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Chapter 8: Q2RQ (page 465)
List some common examples of other receivables, besides accounts receivable and notes receivable.
Answer
Dividends receivable, interest receivable, and taxes receivable are typical illustrations of other receivables.
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Accounting for uncollectible accounts using the allowance (percent of-sales) and direct write-off methods and reporting receivables on the
balance sheet
On August 31, 2018, Bouquet Floral Supply had a \(140,000 debit balance in AccountsReceivable and a \)5,600 credit balance in Allowance for Bad Debts. During September,
Bouquet made:
鈥� Sales on account, \(550,000. Ignore Cost of Goods Sold.
鈥� Collections on account, \)584,000.
鈥� Write-offs of uncollectible receivables, $4,000.
Requirements
1. Journalize all September entries using the allowancemethod. Bad debts expense wasestimated at 2% of credit sales. Show all September activity in Accounts Receivable,Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts).
2. Using the same facts, assume that Bouquet used the direct write-off method toaccount for uncollectible receivables. Journalize all September entries using thedirect write-offmethod. Post to Accounts Receivable and Bad Debts Expense, andshow their balances at September 30, 2018.
3. What amount of Bad Debts Expense would Bouquet report on its Septemberincome statement under each of the two methods? Which amount better matchesexpense with revenue? Give your reason.
4. What amount of netaccounts receivable would Bouquet report on its September30, 2018, balance sheet under each of the two methods? Which amount is morerealistic? Give your reason.
Professional Steam Cleaning performs services on account. When a customer account becomes four months old, Professional converts the account to a note receivable. During 2018, the company completed the following transactions:
2018 | |
Apr.28 | Performed service on account for Parkview Club, \(18,000. |
Sep. 1 | Received an \)18,000, 60-day, 12% note from Parkview Club in satisfaction of its past-due account receivable. |
Oct. 31 | Collected the Parkview Club note at maturity |
Record the transactions in Professional鈥檚 journal. Round to the nearest dollar.
On August 1, Taylor Company lent $80,000 to L. King on a 90-day, 5% note.
12. Journalize for Taylor Company the lending of the money on August 1.
13. Journalize the collection of the principal and interest at maturity. Specify the date. Round interest to the nearest dollar.
What is the difference between the percent-of-receivables and aging-of-receivables methods?
Journalizing note receivable transactions
The following selected transactions occurred during 2018 and 2019 for Baltic Importers. The company ends its accounting year on September 30.
2018 | |
Jul. 1 | Loaned \(16,000 cash to Bud Shyne on a one-year, 8% note. |
Sep. 6 | Sold goods to Lawn Pro, receiving a 90-day, 6% note for \)11,000. Ignore Cost of Goods Sold. |
30 | Made a single entry to accrue interest revenue on both notes. |
? | Collected the maturity value of the Lawn Pro note. |
2019 | |
Jul. 1 | Collected the maturity value of the Shyne note. |
Journalize all required entries. Make sure to determine the missing maturity date. Round to the nearest dollar
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