x 66/360 = $ 165
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Notes Receivable Accrued interest earned on the two notes.
Smith – $20,000 x .06 x 90/360 = $300 Masters – $10,000 x .09 x 24/360 = $ 60 $ 20,000 x .06 x 270/360 = $900
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Notes Receivable End of Exercise
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