Chapter 9 Accounting for Receivables

QUCIK STUDY

QS 9-2

Kordas Corp. uses the allowance method to account for uncollectibles. On October 31, it wrote off a $750 account of a customer, D. Elwick on December 9, it receives a $400 payment from Elwick.

  1. Prepare the journal entry or entries for October 31.
  2. Prepare the journal entry or entries for December 9; assume no additional money is expected from Elwick.

QS 9-3

Darius Company's year-end unadjusted trial balance shows accounts receivable of $95,000, allowance for doubtful accounts of $550 (credit), and sale of $350,000. Uncollectibles are estimated to be 1.5% of accounts receivable.

  1. Prepare the December 31 year-end adjusting entry if the allowance account had a year-end adjusting entry for uncollectibles.
  2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance 0f $150?

QS 9-4

Assume the same facts as in QS 9-3, exprect that Darius estimates uncollectibles ad 0.5% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles.

EXERCISES

Exercises 9-3

At year-end (December 31), Terner Company estimates its bad debts as 0.6% of its annual credit sales of $858,000. Terner records its Bad Debts Expense for that estimate. On the following February 1, Terner decides that the $429 account of D. Fidel is uncollectible and writes it off as a bad debt. On June 5, Fidel unexpectedly pays the amount previously written off. Prepare the journal entries of Terner to record these transactions and events of December 31, February 1, and June 5.

Exercises 9-5

Paloma Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivable analysis.

Days Past Due
Total / 0 / 1 to 30 / 31 to 60 / 61 to 90 / Over 90
Accounts receivable / $95,000 / $66,000 / $15,000 / $6,000 / $3,000 / $5,000
Percent uncollectible / 1% / 2% / 4% / 7% / 12%
  1. Estimate the balance of the Allowance for Doubtful Accounts using the age of accounts receivable method.
  2. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.
  3. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance n the Allowance for Doubtful Accounts is a $200 credit.

Exercises 9-6

Refer to the information in Exercises 9-5 to complete the following requirements.

  1. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 2% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method.
  2. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.
  3. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $200 credit.

Exercises 9-7

Refer to the information in Exercises 9-5 to complete the following requirements.

  1. On February 1 of the next period, the company determined that $950 in customer account is uncollectible; specifically, $200 for Laguna Co. and $750 for MalibuCo. Prepare the journal entry to write off those accounts.
  2. On June 5 of that next period, the company unexpectedly received a $200 payment on a customer account, Laguna Company, that had previously been written off in part a. Prepare the entries necessary to reinstate the account and to record the cash received.

Exercises 9-10

Prepare journal entries to record these selected transactions for Calio Company.

Nov. 1 Accepted a $15,000, 180-day, 7% note dated November 1 from Carlos Cruz in granting a time extension on his past-due account receivable.

Dec. 31 Adjusted the year-end accounts for the accrued interest earned on the Cruz note.

Apr. 30 Cruz honors his note when presented for payment; February has 28 days for current year.

Exercises 9-11

Prepare journal entries to record the following selected transactions of Calio Company.

Mar. 21 Accepted a $17,200, 180-day, 7% note dated March 21 from James Penn in granting a time extension on his past-due account receivable.

Sept. 17 Penn dishonors his note when it is presented for payment.

Dec. 31 After exhausting all legal means of collection, Calio Company writes off Penn's account against the Allowance for Doubtful Accounts.