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Receivables Chapter 8 Exercises.

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Presentation on theme: "Receivables Chapter 8 Exercises."— Presentation transcript:

1 Receivables Chapter 8 Exercises

2 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)

3 Accounting for Bad Debts Expense
General Journal Date Description Debit Credit Exercises E8-17, E8-18, and E8-19

4 Percent-of-Sales Method
In-Class Exercise: Exercise No Page E Percent-of-Sales Method

5 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.

6 Percent-of-Sales Method

7 Percent-of-Sales Method

8 Percent-of-Sales Method

9 Percent-of-Sales Method
Net Realizable Value

10 Percent-of-Sales Method
End of Exercise

11 Percent-of-Receivables Method
In-Class Exercise): Exercise No Page E Percent-of-Receivables Method

12 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.

13 Percent-of-Receivables Method Journal entries are the same as Ex E8-17

14 Percent-of-Receivables Method
Account balances are the same ad Ex E8-17

15 Percent-of-Receivables Method
($54,800 x 3%)…….……………$ 1,644 Allowance account balance… (800) Required adjustment………….. $

16 Percent-of-Receivables Method

17 Percent-of-Receivables Method
Net Realizable Value

18 Percent-of-Receivables Method
End of Exercise

19 Aging-of-Receivables Method
In-Class Exercise: Exercise No Page E Aging-of-Receivables Method

20 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.

21 Aging-of-Receivables Method

22 Aging-of-Receivables Method
Net Realizable Value

23 Aging-of-Receivables Method
End of Exercise

24 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)

25 Accounting for Notes Receivable
General Journal Date Description Debit Credit Exercise E8-23 (Page 461)

26 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 (???).

27 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

28 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)…..………

29 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

30 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

31 Notes Receivable End of Exercise


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