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Chapter 8: Q12SE (page 469)
Question: McKale Corporation has a three-month, $18,000, 9% note receivable from L. Peters that was signed on June 1, 2018. Peters defaults on the loan on September 1.
Journalize the entry for McKale to record the default of the loan
Answer
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Applying the allowance method (aging-of-receivables) to account for Uncollectibles Surf and Sun had the following balances at December 31, 2018, before the year-end adjustments:
Accounts Receivable
81,000 |
Allowance for Bad Debts
Bal. \( 2,063 |
The aging of accounts receivable yields the following data:
Age of Accounts Receivable | |||
0鈥�60 Days | Over 60 Days | Total Receivables | |
Accounts Receivable | \) 78,000 | \( 3,000 | \) 81,000 |
Estimated percent uncollectible | *2% | * 23% |
Requirements
1. Journalize Surf and Sun鈥檚 entry to record bad debts expense for 2018 using the aging-of-receivables method.
2. Prepare a T-account to compute the ending balance of Allowance for Bad Debts.
Accounting for uncollectible accounts using the allowance method (aging-of-receivables) and reporting receivables on the balance sheet.
At December 31, 2018, the Accounts Receivable balance of GPS Technology is \(200,000. The Allowance for Bad Debts account has a \)24,110 debit balance. GPS Technology prepares the following aging schedule for its accounts receivable:
| Age of Accounts | ||||
1鈥�30 Days | 31鈥�60 Days | 61鈥�90 Days | Over 90 Days | |
Accounts Receivable | \( 65,000 | \) 50,000 | \(40,000 | \)45,000 |
Estimated percent uncollectible | 0.4% | 3.0% | 5.0% | 48.0% |
Requirement:
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, 2018.
2. Show how GPS Technology will report its net accounts receivable on its December 31, 2018, balance sheet
When dealing with receivables, give an example of a subsidiary account
Question: On December 1, Kyle Corporation accepted a 60-day, 9%, $12,000 note receivable from J. Michael in exchange for his account receivable.
Requirements
1. Journalize the transaction on December 1.
2. Journalize the adjusting entry needed on December 31 to accrue interest revenue. Round to the nearest dollar.
3. Journalize the collection of the principal and interest at maturity. Specify the date. Round to the nearest dollar.
How is the acid-test ratio calculated, and what does it signify?
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