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Chapter 8: Q2SE (page 466)

Recording credit sales and collections

Record the following transactions for Summer Consulting. Explanations are not required.

Apr. 15

Provided consulting services to Bob Jones and billed the customer \(1,500.

18

Provided consulting services to Samantha Cruise and billed the customer \)865.

25

Received \(750 cash from Jones.

28

Provided consulting services to Regan Taylor and billed the customer \)625.

28

Received \(865 cash from Cruise.

30

Received \)1,375 cash, \(750 from Jones and \)625 from Taylor

Short Answer

Expert verified

The transaction for which the payment is made after some time of billing is called credit sales.

Step by step solution

01

Explanation of Collection Period

The term collection period refers to the period of time allowed by a seller to its customers to make the payment of the transaction

02

Journalize the transactions for summer consulting

Date

Account and explanation

Debit

Credit

April 15

Accounts receivable 鈥� Bod Jones

Service Revenue

(Services performed on account)

$ 1,500

$ 1,500

April 18

Accounts receivable 鈥� Samantha Cruise

Service Revenue

(Services performed on account)

$ 865

$ 865

April 25

Cash

Accounts receivable 鈥� Bod Jones

(Collected cash on account)

$ 750

$750

April 28

Accounts receivable 鈥� Regan Taylor

Service Revenue

(Services performed on account)

$625

$625

April 28

Cash

Accounts receivable 鈥� Cruise

(Collected cash on account)

$865

$865

June 30

Cash

Accounts receivable 鈥� Regan Taylor

Accounts receivable 鈥� Cruise

(Collected cash on account)

$1,375

$1,375

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Most popular questions from this chapter

Accounting for uncollectible accounts using the allowance method

(aging-of-receivables) and reporting receivables on the balance sheet

At September 30, 2018, the accounts of Spring Mountain Medical Center (SMMC)

include the following:

During the last quarter of 2018, SMMC completed the following selected transactions:

鈥� Sales on account, \(475,000. Ignore Cost of Goods Sold.

鈥� Collections on account, \)451,800.

鈥� Wrote off accounts receivable as uncollectible: Randall, Co., \(1,800; Oliver Welch,

\)900; and Rain, Inc., \(500

鈥� Recorded bad debts expense based on the aging of accounts receivable, as follows:

Age of Accounts

1鈥�30 Days 31鈥�60

Days

61鈥�90

Days

Over 90

Days

Accounts Receivable \) 97,000 \( 37,000 \) 17,000 $ 14,000

Estimated percent uncollectible 0.3% 3% 30% 35%

Requirements

1. Open T-accounts for Accounts Receivable and Allowance for Bad Debts.

Journalize the transactions (omit explanations) and post to the two accounts.

2. Show how Spring Mountain Medical Center should report net accounts receivable

on its December 31, 2018, balance sheet.

At September 30, 2018, the accounts of Green Terrace Medical Center (GTMC)

include the following:

Accounts Receivable \( 145,000

Allowance for Bad Debts (credit balance) 3,500

During the last quarter of 2018, GTMC completed the following selected transactions:

鈥� Sales on account, \)450,000. Ignore Cost of Goods Sold.

鈥� Collections on account, \(427,100

鈥� Wrote off accounts receivable as uncollectible: Regan, Co., \)1,400; Owen Reis, \(800;

and Patterson, Inc., \)700

鈥� Recorded bad debts expense based on the aging of accounts receivable, as follows:

Age of Accounts

1鈥�30 Days 31鈥�60

Days

61鈥�90

Days

Over 90

Days

Accounts Receivable \( 104,000 \) 39,000 \( 14,000 \) 8,000

Estimated percent uncollectible 0.3% 3% 30% 35%

Requirements

1. Open T-accounts for Accounts Receivable and Allowance for Bad Debts.

Journalize the transactions (omit explanations) and post to the two accounts.

2. Show how Green Terrace Medical Center should report net accounts receivable on

its December 31, 2018, balance sheet.

In accounting for bad debts, how do the income statement approach and the balance sheet approach differ?

Consider the following transactions for TLC Company.

2018

Dec. 6 Received a \(8,000, 90-day, 9% note in settlement of an overdue accounts

receivable from Forest Music.

31 Made an adjusting entry to accrue interest on the Forest Music note.

31 Made a closing entry for interest revenue.

2019

Mar. 6 Collected the maturity value of the Forest Music note.

Jun. 30 Loaned \)14,000 cash to Washington Music, receiving a six-month, 12% note.

Oct. 2 Received a $1,000, 60-day, 12% note for a sale to ZZZ Music. Ignore Cost of

Goods Sold.

Dec. 1 ZZZ Music dishonored its note at maturity.

1 Wrote off the receivable associated with ZZZ Music. (Use the allowance

method.)

30 Collected the maturity value of the Washington Music note

What is the difference between accounts receivable and notes receivable?
See all solutions

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