Chapter 8 solution - Financial accounting wiley 08 PDF

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Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 8-CHAPTER 8Accounting for ReceivablesSOLUTIONS TO BRIEF EXERCISESBRIEF EXERCISE 8.(a) Accounts receivable. (b) Notes receivable. (c) Other receivables.BRIEF EXERCISE 8.(a) Accounts Receivable ...

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CHAPTER 8 Accounting for Receivables SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 8.1 (a) Accounts receivable. (b) Notes receivable. (c) Other receivables. BRIEF EXERCISE 8.2 (a) Accounts Receivable ........................................... Sales Revenue ..............................................

17,200

(b) Sales Returns and Allowances ........................... Accounts Receivable ...................................

3,800

(c) Cash ($13,400  $268) .......................................... Sales Discounts ($13,400 X 2%) ......................... Accounts Receivable ($17,200  $3,800) .......

13,132 268

17,200 3,800

13,400

BRIEF EXERCISE 8.3 (a) Bad Debt Expense ............................................... Allowance for Doubtful Accounts ...............

31,000

(b) Current assets Prepaid insurance ........................................ Inventory ....................................................... Accounts receivable .................................... 600,000 Less: Allowance for doubtful Accounts ........................................... 31,000 Cash .............................................................. Total current assets ................................. Copyright © 2019 WILEY

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31,000

 7,500 130,000 569,000 90,000 796,500 8-1

8-2

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BRIEF EXERCISE 8.4 (a) Allowance for Doubtful Accounts ............................ Accounts ReceivableGray ............................. (b)

(1) Before Write-Off Accounts receivable Allowance for doubtful accounts Cash realizable value

6,200 6,200

(2) After Write-Off

¥700,000

¥693,800

54,000 ¥646,000

47,800 ¥646,000

BRIEF EXERCISE 8.5 Accounts ReceivableGray............................................. Allowance for Doubtful Accounts ............................ Cash ................................................................................... Accounts ReceivableGray .....................................

6,200 6,200 6,200 6,200

BRIEF EXERCISE 8.6 (a) Bad Debt Expense [(£420,000 X 1%)  £1,500] ............ Allowance for Doubtful Accounts .....................

2,700 2,700

(b) Bad Debt Expense [(£420,000 X 1%) + £800] = £5,000 BRIEF EXERCISE 8.7 (a) Cash (175  7)......................................................... Service Charge Expense (175 X 4%) ...................... Sales Revenue ....................................................

168 7

(b) Cash (60,000  1,800) ............................................. Service Charge Expense (60,000 X 3%) ................. Accounts Receivable .........................................

58,200 1,800

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60,000

8-3

BRIEF EXERCISE 8.8 Interest

Maturity Date

(a) NT$800 (b) NT$1,120 (c) NT$200

August 9 October 12 July 11

BRIEF EXERCISE 8.9 Maturity Date

Annual Interest Rate

(a) May 31 (b) August 1 (c) September 7

6% 8% 10%

Total Interest 6,000 600 6,000

BRIEF EXERCISE 8.10 Jan. 10 Feb. 9

Accounts Receivable ...................................... Sales Revenue .........................................

84,600

Notes Receivable............................................. Accounts Receivable ...............................

84,600

84,600 84,600

BRIEF EXERCISE 8.11 (a) Bad Debt Expense ................................................ Allowance for Doubtful Accounts ................

18,000 18,000

(b) Current assets Supplies ......................................................... R$ 13,000 Inventory ........................................................ 180,000 Accounts receivable ..................................... R$400,000 Less: Allowance for doubtful accounts ...... 18,000 382,000 Cash ............................................................... 90,000 R$665,000

8-4

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BRIEF EXERCISE 8.11 (Continued) (c) Accounts receivable turnover = Average collection period =

R$3,000,000 = 10 times R$300,000

365 days = 36.5 days 10

The accounts receivable turnover is a liquidity measure. The average collection period indicates the effectieness of a compans credit and collection policies. To evaluate Fertigs liquidit and credit policies, these measures should be compared to the same measures for competitors. BRIEF EXERCISE 8.12 Accounts Receivable Turnover:

$20B $20B = = 7.3 times $2.75B ($2.7B + $2.8B) ? Average Collection Period for Accounts Receivable:

365 days = 50 days 7.3 times

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SOLUTIONS FOR DO IT! EXERCISES DO IT! 8.1 March 1 March 6

Accounts Receivable .................................... Sales Revenue ......................................

28,000 28,000

Sales Returns and Allowances ..................... Accounts Receivable ............................

1,000

March 11 Cash (27,000  270) ................................... Sales Discounts (27,000 u 1%) ................... Accounts Receivable ............................

26,730 270

1,000

27,000

DO IT! 8.2a The following entry should be prepared to increase the balance in the Allowance for Doubtful Accounts from R$6,100 credit to R$15,500 credit (5% X R$310,000): Bad Debt Expense .................................................... Allowance for Doubtful Accounts .................. (To record estimate of uncollectible accounts)

9,400 9,400

DO IT! 8.2b To speed up the collection of cash, Neumann could sell its accounts receivable to a factor. Assuming the factor charges Neumann a 3% service charge, it would make the following entry: Cash ........................................................................... 166,600 Service Charge Expense .......................................... 3,400 Accounts Receivable ....................................... (To record sale of receivables to factor)

8-6

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DO IT! 8.3 (a)

The maturity date is September 30. When the life of a note is expressed in terms of months, you find the date it matures by counting the months from the date of issue. When a note is drawn on the last day of a month, it matures on the last day of a subsequent month.

(b) The interest to be received at maturity is 186: Face X Rate X Time = Interest 6,200 X 9% X 4/12 = 186 The entry recorded by Gentry Wholesalers at the maturity date is: Cash ..................................................................... 6,386 Notes Receivable .......................................... 6,200 Interest Revenue ........................................... 186 (To record collection of Benton note)

DO IT! 8.4 (a) ÷

Average net accounts receivable

=

Accounts receivable turnover

NT$1,300,000

÷

NT$101,000 + NT$107,000 2

=

12.5 times

Days in year

÷

Accounts receivable turnover

=

Average collection period in days

365

÷

12.5 times

=

29 days

Net credit sales

(b)

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SOLUTIONS TO EXERCISES EXERCISE 8.1 Jan. 6 16

Accounts Receivable ...................................... Sales Revenue ..........................................

9,200

Cash (£9,200  £92) ......................................... Sales Discounts (1% X £9,200) ....................... Accounts Receivable ................................

9,108 92

9,200

9,200

EXERCISE 8.2 March 1

Accounts ReceivableLynda Company ..... 5,000 Sales Revenue .......................................

3

Sales Returns and Allowances .................... Accounts ReceivableLynda Company..............................................

9

500 500

Cash (CHF4,500  CHF90) ............................ 4,410 Sales Discounts (2% u CHF4,500) ............... 90 Accounts ReceivableLynda Company..............................................

15 31

5,000

Accounts Receivable .................................... Sales Revenue .......................................

400

Accounts Receivable (CHF400 u 1.5% u 1/2) Interest Revenue ...................................

3

4,500 400 3

EXERCISE 8.3 (a) Jan. 6 16

8-8

Accounts ReceivablePryor ....................... 7,000 Sales Revenue .......................................

7,000

Cash (7,000  140)..................................... Sales Discounts (2% X 7,000) .................... Accounts ReceivablePryor ...............

7,000

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6,860 140

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EXERCISE 8.3 (Continued) (b) Jan. 10 Feb. 12 Mar. 10

Accounts ReceivableFarley...................... 9,000 Sales Revenue ......................................

9,000

Cash .............................................................. Accounts ReceivableFarley ..............

5,000

Accounts ReceivableFarley...................... Interest Revenue [1% X (9,000  5,000)] ....................

5,000 40 40

EXERCISE 8.4 (a)

(b) (c)

(d)

Accounts Receivable ........................................... Sales Revenue .................................................

800,000

Cash ...................................................................... Accounts Receivable ......................................

763,000

Allowance for Doubtful Accounts ....................... Accounts Receivable ......................................

7,300

Accounts Receivable ........................................... Allowance for Doubtful Accounts ..................

3,100

Cash ...................................................................... Accounts Receivable ......................................

3,100

Bad Debt Expense ................................................ Allowance for Doubtful Accounts ..............

20,200

800,000 763,000 7,300

3,100 3,100 20,200

Allowance for Doubtful Accounts Beg. Bal. 9,000 Write-off 7,300 Recovery 3,100 Bad Debts 20,200 [£25,000  (£9,000 + £3,100  £7,300)] End Bal. 25,000

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8-9

EXERCISE 8.4 (Continued) (e)

Accounts Receivable

Allowance for Doubtful Accounts

Beg. Bal. 200,000 Collections 763,000 Sales 800,000 Write-off 7,300 Recovery 3,100 Collections End Bal. 229,700

(f)

Beg. Bal. Write-off 7,300 Recovery

3,100

9,000 3,100

Bad Debts 20,200 End Bal. 25,000

Net realizable value of receivables is £204,700 (£229,700  £25,000)

EXERCISE 8.5 (a)

Dec. 31

Bad Debt Expense .............................. Accounts ReceivableL. Dole.......

1,400

Bad Debt Expense .............................. Allowance for Doubtful Accounts [($110,000 X 10%)  $2,100] .....

8,900

Bad Debt Expense .............................. Allowance for Doubtful Accounts [($110,000 X 6%) + $200] .........

6,800

1,400

(b) Dec. 31

8,900

(c) Dec. 31

8-10

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EXERCISE 8.6 (a)

Accounts Receivable Current 130 days past due 3190 days past due Over 90 days past due

(b) Mar. 31

Amount ₩65,000 12,900 10,100 7,400

% 2 5 30 50

Estimated Uncollectible ₩1,300 645 3,030 3,700 ₩8,675

Bad Debt Expense ........................................... Allowance for Doubtful Accounts (₩8,675  ₩2,100) ...................................

6,575 6,575

(c) The total balance of receivables increased from 2019 to 2020. However, of concern is the fact that each of the three categories of older accounts increased substantially during 2020. That is, customers are taking longer to pay and bad debts are likely to increase. Management needs to investigate the causes of this change. EXERCISE 8.7 Allowance for Doubtful Accounts ................................... Accounts Receivable ................................................

11,000

Accounts Receivable ....................................................... Allowance for Doubtful Accounts ...........................

1,800

Cash .................................................................................. Accounts Receivable ................................................

1,800

Bad Debt Expense ............................................................ Allowance for Doubtful Accounts [19,000  (15,000  11,000 + 1,800)] ..............

13,200

11,000 1,800 1,800

13,200

EXERCISE 8.8 December 31, 2020 Bad Debt Expense (2% X ¥450,000) ................................ Allowance for Doubtful Accounts ...........................

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9,000

8-11

EXERCISE 8.8 (Continued) May 11, 2021 Allowance for Doubtful Accounts ................................... Accounts ReceivableShoemaker .........................

1,100

June 12, 2021 Accounts ReceivableShoemaker ................................. Allowance for Doubtful Accounts ............................

1,100

Cash .................................................................................. Accounts ReceivableShoemaker .........................

1,100

1,100 1,100 1,100

EXERCISE 8.9 (a) Mar. 3

(b) May 10

Cash ($650,000  $19,500) ....................... 630,500 Service Charge Expense (3% X $650,000) .................................... 19,500 Accounts Receivable ....................... Cash ($3,000  $120)................................ Service Charge Expense (4% X $3,000) ........................................ Sales Revenue ..................................

650,000

2,880 120 3,000

EXERCISE 8.10 (a) Apr. 2 May 3

June 1

(b) July 4

8-12

Accounts ReceivableJ. Elston ............ Sales Revenue ..................................

1,500 1,500

Cash.......................................................... Accounts Receivable J. Elston ........................................

500

Accounts ReceivableJ. Elston ............ Interest Revenue [(1,500  500) X 1%] ..................

10

Cash.......................................................... Service Charge Expense (2% X 200)........................................... Sales Revenue ..................................

196

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500

10

4 200 (For Instructor Use Only)

EXERCISE 8.11 Jan. 15 20

Feb. 10 15

Accounts Receivable ............................... Sales Revenue ..................................

18,000

Cash (NT$4,500  NT$90) ......................... Service Charge Expense (NT$4,500 X 2%) .................................... Sales Revenue ..................................

4,410

Cash .......................................................... Accounts Receivable ........................

10,000

Accounts Receivable (NT$8,000 X 1.5%) Interest Revenue ...............................

120

18,000

90 4,500

10,000

120

EXERCISE 8.12 (a) Nov. 1 Dec. 11 16 31

2020 Notes Receivable ............................................ Cash .........................................................

300,000 300,000

Notes Receivable ............................................ Sales Revenue .........................................

67,500

Notes Receivable ............................................ Accounts ReceivableFernetti ..............

400,000

Interest Receivable ......................................... Interest Revenue* ....................................

6,800

67,500 400,000 6,800

*Calculation of interest revenue: Shins note: HK$300,000 X 10% X 2/12 = HK$5,000 Malcolms note: 67,500 X 8% X 20/360 = 300 Fernettis note: 400,000 X 9% X 15/360 = 1,500 Total accrued interest HK$6,800

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8-13

EXERCISE 8.12 (Continued) (b) Nov. 1

2021 Cash ................................................................. Interest Receivable .................................. Interest Revenue* .................................... Notes Receivable .....................................

330,000 5,000 25,000 300,000

*(HK$300,000 X 10% X 10/12) EXERCISE 8.13 May 1

Dec. 31

31

May 1

2020 Notes Receivable ............................................ Accounts Receivable Chamber ...............................................

9,000 9,000

Interest Receivable ......................................... Interest Revenue (9,000 X 10% X 8/12) ..........................

600

Interest Revenue ............................................. Income Summa...