ACCT 2301 Chapter 7 Homework PDF

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ACCT 2301 CHAPTER 7 HOMEWORK Solstice Company determines on October 1 that it cannot collect $60,000 of its accounts receivable from its customer, P. Moore. It uses the direct write-off method to record this loss as of October 1. On October 30, P. Moore unexpectedly pays his account in full to Solstice Company. Record Solstice’s entries for recovery of this bad debt. Date Oct 30 Oct 30

General Journal Accounts Receivable—P. Moore Bad Debts Expense Cash Accounts Receivable—P. Moore

Debit 60,000

Credit 60,000

60,000 60,000

Indicate whether each statement best describes the allowance method or the direct write-off method. 1 2 3 4 5 6

Estimates bad debts expense related to the sales recorded in that period Bad Debts Expense is recorded when an account is determines to be uncollectible. An adjusting entry is generally required at the end of each period to estimate bad debts. The write-off of a specific customer account directly affects net income in that period. When an account is written off, debit Allowance for Doubtful Accounts. Matches the estimated loss from uncollectible accounts receivable against the sales they helped create.

Allowance Direct write-off Allowance Direct write-off Allowance Allowance

Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $2,800 account of a customer, C. Green. On March 9, it receives a $2,300 payment from Green. 1. Prepare the journal entry for January 31. 2. Prepare the journal entries for March 9; assume no additional money is expected from Green. Date Jan 31 Mar 9 Mar 9

General Journal Allowance for Doubtful Accounts Accounts Receivable—C. Green Accounts Receivable—C. Green Allowance for doubtful accounts Cash Accounts Receivable—C. Green

Debit 2,800

Credit 2,800

2,300 2,300 2,300 2,300

Warner Company’s year-end unadjusted trial balance shows accounts receivable of $101,000, allowance for doubtful accounts of $620 (credit), and sales of $300,000. Uncollectibles are estimated to be 1.50% of accounts receivable.

1. Prepare the December 31 year-end adjusting entry for uncollectibles. 2. What amount would have been used in year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $400? Date Dec 31

General Journal Bad Debts Expense Allowance for doubtful accounts Amount used in the year-end adjusting entry: $1,915

Debit 895

Credit 895

BioWare’s year-end unadjusted trial balance shows accounts receivable of $29,000 and sales of $400,000. Uncollectibles are estimated to be 2% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles using the percent of sales method. Date Dec 31

General Journal Bad Debts Expense Allowance for doubtful accounts

Debit 8,000

Credit 8,000

Record the sale by Balus Company of $135,000 in accounts receivable on May 1. Balus is charges a 2.50% factoring fee. Date May 1

General Journal Cash Factoring expense Accounts receivable

Debit 131,625 3,375

Credit

135,000

Levine Company uses the perpetual inventory system. Apr 8

Sold merchandise for $9,200 (that had cost $6,799) and accepted the customer’s Suntrust Bank Card. Suntrust Charges a 4% fee.

Apr 12 Sold merchandise for $5,800 (that had cost $3,758) and accepted the customer’s Continental Card. Continental charges a 2.5% feed. Prepare journal entries to record the above credit card transactions of Levine Company. Date Apr 8

Apr 8 Apr 12

Apr 12

General Journal Cash Credit Card Expense Sales Cost of goods sold Merchandise inventory Cash Credit card expense Sales Cost of goods sold Merchandise inventory

Debit 8,832 368

Credit

9,200 6,799 6,799 5,655 145 5,800 3,758 3,758

Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $104,000, and it estimates that 6% will be uncollectible. Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has: a. A $1,768 credit balance before the adjustment. b. A $520 debit balance before the adjustment. Transaction A B

General Journal Bad debts expense Allowance for doubtful accounts Bad debts expense Allowance for doubtful accounts

Debit 4,472

Credit 4,472

6,760 6,760

Following is a list of credit customers along with their amounts owed and the days past due at December 31. Following that list are five classifications of accounts receivable and estimated bad debts percent for each class.

Percent Uncollectible

0 2%

Days Past Due 31-60 61-90 6% 9%

1-30 4%

Over 90 13%

Customer Accounts Receivable Days Past Due BCC Company $5,900 15 Lannister Co. 2,900 0 Mike Properties 6,900 110 Ted Reeves 1,600 75 Jen Steffens 3,900 43 1. Create an aging of accounts receivable by age similar to the table given above. Calculate the estimated balance for the Allowance for Doubtful Accounts. 2. Assuming an unadjusted credit balance of $290, record the required adjustment to the Allowance for Doubtful Accounts. ESTIMATED BALANCE FOR ALLOWANCE FOR DOUBTFUL ACCOUNTS: $1,569 Date Dec 31

General Journal Bad Debts Expense Allowance for doubtful accounts

Debit 1,279

Credit 1,279

At December 31, Folgeys Coffee Company reports the following results for its calendar year. Cash Sales Credit Sales

$915,000 315,000

Its year-end unadjusted trial balance includes the following items. Accounts Receivable $140,000 debit Allowance for Doubtful Accounts 6,500 debit Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 6% of credit sales, (2) 4% of total sales and (3) 9% of the year-end accounts receivable. Transaction 1 2 3

General Journal Bad Debts Expense Allowance for doubtful accounts Bad debts expense Allowance for doubtful accounts Bad debts expense Allowance for doubtful accounts

Debit 18,900

Credit 18,900

49,200 49,200 19,100 19,100...